E-Mini Dow - any experienced traders out there?

Discussion in 'Index Futures' started by Senior Novice, Nov 6, 2010.

  1. Hi Fellow Traders,

    This is my first post on this forum. I have been reading for a while. I’m not a native English speaker but will try to post here anyway since I like the quality and down to earth approach of many of the traders here.

    To start out I will introduce myself. I live in the Netherlands, have a day-job, 39 years old and have been trading the markets in the evening hours (US stock markets open in my timezone at 15:30 my time and are open upto 22:00).

    My aim is to become a successful trader and succes is defined by becoming a consistent profitable trader generating a nett income of about USD 3000~3500/month. This in order to be able to quit my job and be able to completely dedicate myself to trading.

    I have been trading since 2007 and currently trade with a spare capital of around USD 25.000. Currently have switched back to the e-mini dow jones, since two weeks, were I trade one contract at a time to learn and limit my exposure. I have traded with upto 5 contracts and that was not for me..

    I have traded dutch stock market options not too bad but due to my job I don’t have the necessary time to make a proper judgement of the market.

    Then I switched totrading US markets in the evening(for me) and traded S&P e-mini , Dow Jones e-mini, Russel E-Mini,Gold en EUR/USD. All of them without any structural success.

    The ES I did not like as it seemed to be crowded and could not get a good fill, which forced me to adjust my entries and exit and this screwed up my trading plan. The ER was more risky and I traded it for a long while but in the end I was chopped up by the volatility of it so I left the ER.

    Then I switched to the YM. Because of the small USD 5 increments it allowed me to have better money management and more precise entry and exit. This went OK for some while and I was making around 100 dollars a day at a certain point. Then my character/emotions started to take over and I lost all of my carefully earned profit with some stupid trades that were based on my expectation, instead of what the market was showing me in front of my eyes on the screen.

    Hard lesson learned. I gave up and after a while came back to the Gold (GC) . Altough I was good at taking the best probability trades, a too tight stop loss was killing me (probably because of the low volume and too big spread) and ofcourse after I was stopped out the market rallied in the other direction and gained 10 points(USD 1000). In the GC market I got the strong feeling I was being manipulated so I left it as well and will not touch it again.

    Then switched to EUR/USD. Thinking that the liquidity and volume would not allow for manipulation. But here the problem for me was that I was not monitoring my positions close enough, which turned out to be a very bad idea as the market is strongly trending in my opinion. I think my psychology is not set-up for currency trading as I tend to think that I am not losing money if I still have the same amount money, just in another currency, which is not a good state of mind for trading.

    Finally I’m back now at the dow-mini since two weeks and what I changed is that I am now logging all of my trades, analyzing equity curve, averages, winners,losers, entries, exits. This allows me to start trading based more and more on my statistics and not on my current state of mind (which is disastrous).

    After some weeks my statistics are showing me that only 45% of my trades are winners. My equity curve seem to have bottomed and slightly and consistently raising. My long average profit has increased from 37 to 43 bucks, My long average loss reduced from 10 to 8. Shorting is terrible with me: average per profit trade is 23 but average losstrade is 39. Overall I am still making a loss per trade of 11 (down from 14), I’m still burning money since coming back to them dow e-mini but I am getting better.

    Unfortunately yesterday I had a very bad day: 12 trades from which 11 losers ( I got the rally in the end though ;-) . But overall the feeling remains: hopeless.. will I ever master it? It feels so stupid not even being able to log a couple of winners per day with 5 or 6 points which would be sufficient. It looks se easy.....

    Ofcourse I am now doubting again wether I am on the right road or not. That is why I decided to post my story here and hopefully get some help and pointers from you guys here (you would be stupid to do that, since I’m probably your bread & butter!) .

    I will tell you know about my trading set-up:
    - First screen: IB TWS chart for 3 min e-mini YM with RSI 14, Stoch 7,3,3 ( as highs/lows seem to form at a 14 period interval on this timeframe). Bollinger Bands at 14,2. (No moving averages as the backtest seems to be bad, but understood that some pro-traders still use an MA… anyone any ideas on MA’s? )
    - Second Screen: Amibroker (feed with IB) CASH Dow 3 min, same set-up as the YM chart.
    - Average time in the market is only a few minutes, unless I have a winner riding the waves,I let that run as long as possible. I could be in the market for hours.
    - Around 6 ~12 trades per day.

