vulture, You're right. I have never traded ES before but I have traded SPY. I am not naive or I would be trading them all ready. I've read so much of the futures is so much harder than stocks stuff and have invested much time into trying to believe that is true. In watching behavior of ES & SPY this week using same trendlines, S/R, and entry indicators, if I had traded the ES the same way I trade the SPY I would have had success, at least theoretically. My question, which no one has yet completely answered, was if I enter a trade on a high-probability pivot point with the overall trend, what is a reasonable stop loss to set upon entry. Give me your opinion on an this chart. I do not want to go larger than .75
If and this is a big IF, you can time your entries into the exact pivot and you do this well, you will have trades that probably will not go more than a tick or two against you...For example, you could have sold 1119.75 today into a play at the 1120.00 resistance...Regardless, the real question is how could you have traded out of that position if it had touched a little bit above it...You may have better luck using smaller stops in the mid-morning chop...Oftentimes, I will use the mid-morning run into support/resistance in an attempt to get positioned for an afternoon run...Lots advise against it, but by the time you get into the afternoon market, you are not going to be able to simply risk 3-4 ticks to capture the reward...This is the reality of using tight stops and looking for small scalps... You also should avoid the first 30-45 minutes...Obviously, this time has the most volatility, but since your goal is only to net 1 pt vs a risk of less than 1 pt, the movement is too quick and the odds of it overshooting your stop are larger... I would never say that something is impossible...I would only say that you are going to have to exercise extreme mental and emotional discipline to execute this strategy...And please think of your contingency plan...What to do if you are down 2 pts...This will really determine whether you can pull this off or not
if you are looking to take a point - you will have to have at least in theory - a .5 loss limit - but of course - you will have to let everyone else trading that day know that - so they don't accidently spike up or down a point or two and screw up your stop loss
I hate to point out the obvious, but we can all trade charts at the end of the day. Based on your chart, I would think that just below the previous bar would be the place to put your stop, and if each line is a tick then you are looking at 2x your stop.
savage, nice chart, what software? anyway did you seriously think about placing a trade there? I hate to trade this time of day, you can see that you could have been chopped up several times in this last hour broadening formation that had a 4 point range. I think the 1st hour is better because the moves are faster, you are right or wrong immediately. As for a one point daily objective , it's not that easy even ONE point. The difference with the SPY is the leverage, each little wiggle can really be painful to watch when you have a position in ES, so you enter the 5'trend on a nice pullback and two minutes later youre down 1.5 point oops! what do you do you? do you just wait? I think that once you know to enter before the obvious has been seen by everybody, you can almost always get out of a bad trade even or up a few tick if you just wait but it can be nervewracking depending on your size I guess. But you can get there only with experience.
Savage, I think that you are asking a question that can only be answered by yourself, because none of us know your trading system. The way that I would go about finding an answer to your stop loss question is to paper trade your method. Try using a 1.0 point stop loss and see what happens. I think you will get stopped out all the time with such a tight stop, but I don't know because I have never tried to use a 1.0 stop loss. When I test a new idea, I will usually do a manual back test by looking at historical charts and advancing the chart one bar at a time. If you have the ability to do that with your charting package you will find out quickly what type of stop loss will work with your method.
Thanks for all the replies. It always nice to hear the other side of the story. I intend to start trading hopefully this week. If anyone here actively daytrades the ES and is on Instant Messenger (AOL or Yahoo), I'd like to correspond during the trading day to bounce ideas off of. Please send me a private message with email or IM name if interested.
Savage, Couple of points. In light of the educational crisitism, which is great, the only real way of finding out is by trading. Thing is with paper trading, you'll always outperform. Make sure to take into account the spread. With .75 stop, you'll really have a stop of 1.25 with the spread. And most of the guys are correct in that there are quite a few point wiggles which also must be taken into account. Main lesson, come up with a plan, ie get in at $X get out at $Y and STICK to it. Do NOT change your stops, unless its profitable and you're trailing them. Afterall, is the cost of a few thousand in education worth the potential reward of developing the skills to make money for yourself forever?? My answer is yes.... cheers
Hi Savage, I am guessing that your entry price is 1124.5-1124.25? If so, your potential initial stop loss would be about 1.5. Why? Because if your stop is greater than 1123.25 you have a very good chance of getting stopped out on any minor retest of the bottom. If I had to trade with a stop less than 1pt, I would enter at 1123.5 or put a limit order at 1123. If you do that and you are wrong, you should get at least a quick retest back up to 1123(within 1min) where you can scratch the trade or sometimes you even get the exact bottom. I think 1pt might be a bit small of a stop. Good luck. Let us know how it goes.