So you want to make a living trading?

I see many new traders always looking for the “big trade” or the “new idea” for their trading. The key to success and building wealth is small, repeatable gains compounded over a long period of time. You need to be able to do that to have success as a trader. I have heard from all sorts that “that’s not enough” or “I need 10 handles trading the futures”. How about some perspective.

Here is an article from Wikipedia about current household income in the United States. The gist of this article, with data from the US Census is that the average household income in the US for 2018 was $62,626. That number probably seems small to someone living in New York or Los Angeles and probably seems large if you live in Fort Smith, AR (home of Whirlpool). But it gives a hard number goal for a person to look at and develop a business plan for trading the futures.? What? You did not write a plan? Did you think you would roll out of bed, hop on your computer and instantly be the “Wolf of Wall Street.” That will not work.

The ES emini future is a product offered by the CME that represents the market derived future value of the S&P 500. From here on I am going to call this the ES. The ES trades in individual contracts and these contracts move in what are called tics. These tics are a .25 movement in the price each these tics is worth $12.50 for each contract traded. Trade 10 contracts and it’s $125.50 a tic. 4 tics add up to what is called a point or handle. A point is worth $50.00 Commissions on the ES are usually less than $2.50 per side per contract for a total of $5.00 or less per round trip. A round trip is opening a position and closing of the same position. You can usually do better than $5.00, but I am using it to simplify the math. So we will call the round trip for a profitable 1 point trade a win of $45.00 with one contract.

Why was this important? It was important because it lets you do some simple math. If the average household income is $62.686 all you have to do is divide that by $45 and you get how many points you need per year to make as much as half of the US. In this case you need 1391.68. (62686/45) I will call that 1392. That sounds like a huge number to a new trader? It’s only 26 odd points weed or a little more than 5 points a day.. The market doesn’t care if you get those points in one trade or ten trades. The goal is to develop a system that allows you to make those 26 points a week.

Once you learn how to make a point with 1 contract. you can use the same methodology to scare up to move contracts as your account grows. The important thing is the methodology and the realistic goals.

This is my favorite trade setup right now. It’s simple and can be done in every charting package and does not require special tools. What it does require is practice and patience. When I saw practice. I mean do this for a few months to make sure it works for YOUR type of mentality. Patience means WAITING for the trade to setup. I take no responsibility if this does not work for you. I cannot trade for you.

Good luck and I hope this helped someone


New chart image locations

I use to host images that I share with other traders. I had been using this folder location for the daily files and this location for my educational files

In the past, when doing my Sunday homework, I had been deleting the intraday images to cut down on the clutter. Usually, just leaving up the 4 hour charts from previous Sundays.

I noticed that caused some broken links on some of the earlier posts. That will be changing. My intraday charts will be posted here. so they can be specific to this blog.

Being Greedy

I have been selling call, call spreads, put and put spread options on the futures for the last year. I have been using a pretty simple strategy doing these setups. If the ES is up or down over 20 handles + then I will sell counter direction options with a 15 or so delta.

So for example. Today the ES is trading 3257 + 23 handles or so. The 3300 Jan 17 is selling for 3.75 with an 85% chance of being out of the money at the time of expiration. So I would keep the money.

I have been doing this for about a year now. Earlier this year, I laid out some Jan 10 3260 and 3270 naked puts. They were pretty much underwater the day I after I sold them, but the percentages were still in my favor. This is not unusual because I am usually selling them between the bid and ask.

The Iran missile attacks last night tanked the market and also tanked the price of those calls. I had the opportunity to get out for a scratch and slight profit. The math worked out that there was a 98% chance of those being out of the money on Friday, so I did not cover those positions. Now those calls are underwater again. That was a mistake on my part.

I got greedy. When I have been in negative positions for a length of time, a day or more, I should have been happy with just taking them off for break even. Live to fight another day. I should have done that last night.

What is a future?

A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future. Hence the name “future.”

This website will discuss getting started in trading futures, some basic strategies and my market commentary.