    What do I look for:
    Here is where I probably go wrong. My statistics show me that my only best probability tradein the current YM market is when I go long when RSI is at 60 or higher (67% probability for a winner). All other set-ups are losing for me at this moment. Anyway:

    - Stoch crossings above 20 or below 80 is see as a signal but not necessarily see as immediate entry. (although my feeling/screentime is telling me it is a good signal). It has to be confirmed by RSI (rising? Declining? Divergence?) and candlestick price-action.

    - Candlesticks breaking through BB, may be a signal as well to catch the rebound. This is for very short exposure in the market only. After rethinking this, this might actually not be a very good strategy as breaking through Bollinger bands could also mean the start of a strong trend.

    - Price Action. Candle stick patterns. I feel the most succesful is to trade a candle that opens higher or lower then the previous candle. You can feel sometimes that the market is gearing up for a rally and I jump at it. (These are my only winners now, in the current bull market, long with RSI at +60)

    - Price Action: Support/Resistance level. For example: yesterday it seemd to me that 11400 was a being tested several times and the dow could not make new highs when bouncing of 11400 (also no new lows). It did not seem it could take a direction and that chop around 11400 killed me. Finally the dow seemed to want to try 11400 again and it failed , and the market turned and rallied up sharply.

    I mean, I see these patterns, but how to trade the? (Now I just anticipated on a sell-off below 11400 that ofcourse never came). In general, how to trade these round numbers? 100’s.

    - Charting: break through support & resistance lines. (Square trading ranges, triangles, wedges etc.) These usually would trigger some(short term) movement.

    I tried Fibo’s and Gann but these probably are not suitable for my style (?). Also was in woodies CCI club that was OK but in the end it seemed there were more losers then winners and they would only get into the trade when (imho) the trend/momentum was already nearing it’s end).

    I also thought of joining other trading rooms or hiring a coach but I never could get rid of the thought that most of these are scams. How to filter the good from the bad. I trust nothing. Also thought of buying a black-box, but since I can not know how that works, I have declined that idea too.

    I have some ideas where I go wrong:
    - Chasing trades after some losers (however, that is getting better since I try to learn how to trades my statistics. It helps not getting caught in emotions).
    - Overtrading/trading too much. That is OK ( I think?) for scalping some points (3~4~5 points), but I tend to wait and catch a “wave”. Therefor I tend to wait to long before cutting a trade that was initially ment as a scalp and instead of taking the 3 or so points, I end up having to take a couple of points loss in the chop if nothing really happens after my entry.
    - Trade to much on trend reversal. It can be profitable, but it’s also dangerous. With a short stop (imho inevitable a short stop is needed as the trend might not reserve and steam-on, leaving me on the wrong side).

    I have some ideas how to improve as well:
    - I like scalping, I should take the 3 or so points after entry if the trade does not take off and if the chop after entry draws me down a couple of points I have to also exit immediately.
    - Moving up stops sooner on a winner, not giving back all of my profit if I want to let a winner ride (?)
    - Be more systematic ?, which is difficult since my style seems not crystallized down to just one trading idea. (not it seems I really have no system when I look at it, but in my head I feel like I do have a system..??)

    I am determined to become a profitable trader, and I know I will. I am learning and making progress all the time, but after three years off still not being consistently profitable, I think am lacking help and feedback from an experienced trader or group of traders.

    I am not sure If I can make it on my own. It takes such a long time.

    Since there are many here trading for a living and probably have felt the same pain and sometimes even desperation if it is ever going to happen, I am wondering if anyone could have a look at my story and give me some advice from a profitable trader perspective.

    I hope this long post makes some sense and that you recognize the mistakes that you might have done as well. No doubt some posters will jump at my post and ridicoulize it, but OK, so be it! Fair enough, but I also hope for some more serious reactions.

