Trading Tactics - Position Sizing and Controlling the Trade

Index future traders should always be watching out for potential strategies which can enhance success rates.

One strategy that allows flexibility in improving profitability is position sizing when trading mini Dow contracts.

Managing our emotions with strict discipline is one of the most difficult elements of any type of short term trading.

We all naturally want to hit a homerun rather than a single but success only comes to those traders willing to forego the homerun and become consistent at base hitting.

 Check The Daily Emini Trading Room Results

One way to overcome the swing for the fences mentality is to utilize position sizing.

For example, if a trader were to enter a trade having purchased ten mini Dow contracts he can scale out of the contracts as the market moves in the direction anticipated.

He could sell half or five of the contracts once the position reaches profitability and hold the other five to let profits run if the market allows.

In this way emotionally undisciplined traders can make a profit and still satisfy there desire to swing for the fences.

Although it is not recommended for inexperienced participants to utilize this trading method, experience has shown new traders have great difficulty in selling a position when their emotions tell them they could gain more profit if they leave the position open.

However, by selling a portion of the position once profitability has been attained, the trader will at least lock in some profit and still satisfy the need to follow his emotions until such time he gains trading maturity.

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Become a Student of the Emini Futures Market - Identify, Study and Master the Trade

Correct identification of futures market conditions is necessary to maintain consistent trading performance as is attention to proper tactics to capitalize on these conditions.

However, proper identification of market conditions does not equate to profitable trading success by default. 

Emini trading setups are limited as the charting landscape moves from one potential setup to another as it ebbs and flows reacting to internal and external forces.

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Successful emini index future traders learn how to differentiate between noise and potentially strong setups for possible trade execution.

In more practicable terms, the experienced trader knows when to sit on the sidelines and when initiate the trade. This is the art of mastering the emini trade.

Those traders willing to become a student of the market by always watching, testing and reviewing his trading journals to understand why a trade went well or turned out to be a broken trade will eventually become a successful trader.

Emini trading requires a focused and dedicated approach. New traders would do well to understand that by entering the index futures market they will be going against some of the most intelligent and brightest minds in the financial world.

Mental preparedness not only is a requirement but is vitally important to long term success. By first mastering the emini trade, you will be able to compete against some of the best traders in the world.

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How To Trade The ES Emini Contract

Below is a good video on how to trade the ES S&P 500 Emini futures uploaded to YouTube.com by
http://daytradingradio.com/ . It's a pretty good video showing a 5 indicator trading system. For those of you just entering the index futures market, specifically the ES, this is a good introductory video.

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Trading Emini Futures Without Indicators - Video

Many professoinal traders in the Emini Futures markets don't use any indicators or even  fancy charts for that matter. They trade on price action alone using only a time and sales screen. Can it be done? Absolutely! Below is a video  by daytradetowin.com showing a live example trade of the ES contract using only a time and sales screen.

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Time and Sales, a.k.a Tape Reading

As you can see in the above video, it is possible to trade effectively without using any indicators other than calculated support and resistance levels along with a time and sales screen. Tape reading is how most traders identify this form of trading. Tracking the order flow with the screen is called reading the tape.

Using calculated support and resistance levels, the trader waits for pre-determined price to levels to enter and exit trades. For a more in depth tutorial about tape reading, you can visit TradingSim.com where they have an excellent tutorial about reading the tape.

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Jeffrey Brewer Interview - Founder of the Power Emini Trading Room

Read this transcript of my recent interview with Jeffrey Brewer, our head trader, to learn more about this unique day trading environment. 

Phil: We are here in the studio today with Jeffrey Brewer, our head trader and host of our weekly Emini Show - I have to say... it really looks like a fun place and you already have quite a following of traders, you must be doing something that people like!

Jeffrey: Thanks Phil, yeah I have to tell you, its been great, we are really getting a good turn out from people all over the country that love the concept of day trading the emini and there is nothing better than being able to interact and share trading ideas and learn from each other during the day.


Phil: For those people who don't even know what the Emini Futures are... can you give us a quick overview?

