Credit Suisse Fx Strategy - How to Day Trade E-Mini Futures
We've all seen the teasing advertisements online and in financial magazines, about how some average Joe made millions day trading from home and now wants to teach you his same techniques of success... for a small price, of course. Credit Suisse Fx Strategy
Unfortunately, most of these blowhards often turn out to be charlatans selling outdated "snake oil" trading strategies that simply do not work consistently. Let's face it, in this volatile market, anyone can get lucky with a few good trades here and there. However, the key to successful day trading is not hitting homeruns, but consistent singles and doubles. Your goal should always be to make a certain amount everyday for the rest of your life.
This amount can differ according to your financial needs, of course. But the average investor should probably aim to earn $300 to $3000 per day from day trading. Not only is this very doable, it's actually very probable if you follow the strategies in this article.
Firstly, if you are serious about becoming a full-time day trader, you will need a good computer with a fast processor and a secure, broadband internet connection. That is a given. Secondly, you will need to open up an account with a brokerage firm that specializes in futures. Why futures, you ask?
Futures are the preferred day trading instrument for a number of reasons. They are very liquid, trading millions of shares per day. They are highly leveraged, giving you tremendous buying power. They trade 24 hours a day, letting you get in or out of a position even in the wee hours of the evening.
E-Mini Futures
We recommend trading the E-Mini S&P 500 contract (symbol: ES). Not only is this the most actively traded futures contract, but it tracks the entire said index (in fact, it leads and doesn't follow it) giving you the safety of buying or selling the entire market rather than putting all your eggs in the fate of one company or "basket" as it were.
Now, despite its safety, the E-Mini contract is also extremely volatile. Whipsaw moves are commonplace, and algorithm robot traders dominate during low volume periods often causing sudden, explosive price action. As well, the prop desks of Goldman Sachs, JP Morgan, and Credit Suisse often push or pull the market (seemingly at will) in a new york minute, so you never want to be caught on the wrong side of the trade during one of these breakout moves.
That's why we recommend that you never try to anticipate the moves of the big traders by establishing a position before they show their hands, but that you only try to follow in their footsteps after their hand has been exposed. Elephants always leave tracks, so your job is to spot the clear direction of those tracks and jump on for the ride.
Now, there a certain times of day that offer better trading opportunities than others. We tend to prefer the morning session (from 9:30 to 11:30) as this time frame presents good two-sided trading volume and excellent market rotation, allowing you to get in and out of trades for quick profits. Credit Suisse Fx Strategy
How To Day Trade
A key strategy to successful day trading is to plot a moving average of the NYSE-TICK chart and watch for divergences during early morning moves. Very often if the futures index is making a new swing low that is not confirmed by the, say 34 EMA of the TICK, a strong reversal is likely. Also, if the average TICK is staying above the zero line, that tells you that there is a bias toward the buy side, as the majority of stocks are beating bought at the ask (buying pressure) and ticking up. As well, during the first hour of trading, count how many TICKS are occurring at +800 and how many at -800. This could give you a clue as to the underlying strength or weakness of the entire market.
Take note that the morning session won't always give you a solid trend move that you can just sit on. More often than not, there is excessive volatility until 11:15 or so, when a more clear trend can start to emerge. In order to understand possible market direction, look to see where the Point of Control, or highest volume area, of yesterday's session exists. The market tends to gravitate toward prices where there is high volume. Why? Because that's how market makers make their money... with volume! Every contract traded puts fees in their pockets, so the incentive to bring the market to the nearest high volume area is obvious.
Trending Or Chop
The ability to determine when a market is trending and when it is in random chop is one of the most important skills to learn in any day trading system. One of the best indicators to use for this purpose is R-squared indicator.
Add this indicator to your charting software and plot it with your real-time data feed. When a market move is the result of a clear trend, the R-squared indicator will move above the 70 line. You can jump on the move when the line crosses this 70 and exit the trade when the line crosses back below the line.
There is much to learn to become a successful day trader. Before you begin in earnest, open a free simulated account and practice trading with pretend money. Once you are comfortable with some of the techniques discussed here, then you can apply them in real-world trading. Be sure to start with small positions, no more than 1 to 3 contracts as a beginner. Remember, the ES contract is a highly leverage product and trading without a defined system can make you go broke in record time. Credit Suisse Fx Strategy
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