  2. Senior Novice
    Welcome to ET :) Wow, that's quite a post! I congratulate you on surviving since 2007, good job. You offer many opportunities for inclined traders to offer suggestions to enhance your trading experience. I am truly surprised at the lack of response to your thread. I read your post a few days ago and have been thinking about your situation.

    One line (above all others) keeps rattling around in my head. "I really have no system when I look at it, but in my head I feel like I do have a system"
    Obviously you've been doing something right or you wouldn't have survived since 2007! I would invite you to take what you have and define "A system". It seems to me you have the bones of two or three systems (methods) firing off signals and at times contradicting each other! Until I was able to define my system in simple non-discretionary terms my trading was all over the map and only my broker made any real money. :( Until I could replicate my entries and exits again and again using the exact same criteria there was no possible way I could ascertain whether my system was generating predictable profits or random results.

    I also suggest a simulated trading platform. Properly implemented a good simulation program (Ninja Trader) can save you a lot of cash and provide you with benchmarks for achievement in live trading after your system has generated consistent proven results.

    I believe posting end of day charts describing your entries and exits would be most helpful in generating responses to your query. The traders you are soliciting here on ET are most gracious with suggestions and direction if you expose that determination you mentioned in your post,,,, "I am determined to become a profitable trader, and I know I will".

    Good luck, Senior Beginnend :)
  3. I agree with previous poster, definitely look at Ninja Trader, it is free unless you need to place live trades.

    The advice that was given to me a while back, and it saved me tons of $ was to never trade live unless consistently profitable on demo. If not in green on demo, live will only be worse. Now, once live it is a lot different, but mostly psychological. If you were trading stocks or options, sim is not as accurate due to real fills, but you trading decent index futures, so sim is very close.

    The change that I would suggest you make is to switch from fixed time frames, and pick either volume, range or tick based charts. Fixed time fractals distort the picture since the bars are created regardless if there is market activity or not.


    P.S. btw, cci is nothing more that a better visual interpretation of price action, just switch from candle sticks to a line chart.
  4. Hi Guys,

    thanks for your replies. I am following your suggestions and am busy with Ninja Trader. And indeed I want to look at the range bars. Another trader also advised me to look at rangebars via PM.

    Sorry for my late reply but it was a busy week (have been working and also trading in the evening hours, actually a good week this week, think because we are seeing some trending and not that terrible slow chop upwards. Basically traded just the price action - breaks on the bottom and also tried succesfully good strategie received via PM, with just a simple chart with RSI and MA).

    Will us the weekend to study and also post some EOD charts with entries and exits.

  5. uxtrader


    So where is Your daily chart analysis? I'm novice in futures trading and look at YM also because it suits my trading capital and money management. I'm extremely interested in Your progress! So go ahead, friend! Don't think that You job here is not interesting to others!
  6. the biggest thing that changed me from a loser to a winner was patience.

    I think you need to have more patience. As an ES trader, many times I say 'oh, i need to get in on this move' , but then I need to remind myself that the edge I have does not take advantage of that particular movement.

    If you are of the mindset that you need to take advantage of every trend or chop in the indexes, you will fail.

    Trading the indexes, you need to be like a sniper. One shot one winner. You find that entry, and you nail it, you make money. You dont want to spend 3 bullets trying to nail your target.

    I'd rather not take any trades for 2 days, and on that 3rd day nail a 6 ES point move, than trade coin flips for 3 days and be lucky if I come out ahead. Very few people can scalp and make $ trading the indexes every day.

    Make sense ? Its all a mindset. once you have the right mindset, you can begin to assimilate a system.
  7. uxtrader


    brilliant words, friend! i have a set of good setups which work nice but now i just learn to be patient thats why i still not consistent...
  8. I agree completely with Wiseman02. In fact their are a lot of things that are missing in the OP's Analysis. The RSI, MA is good, and all. But, more important is the cause behind a market index, or etc. If you don't understand market correlations, plus you try to take a trade in every type of range you will most likely fail.