Jeffrey: Well there are many different "Emini" futures contracts that can be traded now, but the most popular is by far the original S&P or ES, that was introduced back in 1997 by the Chicago Mercantile Exchange or CME. Being 15 years old, has become one of the most important trading vehicles worldwide. For example, the average daily volume for the S&P ES contract is over $140 billion, which exceeds the combined traded dollar volume of the 500 underlying stocks themselves. Basically the Emini is very straight forward. The contract price moves in 0.25 increments called "ticks". Each tick of movement is $12.50. There are 4 ticks in a point which equates to $50. So a 2 point move in your favor makes you $100 for example. The futures symbol that is use is "ES".






Phil: What is the main advantage of trading mini index futures for those who may only be familiar with day trading individual stocks?

Jeffrey: There are several advantages that come to mind right away with the mini contract. The first and best is probably the incredible built in leverage you get with the emini. For example, just trading one contract is the equivalent of being able to trade over $50,000 of the SPY for example. And a new trader can setup a futures brokerage account for only a few thousands dollars and begin trading several contracts. So the leverage is fantastic for somebody that is not heavily capitalized in the market. Of course, when trading with this kind of leverage, proper money management is very important and you typically do not hold any  contract positions overnight. Other advantages are the great liquidity, the fact that you can trade long or short with equal ease.


Phil: Do you think it easier to day trade stocks or the emini for beginners?

Jeffrey: Definitely the Emini and here is why. First of all, lets go back to the fact that every tick is always $12.50 of price movement and every point is always $50.00. This is fixed amount per contract traded, so it is very easy to learn. Without to much trouble you get into a rhythm shooting for 3 tick targets or 1.5 point targets for example, no math involved. With individual stocks on the other hand, you will constantly be trading different priced stocks and different share amounts so there is a lot more math involved every time you take a trade to determine your correct position sizes stops and targets. When trading stocks you have percentages targets which have to be calculated, but with the mini contract its just the ticks and points which is straight forward. So the whole Emini thing is a whole lot easier for a beginner to get their head around. The other thing that makes it easier to trade is that we trade the same vehicle everyday. With individual stocks you many times get stuck in the trap of constantly having to scan through large numbers of equities the night before to find just the right trading setups for the next day, and then many times morning gaps the next day mess up your trade entries. This is not only frustrating but results in a lot of wasted time. Trading in this futures market we do not have morning gap problems because it is a fluid market trading 23 hours a day.


I will be posting more of my interview with Jeffrey Brewer next week...stay tuned!

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Lessons and Hard Knocks

Costly Lessons Learned

I remember May 5, 2005 very well as it was the day I realized I needed to make a change or my trading days would soon be over. Most traders experience days they will never forget and for me, May 5, 2005 was my unforgettable day. This was the day GM was downgraded to junk bond status by Standard and Poor’s Corp. What was so surprising about this announcement was not that it WAS announced but WHEN it was announced. The news hit the wires in the middle of the New York lunch hour! What is the significance of this particular time? For me it was the fact that I was holding a long position of five YM contracts when the news hit the wires. Needless to say the news resulted in a death spike of epic proportions and I lost a few thousand dollars in the blink of an eye. Hopefully you can avoid this kind of disaster and I've provided information that can help later in this article.

You may be asking yourself why am I telling you this? Because this was a major turning point in not only my trading career, but my life. I learned hard lessons from this event and when I look back now, I’m glad it happened. I know some of you are probably snickering and thinking, “Well, it’s good enough for you if you are stupid enough to trade during the New York lunch. You should know better!” You’re right, I knew better since most experienced traders are away from their trading screens taking a well-earned break from the morning session’s action at this time. Not me! I wanted to make up for the losses I had incurred previously and forced the trade because I lacked discipline and money management skills. (I’m snickering now because some of you reading this know exactly what I’m talking about).

Some of you may have mastered trading during the New York lunch hour. I haven’t and won’t attempt it again. At this time of the trading day the futures market is in the doldrums and really not doing much since the big guns are at lunch. My mistake on this day was really a combination of mistakes. First, I shouldn’t have been trading at this time of day and I knew it. Second, at the time I thought major news events like this were only announced after-hours. WRONG! Third, I didn’t have a stop loss in place and it wouldn’t have mattered anyway since the spike happened so fast it would have blown right through my stop. Fourth and most importantly, I was trading (gambling is more like it) on pure emotion rather than sound trading principles. All I knew is that I wanted to make up for my losses! Guess what? I sustained an even greater loss.




