ES Trading Random Thoughts

Discussion in 'Professional Trading' started by wiesman02, Sep 11, 2013.

  1. Steps to being an ES trader:
    (I've been feeling quite creative lately, and these are just random thoughts of mine. I might have skipped a lot, but this might or might not help anyone. I've been lurking here for years, and i'm in the mood to get critiqued and criticized to death by the ET gods) lol

    1) Starting learning about the markets, and thinking this is really easy, lots of money to be made, so you start trading. Not have a freaking clue what you're doing, but quit your job and daytrade for a living anyway. Think you want to trade stocks. Learn quickly through others that $50k is quit undercapitalized for trading stocks.

    2) a few months in switch over to trading ES for its beneficial tax structure and ease of getting into the 'game'. Learn quite quickly that this is a zero sum game, and throw all indicators away except for moving averages as a point of reference. Lose your ass in the next 6 months. Get lucky by getting a mentor, and slowly learn price action behavior.

    3) Lose $30k in tuition money. Quickly learn PA behavior to a point where you can start to predict moves in the market, but cant really capitalize due to the lack of a really good strategy. You might have 'setups' but you aren't experienced enough to use these setups to exit in the correct manor. You also lack confidence nor do you really understand why these setups work so well so you dont take every one. This leads to net losers ! You also discretionary trade often b/c you still don't have that much of a 'clue'. In this stage of the game, discretionary trading means big loses to the untrained eye. IMO, those 10,000 necessary hours don't start ticking until you have a freakin' clue what you're doing. So hour 1 didn't really start for me until about 9 months into trading fulltime. You have 'epiphanies' constantly where you think you get it. Don't kid yourself, you don't yet.

    4) Start having 2-3 up days a week, followed by 1 or 2 large down days. Contribute this to inexperience, emotional trading, lack of risk management. One of the BIGGEST problems in this stage of the game is spending too much time looking for perfect setups, and not enough time identifying areas / times when NOT to trade. Knowing when not to trade is, IMO, more important that looking for setups. You can start to learn market behavior a tad better
    5) Knowing price action expertly. Being able to understand concepts of contraction / expansion in the ES markets. Knowing when certain days might lead to these concepts. Using ALL time frames in your analysis. All time frames can give you clues to how the market will move that day. Understand that computer algos and big fundies use EVERY possible indicator, and every possible PA behavior in their trading. Understanding this can help you understand market behavior better. Although you know that none of these strategies offer a holy grail. Prepping prior to the trading open in a very very detailed manor.

    6) You begin to learn 'where to look' to gain edges in this market. Through this study, you learn that finally, averaging up really can be a phenomenally profitable system. As your trading begins to turn profitably you can finally scale up from 1 contract. Now, you need to do crazy amounts of backtesting. You were not taking into account scaling out of contracts before b/c you were too busy losing your a$$ with 1 ! How to scale out, and let profits ride is now your next big hurdle. Understanding when to scalp out half, and let the other half run requires extensive testing. Its almost as if that 10,000 hours begins over again b/c this is something thats not taken into account as an ES newbie.

    7) You now know, 1) when not to trade, 2) Price action behavior, and 3) proper exits of your trades. But, now that you can trade without losing your a$$, you have the potential to make big profits b/c you've gotten further than most do in this game. You now have to take a closer eye in to 'risk management' . Granted risk management was important prior to this, but now that you can eek out some profits here and there, you need to take a more professional approach to this. Statistically learning the percentages that your setups will be successful (for me, this meant backtesting by going through historical charts at an alarmingly slow rate b/c i couldnt find a way to quantify this), knowing acceptable drawdown amounts on your account, and making sure ALL position sizing is proper for your account level.

    8) Ego starts to take a hold of you at this stage, and you think you are better than most traders. You are comparatively almost making the 'minor leagues'. You have the talent, but now you have to work on the pyschology. If you already know, 1) when not to trade, 2) price action behavior, 3) setups + exits, 4) proper risk management, then congratulations ! You are 50% of the way to being a successful trader. Understand 2 things at this stage. You dont trade perfectly. There's plenty more market behavior to learn that will constantly allow you to modify setups for better r/r. You are constantly learning when not to trade. Those early days in your career where you will take 5 loses in a row trading algorithmic lunch time nonsense chop, you might just get caught out once in a great while now if at all (along with that 4 or 5 fake breakouts that seem to occur during this trading time). The fact that you are not a perfect trader, and that you can sometimes watch yourself getting back to old habits can lead to psychological destruction. You might be able to trade profitably 3 out of 5 days in this stage, but the reason why its only 3, is you have not mastered the psychology.

    9) Mastery of the pyschology. For me, personally, I conquered this through meditation. If you only witnessed some of the temper tantrums i used to have when trading, you'd laugh hysterically.

    10) Maintain an open mind at this stage. You have mastered pyschology and have a somewhat profitable trading plan. Always fine tune. Understand that you can make hundreds of thousands after 4 years of trading, but its rare as there is a lot to go through.

    11) Always fine tune. Your setups and exits are always changing slightly according to market conditions. What was working in 2008 does not really work that well in 2013. Knowing that while PA never really changes as its primarily psychology and herd mentality with lots of computer algos programmed to take advantage of this, so it will always work.

    Here are some random helpful tips:
    1) Trade 1/2 size in risky areas that provide good r/r, and average up when you seem confirmation. This seems like an obvious tip but it took me years to accurately get this into my trading plan.

    2) if you are trading small TF's, always look at higher time frames as they provide helpful clues to market sentiment.

    3) Don't make decisions off indicators, but keep one or two on your chart. Why ? B/c other traders use them. Use the weakness of others to your advantage.

    4) Use EMA's as there are plenty of trend traders and reversion to the mean traders out there. EMAs will help. Think of use of EMA's somewhat like tip #3

    5) Study charts, breaking them up by time frame. For example: 12am - 929am est, 930-1130 est, 1130-130pm est , 130pm - 400pm. Different time frames during the ES trading day have different trading styles.

    6) You need some REALLY profitable days to stick around in this game. For example, if your average day is $200 per day, you need a few $600's in there. You need to get 'lucky' if you want to call it that, by an outlier day profitability wise. For me, this means accurately predicting early on in a trading day, if we are likely to see a trend for an extensive period of time. Scalping for 1.5-4 points makes up the bulk of my trading, BUT holding for a few hours at the LEAST, to capture 7 or 8 is AS important. Having the balls to hold with conviction is TOUGH !

    7) The only reason I have been able to make it to year 6, was b/c after quitting my job to trade for a living, I realize rather quickly that I needed a job to support myself during my 'tuition years'. Being able to work 4pm - 12am, or 12am-8am and make $60-$70k doing so allowed me to not rely on trading profits for years.

    8) When you start to make money, dont go out and buy a corvette with cash like a baller. B/c when u realize you still have a lot to learn (ie: drawdowns, risk managemet, psycology)its often too late as you have to sell it to refund your account to acceptable levels LOL.

    9) It seems that most gurus will tell you not to trade near the pit open. Its too volatile, risky, yada yada yada. All a load of shit. I trade my largest size near the open, and have the best win percentages at it. I think its the easiest time frame during the ES trading day to develop a successful strategy.
    Thats it, take it or leave it. Time to get back to lurking ET, as its much less drama :)

    All this has been repeated, for years on ET. Don't bother PMing me, or getting me to respond to this thread. Back to lurking. Much less drama :)