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....

Today’s Lesson: How to exit with a profit. I’ve interviewed dozens of superb traders on this topic and the answers often conflicted. Understood. Everyone has their own style. Finding your style will take time, trial, and error.

If you prefer to have a few big winners and plenty of smaller losers then this trade was likely a loser, maybe a trail-stop breakeven or small winner at best.

If you prefer more winners, you likely took some money out of this trade and had a modest winner. But where?

One approach our team uses is based on hard evidence. We’ve documented thousands of trades and know with near certainty the probabilities of movement. For the S&P futures, we know that 2 points will be achieved 60% of the time and 4 points 40% of the time.

Given a 7.75-point run, two targets banked 6 points and any remaining contracts gave a little back or exited at breakeven, depending on your stop movement philosophy.

When applying this approach you obviously must adjust...

Monday’s Free Edition Results: The suggested buy @ 4344.75 ran for 26.50 points.

Today’s Lesson: When does the well run dry? In other words, how many times should you take the same trade?

Yesterday’s buy level was very strong. You earned 20+ points per contract in about 20 minutes on the first touch. Assuming you had a sensible exit strategy and didn’t give back the gain, you had a 2nd opportunity to enter. That ran for 15 points. Then a 3rd opportunity. 13.25 points.

This well had plenty of water in it. You could keep drinking. The real issue is what was the quality of the water?

That first touch was crystal clear ice-cold water. Very satisfying. Subsequent touches were good but not as clear and cold. 

Now, if you knew that over thousands of trades subsequent touches were less effective, would you bother to take them? Would you risk your winnings on a LOWER probability setup?

The trading team here knows it’s way better to move on to the next HIGH...

For Mon 210920 (Plenty can change by the open, be aware.)

Globex Review: The melt-down accelerates worldwide. I’ve noticed over the years that reversals are tougher to trade in a fast-moving market (either direction). Breakouts are better however the wiggle room may need to be wider. Three tradeable setups last night, two small winners that cover the loser.

Day Session Analysis: Sentiment is VERY BEARISH. FOMC coming. Melt-down accelerates. All this equals fear and risk-off.  STATS say buy-the-dip will come (when is a guess). Monday (both sessions combined) garnered 27% of all the gains over the past 5 years in dollars. Reversals and Breakouts are about even. Trading ES/CL/GC using BB Rev with new filters. VERY cautious with SPXW credit spreads due to expected wide range. Leaning toward ITM spreads for now.

S&P 500 Futures CPL: 4420.50/4427.50. We’re trading BELOW the CPL (short edge below, long edge above) and BELOW the equilibrium 4429/4431 (open below = short...

For Fri 210917 (Plenty can change by the open, be aware.)

Globex Review: No takeable trades.

Day Session Analysis: Sentiment is mixed. The “melt-up” environment has become “melt-down.” Stats are mixed. Looking to take trades in either direction and letting shorts run further. Friday (both sessions combined garnered 25% of all the gains over the past 5 years in dollars. Reversals (78%) crush Breakouts (22%).  Trading ES/CL/GC using BB Rev with new filters. VERY cautious with SPXW credit spreads due to Quad Witching.

S&P 500 Futures CPL: 4463/4469.25. We’re trading BELOW the CPL (short edge below, long edge above) and BELOW the equilibrium 4457/4457.25 (open below = short edge, open above = long edge).

The World Index: (+100/-100) rises from -14 to +7. Improving? Not so fast. Asia rebounded from several days of selling, the western world sold off some. Mixed sentiment (no edge).

Catalysts: Consumer Sentiment @ 10:00. Quad Witching (volatility...

For Thu 210916 (Plenty can change by the open, be aware.)

Globex Review: Price traded in a 15-point range and offered one takeable trade that ended a small loser. “Thursday Filter” saved you.

Day Session Analysis: Sentiment is mixed. Traditional chart analysis says bearish. Stats mixed, leaning bullish. 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 for attractive SPXW premium for credit spreads ladders.

S&P 500 Futures CPL: 4438.50/4445.75. We’re trading ABOVE the CPL (short edge below, long edge above) and ABOVE the equilibrium 4459.25/4460.50 (open below = short edge, open above = long edge).