Are you experiencing some of what I mentioned above? Have you traded when you shouldn’t be trading? Have you forced trades in an attempt to make up for previous losses? Are you gambling rather than using disciplined trading methodologies? Will you continue to throw the dice and hope for the best or learn to trade well? If you’re reading this, you probably are guilty of many of these. Most of the articles on this blog are about trading methods, indicators, risk management and detailed information about each mini contract. I wrote this article because I’m getting a lot of emails from people struggling with their trading. First let me say, I’m flattered that you would consider me worthy of answering your questions. However, I started this blog about four years ago because I love the financial markets and particularly the index futures market, but I’m not a teacher or a mentor. The articles I have written here have resulted from my experiences as an index futures trader.

Over the past four years I have tried to direct people to sources that will help them with their futures trading and from the feedback I have received over this time period, I have been successful to some degree. However, as this blog grows it receives more traffic and I feel I have a responsibility to my readers to share with them how I reached a level of success with my trading. After the losses I incurred on May 5, 2005 due to the GM downgrade, I realized I had to make a change. I knew I didn’t want a canned trading system designed by someone else, I wanted a teacher. Someone I could follow along with during the market day and watch as they traded. I wanted to learn why they took a position and why they didn’t. I wanted to learn the dynamics of the markets and how to interpret market data.

I scoured the Internet searching for trading rooms. I spent more time than I care to admit on Pal Talk in some of those trading rooms without success. Finally I found Firetraders. They closed down a few years ago since the founder decided to move on to bigger and better things, but the education I received during the six months I was a member was priceless. I learned how to trade, use discipline and most importantly I learned money management. They did not sell a canned trading system for thousands of dollars but they did offer a trading room designed to teach and help inexperienced traders become successful emini traders. You can join our interactive trading room and benefit from following along with experienced traders.

If you want to learn as I did, nothing is better than a live trading room. It doesn’t matter which mini contract you trade, ES , YM or the NQ , they react to the market in similar fashion. The moderator I followed traded primarily the ES and I traded the DOW YM. Although we traded two different contracts, the fundamentals were the same. More information about the various contracts can be found at the CBOT and the CME websites. Thank you all for your emails and I hope I’ve provided enough information here to hopefully get some of you that are struggling on your way to trading success!

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Using Trailing Stops In Your Trading System

As traders, we are all familiar with the feeling of excitement when the trade goes our way.

The satisfaction of knowing we used the necessary discipline as required by our trading system and followed through adhering to the rules as outlined by that system.

We watch in anticipation as the set-up materializes and reveals the entry point we expected.

Order entry was executed without a hitch and now we are watching as all our hard work has paid off…so far.

The next step however, and the most difficult for new traders is locking in profits.

Check The Daily Emini Trading Room Results


This area of the trading process is where many deviate from their rules based trading system and let emotion take over the trade.

Many times profit is erased and a loss is incurred because the futures trader fails to follow his system and obey his stop loss.

Maximizing profits is the goal and the only way to ensure we lock in profits already made is by utilizing and enforcing the trailing stop.

Are Your Stops In Place?

The trailing stop is dynamic in that you as the trader will continuously adjust the stop as your position continues to move up with the market if in a long position.

The opposite would be true if the trader were holding a short position and the direction is down.

By continually moving the trailing stop as our position moves, we lock in profits already made, effectively a guarantee that a loss will not be a result of the trade.

The trailing stop is a one-sided calculation in that it is calculated to move in only one direction, trailing our position as the trade moves in the direction we anticipated from the beginning.

The trailing stop is only adjusted as our position makes new highs if we are long the market or adjusted downward if we are short the market.

The trailing stop is never adjusted opposite of the initial move. The trailing stop is designed to protect profits already made, only.

Many times, new traders begin a trade with the market going in the direction they expect and are quickly in the money.

Reversals Happen - Often Unexpectedly!

But as is often the case, the market reverses and turns against the trader. Either out of emotion or the absolute need to be right, the new trader either fails to obey his trailing stop or never considers using one in the first place.

