I started daytrading the S&P e-mini Oct 1 of this year. I use technical indicators to determine my entry, and after entering a trade, immediately enter a 2 point stop loss order, and a 2 point limit order. In IB, I enter these as OCA orders (One Cancels All). Then I just watch what happens. I'm averaging profitable trades about 60% of the time. Each point in ES is worth $50. So, I either lose $100 ($105.90 w/commision), or gain $100 ($94.10 w/commision). For now I only trade 1 contract per trade. That may not sound that great, but I started trading about 1.5 years ago, and (I'll admit it), never had a profitable month until last month. I ended October with a 5% increase. And this month I'm up 7%. This is a new system for me that I studied for about 3 months before trading real money. For those of you just starting out in futures, trust the previously given advice that you should get into this slowly. Find a mechanical system that works for you, and stick to it. You don't need much in points to make money, just a system that yeilds profitable trades more often than not. I wasn't profitable until I followed this advice. To answer brich's question at the start of this thread, I would say, trade 1 contract for 1 to 2 points, and when you've made enough profit doing that to cover a second contract, go to 2 contracts for 1 to 2 points.
I have to disagree with using a fixed profit target, like a 2 point limit order to exit. I would much rather enter a stop order when appropriate then inch it up/down only in the direction of the profit. I'm now trading Eminis and I will only exit with stop orders, never limit. Let the market trade and if your up why exit the market, its going in your favor! LET PROFITS RUN
I can see pros and cons both ways (trailing stops vs. fixed target). If the market is trending strongly, trailing stops are very profitable and fixed targets while profitable, you miss the big moves. If the market is choppy or whippy, then trailing stops will usually trigger with a loss or break even, while a reasonable fixed target will give you small profits. For a beginning trader (I speak from personal experience), I think reasonable (small) fixed targets will produce better results.
It's ok for a newbie to trade for 1 or 2 point profits in the NQ, but only to get the feel of exiting a trade. You do need to learn how to bang out an exit with no hesitation, but it's a joke to think you can make money trading for tiny profits in the futures. Once a trade has cleared break even, you should do everything possible to hang on to it, at least until the close, not look to catch a small profit.
AAA...i agree whole heartedly...i trade the NQ 100% defensively. I assume the postition is wrong to begin with and vow not to give up the big play. As soon as i get about four ticks positive, I set my stop to break even. Im at the point now where I would guess about 40% if my trades are break even. It took quite awhile to just stop losing money. I cannot emphasize enough for anyone wanting to try this that they most down load a simulator like the one from PFG and just try to not lose money for a month. Don't do know back testing-paper trading - would of bought at this crossover and sold at this signal crap unless you have a big trust fund. The eminis are the real deal.. Respect the hell out of them. Best, Mike
Sorry about all the grammer mistakes in the above post...very late and I'm tired and I dont know how to edit it once it is posted.
It depends on your time horizon and risk/reward. Fixed profit targets can be very lucrative. Say you are looking at 2-3 min bars and are using a short-term RSI to enter/exit trades. A good stop loss is a one or two bar low, and a good profit target is the truerange of X bars where I usually use X as the same length as my RSI. If you're using a short entry system like this, then you're expecting quick profits and tight stops. Yeah I'd love to let profits run like with anything, but a lot of day traders go for the quick 1-2 pts on the eminis. Some very successful ones do it day in and day out. It's like going fishing. You don't have to stay glued to the screen all day long. Whenever you feel like it, you load up your 2min bars and look for your entry. Enter, and you'll exit within a few bars either up a few or down a few ticks. It feels like fishin' to me! No need to use up all my bait and go for the big catch, a bunch of small fish will feed me just fine.
Sure have, I only trade mechanical systems, no discretion involved. I actually use two systems to trade the eminis. I have a longer term system that buys on stops on 60m bars. Then I have a short-term system that I use on 3m bars. It enters on limit and takes profit target at limit. It uses stop only for stoploss. Profit target is between 2-4 pts. I initially was trying to setup some filters and conditions on when to lift the profit target limit order and just ride my stoploss, to catch a strong trend, for example, but couldn't find anything that performed better than the profit target with one exception (see below). But if there is a strong trend then my 60m system catches it although it will have entered on a stop so will miss the first move, but no big deal because I've made a small profit on my short-term system. I've found this combination to be very effective. If my 60m system gets whipsawed, odds are my short-term 3m system picked up small profits on the up swing and down swing to break even or come out slightly ahead. Regarding the one exception- for my 3m system during the last hour of trading I do not use a profit target (I still enter on limit orders) but instead ride a one or two-bar stop loss depending on the truerange of the bar. This is because there are a lot of strong thrusts that occur in the last hour of trading as program buying/selling kicks in. In fact, you could do well focusing on a system that only traded the last hour or 1.5 hours of the trading day. You are correct in what you say about limit vs. stop orders, though. Generally speaking limit orders get filled when the market is moving against you, whereas stop orders get filled when the market is moving in your favor. Momentum traders live and die by this. But my short-term method enters on specific setups around mechanical way of determining S/R. Another note on backtesting- I've noticed that short-term systems using stop orders suffer a lot more slippage when implemented than limit orders which experience no slippage on the limit entry or limit profit target. In fact, I originally was trading a short-term momentum play trying to scalp for 1.50 to 2.00 pts at a time, but while it was successful backtesting, in practice I was often losing 2-3 ticks to slippage. For example, if I had a nice thrust up and my momentum model says buy one tick above the previous high on a stop, but the close=high or is close to the high, by the time I entered my order I may have missed a few ticks. I tried a few different ways where the system would give me a warning on 1m bars so would know to be ready to adjust my stop price and hit transmit as soon as the 3m bar completed, but I stilled missed a few ticks. I haven't looked into automating trading via an API but I don't trust my results shooting for 1.50-to-2.00 points when slippage of a few ticks will drastically affect the risk/reward. That's why I said if you trade short-term, you have to shoot for 2.00-4.00 points to minize effects of slippage. But yes, I do use limit orders as my entry and profit target exit, backtested and successful. If you want to see confirmation of limit order system working successfully in stocks, go to <A HREF="www.wealth-lab.com">www.wealth-lab.com</A> and check out some of the band systems there that buy only on limit. My short-term emini system is nothing like those, I just include it as a reference to a limit entry system that works (for stocks).
dottom, Sounds like you've analyzed it pretty thoroughly. I'm not quite sure what you are referring to when you discuss merits of limit versus stop orders. I don't think I raised that issue. My point was just that it often pays in the futures to hang onto a winning trade, as long as it is above break even. In fact, the best thing about electronic trading is the ability to enter and exit on limits, which was not too easily done calling the pit to place trades. The wealth-lab site is interesting. I notice you have some systems there. I have never used it but I can see it is worth some time.