One Setup, Two Points, Trade Size

Discussion in 'Index Futures' started by jasper6, Dec 2, 2007.

  1. jasper6


    Lately I have been trying to pare my trading down to the single highest probability trade of the day.

    I find the moves in the first hour on the ES are the most definitive (i.e. price goes from point A to point B with the least amount of drama). I assume this is due to pent-up supply or demand from the last close. It may also be due to larger institutional trading as opposed to the games played later in the day by smaller traders.

    As such, my mantra has been "one setup, two points, trade size". In essence, I am trying to take the day's highest probability trade that consistently (say 80% of the time) gives two points in profits. This might be the 10:00 trade, for example, after the news is out.

    My theory is it is easier to scalp out two points than to hold waiting for the big winner. This probably comes from trying to hold for the big winner in the past, only to watch a small winner turn into a loss.

    With this theory, you would only be trading the first hour of the day, then walking away.

    Also, you would build size over time. Say 1 ES contract per $7500 in account equity. This would keep the per trade risk around 1.3% using a two point stop.

    The idea would be to let the account build and to build contracts over time. At 10 contracts, you would be netting out about $600 per day less commissions (8 x $100) less (2 x $100).

    Does anyone else trade this way? Just focusing on the single best trade of the day and forgetting about the rest. I would think it would be a lot less stressful than trying to figure out the price action for the next 5 hours. Not to mention the brain damage of just staring at a monitor for 6 hours straight everyday.
  2. Greetings,

    What if your sweet setup occurs more then once in the day time? I usually try to trade on 3-4 times a day even if Alex is making 7-8 calls in for the traders. If you want to stare at the monitor less I'd just trade from 9:30am to 12:30 or so. I've lost more money in the afternoon then any other time period. Your on the right path. Limiting the amount of trades you do is definitely key for a lot of people. There is a range break setup I take every day. Only once a day!! It is profitable over time but on the days it loses I still feel unfulfilled. Trades like the 'gap fade' are also good once a day type systems.

    Geoff / Cajun / Co Admin