Profits made earlier rapidly evaporate and turn into a loss which could have been avoided had the trader obeyed the rules of his trading system and entered a trailing stop order.

Of course, a initial stop loss order should be implemented when the trade is executed in the beginning.

The initial stop loss is there to protect you from a large loss should the trade go south below your entry point.

The trailing stop is there to protect profits as the trade unfolds and continues to move in the direction you anticipated when the order was executed.

Index futures can be fast paced, volatile and is highly liquid and it is the equivalent of trading suicide to actively use any method without employing both initial stop losses and trailing stops in your trading system.

Trailing stops can be used and are used effectively in both day trading and scalping no matter which of these emini trading methods are chosen to trade the index futures market.

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A Brief Trading Course In Relation To Money Management And The Traits Of The Futures Trader

Knowing Your Personality And Risk Management

The index futures market has experienced a escalation in volume over the last few years providing a robust trading instrument on the most important futures indexes.

Check The Daily Emini Trading Room Results

What makes emini futures so appealing is traders no longer need a a big trading account on hand to play the futures markets seeing as margin account requirements are significantly lower.

With extra futures traders involved through the day by day sessions, improved liquidity and volatility create several day after day possibilities for traders to enter successful trades.

However, index futures trading will call for a certain degree of proficiency from the index futures trader to be successful.

Take A Pesonal Inventory and Self-Evaluation

If you happen to be considering trading in the mini futures markets, it is imperative that you first consider a individual inventory of equally your personality qualities and your skill level in the futures markets.

Mini contracts trading is best utilized by those people that are seeking to harness a shorter time frame trading method such as index futures day trading or scalp trading, in view of the fact that volatility and liquidity in the index futures markets offer itself very well to these trading approaches.

Taking an inventory of yourself ought to be your original move given that individual characteristics are going to be a most important factor in your effectiveness as a index futures trader.

Recognizing that losing trades are going to be incurred when trading, despite what futures market is chosen to trade, is an unquestionable requirement.

Lots of individuals experience difficulty tolerating monetary losses and losing trades are to be expected when trading index futures.

No trader executes successful trades all of the time although proficiency levels can be increased to the point where the trader comprehends unproductive trades are a part of profitable trading.

Bad trades will undoubtedly be a part of your trading, but a disciplined trader realizes the best way to shelter his trading capital by exiting quickly on bad trades.

Using A Tandem Approach

Most veteran traders utilize a two-fold trading approach that is designed to use trading indicators to notify them of potential trade set ups and stop-loss entry.

Alerts employed for likely market entry is simple enough to understand because nearly all index futures traders with even a basic comprehension of the financial markets understand charts and trading indicators are used to determine trade entry.

Nonetheless, protection of capital is the element which separates profitable index futures traders from unsuccessful and broke traders.

Index futures brokers and market experts underline the necessity for trading software platforms and order entry with too little mentioned about the ideology of good protection of capital in a index futures trading system.

A thorough trading system will help the mini futures trader determine what time to execute entry into the index futures market and more notably, at what time to exit the market.

Determining your personal traits along with obtaining the obedience to go along with your trading platform are characteristics of a profitable  trader.

Playing the index futures market often is a lucrative and gratifying trade if the trader is disposed to learn the underlying forces of the futures markets and build a trading system which is proper for their personality and tolerance levels.

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Emini Trading Tips - Three That Are Important

Although many are drawn to the financial markets because they can be lucrative, most will leave in failure. Why?

Lack of discipline. In this blog post, we will cover three very important emini trading tips that can increase your chances of becoming a successful futures trader.

Check The Daily Emini Trading Room Results

Mini futures day trading offers something other forms of trading does not…short term profits, everyday!

The level of risk involved with index futures trading is substantially high but new traders can learn to become successful.

Most new participants (we will call them participants because they aren’t traders) will fail miserably because they are more focused on gambling rather than trading with purpose.

Getting It Right In The Beginning

Profits, to them, are more important than learning a skill and increasing knowledge. They, in effect, have the process backwards. Profits are only a result of gaining the skill to trade first.

Many increase the number of contracts they are trading from one to two or more before they are ready which results in larger losses and eventually blowing out their trading account.

Trading with one contract until such time the necessary skill level is gained and accounts levels justify increasing the number of contracts, should always be the rule.