The World Index: (+100/-100) rises from -43 to -14 in a world of very mixed sentiment. Asia trending down, Europe trending up, S&P Futures trending down (modest long edge).

Catalysts:...

For Wed 210915 (Plenty can change by the open, be aware.)

Globex Review: Price is range-bound between congested volume levels. No takeable trades triggered.

Day Session Analysis: Sentiment leans bearish and that means buy-the-dip. Stats mixed. The levels are congested for the open. Patience required. Wednesday (both sessions combined) garnered 24% of all the gains over the past 5 years in dollars. Reversals (74%) crush Breakouts (26%).  Trading ES/CL/GC using BB Rev with new filters. Looking for attractive SPXW premium for credit spreads.

S&P 500 Futures CPL: 4448.50/4453. We’re trading BELOW the CPL (short edge below, long edge above) and BELOW the equilibrium 4446.75/4447.25 (open below = short edge, open above = long edge).

The World Index: (+100/-100) FADES from -29 to -43 in a world of bearish sentiment (long edge).

Catalysts: Empire State MFG Index & Import/Export Prices @ 8:30. Industrial Production @ 9:15. EIA Petroleum Status Report @ 10:30. China’s...

For Tue 210914 (Plenty can change by the open, be aware.)

Globex Review: Price is range-bound between volume levels. The set/forget long trade off the CPL is still open running for 13 points so far.

Day Session Analysis: Sentiment leans bearish and that means buy-the-dip. HOWEVER, CPI @ 8:30 will certainly determine the early trend. Stats say LONG is best. Tuesday (both sessions combined garnered 20% of all the gains over the past 5 years in dollars. Reversals and Breakouts are about even. Trading ES/CL/GC using BB Rev with new filters. Looking for attractive SPXW premium to initiate a ladder.

S&P 500 Futures CPL: 4450.50/4455. We’re trading ABOVE the CPL (short edge below, long edge above) and ABOVE the equilibrium 4460.75/4461.50 (open below = short edge, open above = long edge).

The World Index: (+100/-100) FADES from +14 to -29 in a world of mixed, bearish leaning sentiment (long edge).

Catalysts: CPI @ 8:30. All eyes on CPI. Oil supply expected low for a month or so,...

For Mon 210913 (Plenty can change by the open, be aware.)

Globex Review: After dipping below Friday’s price has rallied up (all indexes). Two takeable trades, one small loser and one small winner.

Day Session Analysis: The World sentiment is mixed. Stats are mixed as well. Common sense says follow the price action after the open. Monday (both sessions combined) garnered 27% of all the gains over the past 5 years in dollars. Reversals and Breakouts are about even.  Trading ES/CL/GC using BB Rev with new filters. Looking for attractive SPXW premium today.

S&P 500 Futures CPL: 4481.50/4485.25. We’re trading BELOW the CPL (short edge below, long edge above) and BELOW the equilibrium 4477.50/4478.5 (open below = short edge, open above = long edge).

The World Index: (+100/-100) dumps from +64 to +14 in a world of mixed sentiment (modest short edge).

Correlations: After analyzing correlations over multiple time periods (180, 120, 90, 60, 30 days) I observed that the...

For Fri 210910 (Plenty can change by the open, be aware.)

Globex Review: Price is drifting up. No trades taken based on reward/risk. Two winners documented with a third trade open no targets hit yet.  

Day Session Analysis: The world flipped to a solid BULLISH sentiment. Stats point to shorts working better than longs, but both should be taken. Mindful that we’re opening in a congested area and likely will wait for Volume Profile entries. Friday (both sessions combined garnered 25% of all the gains over the past 5 years in dollars. Reversals (78%) crush Breakouts (22%).  Trading ES/CL/GC using BB Rev with new filters. Looking for attractive SPXW premium today.

S&P 500 Futures CPL: 4495/4501.50. We’re trading ABOVE the CPL (short edge below, long edge above) and ABOVE the equilibrium 4501.75/4503 (open below = short edge, open above = long edge).

The World Index: (+100/-100) SOARS from -57 to +64 with all major world markets soundly bullish (short...