    I use Trendlines, 20-Day MA, RSI and correlations. I only derive my edge from having a small amount of criteria match up, plus a certain amount of time, and volatility. Added volatility helps if the range is big enough to make room for late entries, and still be profitable. If the range isn't big enough than don't bother with it. Also if you're only looking for breakouts. Than trade only the breakouts. Scalping is just noise. It's something that makes your trading record look good. But it's the big breakouts that make enough money for someone to make up their loses.

    Be patient, and don't glue your eyes to a chart. Check on it every 5 minutes or so, and keep yourself pre-occupied. It keeps you from making emotional decisions. I trade Silver, Crude Oil, ES, Gold, Bonds, and the DX. I understand the correlations between those markets, and thus I engage in behavior.

    If I see nothing breaking out in the Crude. I look for something else in gold. If gold's not doing I look at the dollar. If dollar is falling I may consider a long position in the ES, or a Short on the DX. Either way I have multiple options to choose from. Which allows me to be selective, and not aggressive. It's just a thought. Learn correlative finance, or behavioral finance. It's very important to your trading success.
  9. Trading System. So now you have a strategy, next you need rules.

    My five golden rules are this.

    1. Define the longer-term trend

    2. Don't take trades overnight, over the weekend

    3. Don't trade within the first 30 minutes of a market open. It can be suicide.

    4. Stay away from ranges. Look for buy, or short opportunities in breakouts (intra-day).

    5. Take profits the moment my trend breakout indicates a movement in the opposite direction of my current trade. For example if you have a system that can detect good short, and long entries. Let's assume your short, and all of a sudden your system indicates a great possibility of earning money by going long. That means you should exit your short position. Depending on different market correlations you can jump on in it, or decide to be patient. But, look at my previous rule. Which is to determine the longer-term trend. Then determine if this is a reversal in trend or just a pop on a continued down trend. If the trend starts making higher highs, higher lows. Than obviously it's the makings of an intra-day uptrend. That means buying opportunities are available. So you can reverse your positioning to the buy side instead of the short side.

    The same could be said inverse. Let's say your long, and all of a sudden the system indicates a great shorting opportunity. That mean you should take money off of the table. Than you sit back, and watch the pull back. If theirs a key support level, and it bounce off. You're still at a higher high, with a higher low pattern. Than you should buy, as long as the system indicates that a great buying opportunity is available. The other possibility is a break below support level, and a reversal in trend. Than you could add to that with a short position.

    My rule is pretty affective. Identify trends ride them use the same indicator to get me out of a trend. Confirm the continuation of a trend ride it some more. If the trend is reversing confirm the reversal. Than ride the reversal of trend. I continually do that over, and over. It's so simple. I don't use 3:1 or any of that crap. That's just noise use the same indicators that get you in a trade, to get yourself out of a trade. It's so much more affective. When you start looking for ratios it screws up where a stop entry should be or where a good exit should be. Use your system as a dual blade. It's more effective that way.
  10. Thanks all, for your tips and also private messages. It was really helpful and sorry that i did not come back to the forum earlier.

    your replies have been an eyeopener, altough some of them just seem to kick in open doors, but it helps to really try an understand what you are actually saying.

    I changed my trading as follows:

    - changed to NQ's
    - get rid of ALL indicators (screw the indicators - they stop you from looking at what is really happening)
    - just look at the market: are dow, s&p, eur/usd, oil, gold etc trading around psychological figures. example: if the NQ is up 2,5%, does it seem logical that would go up in a straight line to 3%? no! the chance is to look at a pullback.
    - trade price action only: break-outs
    - take ONE trade a day (unless there is a no brainer second possibility)
    - patience
    - not overnight (was never doing that anyway).
    - no scalping (unless it's obvious to just take the scalp)
    - don't be afraid to loose (meaning: no panic-exits when the reason for entering the trade in the first place are still valid. this requires a mental set-up: do NOT stop thinking during the trade!)

    all of the above are probably all open doors as well, however, the main changes are: mind-set , kick out the indicators, look what the market is doing, and keep thinking during the trade.

    I have now been consistently winning for three weeks. altough still not sure if this is just an unsignificant exception, at least it's FEELS like I am a couple of steps further down the road of becoming a winning trader.
    #10     Feb 3, 2011