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


Diaper Trade

This is my single favorite trade. You can chart this on a blank chart with no other indicators. This is basic support and resistance.

These show up all day long on a 5 minute chart. You are not going to get rich making 10-20 handles on these trades, but they can provide you with steady income.

Stuck longs. These are people that bought and area and it very quickly sold off from that area. They decided they knew it all and did not honor their stops. The market has sold off and they are praying and wetting their diapers hoping price gets back to that level so they can get out and get their money back. You could take advantage of their fear with a short order where they got stuck and get a few tics or a handle out of it as they cover their bad positions.

On this chart that is around 2564

ES 03-19 (5 Min)  1_7_2019diapertrade.jpg

You had a similar setup with stuck shorts around 2538ish. You could place a waiting long order at that area and expect to gain a few tics as the stuck shorts cover.

Do not get greedy with this setup. Take 2, 4, 6 tics and get out or scale out and move your stops to your entry level after the first scale.

Practice in sim first.