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

Kheldar

ADR Average Daily Range

The ADR (Average Daily Range) is the daily high – daily low / number of days in the count.

The last 5 days range for the S&P 500 Emini March 20 futures contract are 56+28+46.50+37+56.50 totaling 224 diver that number by 5 and you get 44.8 or basically 45. You can take this out for any number of days that wish to count.

How might this be useful as a trader. You could use it to find possible pausing points in a directional market. Today the ES March 20 futures are down about 35 handles. WE are getting to a point near the ADR. Prices a usually like rubber bands. They do no usually hand out away from their midpoints often. On a day like today a counter=trend trader might consider a long order just in front of that -45 number or around 3244 in this case.

A trader might also consider these ranges in calculating their risk. You could use a number that is 1/4 of the ADR as a stop number a a target of 1/2 the ADR for their first scale for a 1:2 risk/reward ratio. These for each trader to decide.

Scene of the crime

You may have heard traders talk about the scene of the crime or SOC. This is an area of the chart where price has moved up or down very quick for an above average range from the previous price. This could have been a movement out of a consolidation zone or a news based event.

When these moves happen, it is expected that the price will return to the start of that move to see if the buyers or sellers of that move still exist.

This chart is a picture of the 15 minute S&P 500 emini futures (ES). There was a selloff because of news out of China of a virus outbreak. Where that selloff occurred is a price a trader should have noted on their chart with the expectation that price would return to that level. In this case, price did return to that level on the chart. I have labeled that the return.

Price made it back to the Scene of the Crime

Sceneofthecrime.jpg

HVN LVN

HVN is a High Volume Node and LVN is a Low Volume Node

These are terms used by traders using either volume or market profile. HVN is an area inside a profile where the most volume has traded. An LVN is where the least volume has traded. HVNs generally act as magnets for price.

Terminology HTF

Higher Time Frame (HTF) This is a reference to a larger trader (an institution with larger funds) that has come into the market and moved it either up or down. These groups are generally working on positions that would take longer times to develop vs. intraday traders