The Daily Market Forecast... Lesson Day

Today’s Lesson: How to choose your trading asset.

More and more futures contracts are being released in micro size. This is great news. Not just for beginners or those with a modest account, but everyone. Why? Because now you can live “test” your trading strategies on different assets that you might not have traded prior.

Diversification is good. You should do it. The question becomes WHICH other contracts should you trade. Here’s a quick look at filtering for candidates:

1. Volume. Without adequate volume you’ll experience slippage and not perform as well in the real world.
2. Margin. Check with your broker and determine whether your account size can afford the margin required. Keep in mind that all brokers will give you more margin than you should use. Keep your per-trade risk to no more than 2% of your account, even if the margin required allows you to trade excess contracts.
3. Movement. You’re going to make more money with contracts that MOVE. Compare using the same time interval and ATR. Keep in mind that ATR for futures contracts is meaningless for this purpose UNLESS you multiple the ATR by the point value of the contract. That will give you the ATR in dollars the contract is moving and allow you to compare properly.
4. Margin Ratio. Divide the “movement” number you just determined by the required margin. Compare. You’ll quickly see which contracts give you the most “bang for your buck.” For Wed 210922 (Plenty can change by the open, be aware.)

For Thu 210923 (Plenty can change by the open, be aware.)

Globex Review: AWESOME Globex session… the breakout from the CPL @ 4388.50 ran 32 points to the next level. The reversal @ 4420.50 ran for 19 points so far and is still live.

Day Session Analysis: Sentiment remains bullish. STATS mostly SHORT. I know, this is a hard pill to swallow but EDGE here doesn’t mean direction per se, it means those trades have historically performed better, trade either direction. Thursday (both sessions combined) garnered ONLY 4% of all the gains over the past 5 years in dollars. Breakouts (95%) crush Reversals (5%). Consider not trading Volume Profile.  Trading ES/CL/GC using BB Rev with new filters. Looking to ladder into SPXW credit spreads for tomorrow’s expiration. Possible ITM spreads as well.

S&P 500 Futures CPL: 4379/4388.50. We’re trading ABOVE the CPL (short edge below, long edge above) and ABOVE the equilibrium 4371.25/4183 (open below = short edge, open above = long edge).

The World Index: (+100/-100) REMAINS +36 in a bullish-leaning mixed world (short edge).

Catalysts: Jobless Claims @ 8:30. PMI Composite Flash @ 9:45. Evergrande looks under control.

Trends: 60 min UP, daily UP now moving toward a wedge (short edge)

High outside day: Win/Stop% about the same, shorts delivered 20% more profit. Opening +0.62% (short edge). $TRIN XMA stable at 1.06 (long term outlook: stay long).

Globex: The range of 39 (possibly wider by the open) suggests a day session range around 52 points on a RISING ATR of 54.51. Prior forecast around 65 points, actual 50.

Trade Well,

Mike Siewruk

P.S. For a free “mini-course” packed full of lessons on HOW to trade the Blog… Watch this video.