Some tips in Trading the ES successfully

Discussion in 'Technical Analysis' started by EsKiller, Mar 21, 2011.

  1. EsKiller


    I haven't seen any good thread started lately on trading the ES. I'd like to start one. Perhaps it'll die quickly, but I will add to it every now and then. Probably not everyday, but here and there when I'm in the mood.

    This contract is extremely difficult to trade and only the best pros can beat it. I'd like to provide a few tips and tricks to trading it successfully. There's no magic formula that I'm providing. Just simple observations that I've learned throughout the years. There will be no indicators in here. I'll talk VERY rarely on volume, if at all. I'll have some moving averages on my charts and thats about it.

    The first point I'd like to make, and I know its beaten to death on ET, is risk to reward ratio. I very rarely make an ES trade if I can't get at least a 1.5 : 1 rr ratio. In simple speak, if I'm risking 2 points, my minimum target is 3 points. But most of my trades are at least 2:1. This means I'm not trading very much throughout the trading day. Some days I won't trade the ES at all.

    I try to take advantage of the predictability of the big trading algorythms from large institutions. Price patterns tend to repeat over and over again. Fear, uncertainty, and greed drive these obviously. But at certain points in time with certain patterns developing, price is very predicable. Successful traders know that these points will not happen often, sometimes not even every day with the same instrument, thus the need to trade multiple instruments. I'd like to outline a few ways to take advantage of the ES in this manner.

    The only 4 setups / patterns that I will trade:

    1) Trends
    2) Reversals
    3) Price Pattern failures (when a certain pattern develops and fails to develop in the way thats expected, there's a good trade here)
    4) Buying Support off the open.

    I'll go into all these soon. I'll post charts and whatnot and go into some detail. One thing I do not trade is chop. Consolidation days and chop are usuall a waste of my time. They're normally a result of either strong gaps or after a strong trend where the algo's are all out of wack trying to compete against themselves to position themselves for the next move. I have no interest in trading that crap. Normally, there's not a trade with a good enough risk to reward ratio worth my time.

    Stay tuned for the first chart coming soon....
  2. How do you know when to trade and when not?
  3. You are missing exit, which is much more important than entry. :D
  4. What is so special about the ES?
    Why do you think it is so much better than Crude Oil, The Russell, or Euro FX?
  5. EsKiller


    I'll post more later tonight.
  6. jo0477


    Thanks for starting this thread and sharing your experience. I don't tend to use any indicators other than vol and MA (sometimes Stoch) so I'm looking forward to your posts. I'm hoping there will be some useful info for me here.

  7. Every mkt has its own characteristics, as does every trader. People have to find the mkts they trade the best. I like the ES because of it's high intraday volatility and liquidity. FX mts traditionally have longer trends. I've never known a successful trader to say one is better than the other, only that they can trade one better than the other.
  8. Agree, I get a way better "read" on CL, and NQ than any other markets. My statistics verify this also. Interested in seeing how ESkiller interprets the ES.
  9. His/her method may have been backtested on many different markets and he discovered it's more profitable on the S&P 500 Emini ES futures. In contrast, someone using a different trade strategy may find their method is more profitable on a different trading instrument.

    Simply, it should be obvious these are completely different markets. Therefore, price action is different and that in itself alone will produce different trade opportunities and results in comparison to another trade instrument.

    Too many traders get married to a trading instrument. To prevent trading an instrument with less profit potential...that trader must backtest a method on many different trading instruments and then determine which trading instrument to trade based upon the backtest results. Further, a trader must do the backtesting again whenever profit levels change from the norm to determine if a different trading instrument is more suitable for trading via the method because of key changes in volatility. I use the word volatility because more often than not it's volatility that has the most impact on trade opportunities and trading results.

    However, there are exceptions like different time zones may not be desirable. For example, if you live in the U.S. and you're trading Emini ES futures and then you do a backtest review to discover currently the Hang Seng HSI futures produces the best results via the trade may decide to continue trading the Emini ES futures because you don't want to be staying up awake through the night to trade the Hang Seng HSI futures price action. This is an example of the trader making the decision and not the trade method about what should be traded although that decision will produce less profits or worst.

    In fact, I've come across many traders that were consistently losing due primarily to one fact...they were trading the wrong trading instrument. They discovered such when they backtested their method on different uncorrelated markets to find out their methods were profitable on a different trading instrument.

    Don't get married to your trading instrument.

  10. How does price action differ between charts and symbols? Doesn't price move the same on all charts?
    #10     Mar 23, 2011