This is one area where discipline is necessary.

It’s easy for a new trader to throw caution to the wind after a successful trade rationalizing, “I could have made more had I only traded with more contracts“.

Don’t do it!!!

Tip number one is; never ever increase the number of contracts until you are ready and your trading account capital can tolerate failed trade draw downs.

Always know the prevailing trend for the day.

Countertrend methodologies are the domain of experienced traders whom have the trading account balances to withstand the loss should the countertrend method go bad.

In trading, the trend is your friend!

Every level of trading throughout the daily session is effected by the underlying trend.

If you trade with the prevailing trend when trading, your odds of success are greater.

Always know what the current trend is by checking higher time frames before the opening bell.

Look at the hourly, daily, weekly and even the monthly time frames.

This information may seem unimportant to you as a  day trader since the goal is short term profits.

Nothing could be further from the truth. So index futures trading tip number two is to always trade with the prevailing trend.

Trading tip number three is another area where new participants fail miserably:

Obeying stop losses is also where a new trader often lets the gambling mentality takeover, leading to disaster.

Stops are there for a reason, to stop the trader from taking a larger than anticipated loss.

Where the new participant fails is he lets emotion take over when a trade goes against them, hoping the market will return to their entry point or higher.

In some cases this does happen but the novice failed to trade and only gambled.

Do this over and over and you will soon find yourself with a empty trading account.

Stops are there to be obeyed and not disregarded - EVER!

Trading is difficult enough without a proper trading system in place.

Why would anyone approach the index futures market without a proper trading plan in place?

Because they are more focused on profits rather than learning to trade well.

Follow these trading tips and you could be well on your way to being a successful  futures trader.

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Scalping Futures Using Emini Contracts

Although as traders we use various methods to make our money from the markets, scalping futures using emini contracts is one method experienced traders use frequently.

If you're new to the index futures market, in this article we will explain how using this method can reduce your exposure while allowing you to reach your trading goals and increase your confidence and grow as a futures trader.


Check The Daily Emini Trading Room Results

By nature, trades executed using the scalping method are designed to get the trader in and out of the market quickly.

Usually with no more than a few minutes elapsing between entry and exit with the trader pocketing a small profit. Since the time frame is small, exposure to the market is significantly reduced thereby protecting precious capital.

Shorter Time Frames - Less Exposure

With traditional emini day trading, the trader is focused on a larger time frame, ideally entering a trade and riding the current days trend, banking larger profits than the trader utilizing a scalping method.

However, the day trader risk more exposure to market forces by holding a position for longer periods.

Scalping mini-sized contracts is a much more rapid type of trading with traders focused more on smaller movements in market action.

Accumulating profits with each trade, the trader will execute several times more trades throughout the daily session than those using a futures day trading methodology.

Since this type of trading is faster than traditional day trading, the scalp trader must be more focused on his trading rules and sticking to his money management system.

Although experienced traders utilize scalping methods, this form of trading lends itself very well to the new index futures trader.

Day trading methods normally allow for more liberal stop losses before exiting a losing trade.

However, scalp trading by design, requires the position be exited quickly should the trade turn south minimizing trading losses.

Stealth and Favorable Odds

Scalping futures is not unlike a submarine using stealth to stalk and attack an opposing target.

The scalper will only execute trades when the odds are in his favor by employing tactics and strategies which exploit favorable market conditions.

In most cases, other traders will never know he's there, quickly entering and exiting the market, waiting on the next profitable set-up.

Although many believe scalp trading to be difficult, in most cases a simple strategy or one tactic can be used over and over.

The futures market offers many opportunities throughout the daily sessions for a skilled scalper to enter many trades everyday, making it possible for him to make as much profit as a traditional day trader.

Scalpers or day traders never hold positions over night, going home with a flat account with no exposure to the news and geopolitical events which can affect the overnight futures markets.

Hence the scalper sleeps worry free each night. In fact, the scalper seldom if ever concerns himself with daily financial reports or anything that can affect the markets, relying only on the technical attributes of the futures markets.

Ideal Conditions For the Scalp Trade

Certain conditions need to be present within the index futures market for successful scalp trading tactics.

Fortunately, these conditions are almost always present in the daily futures trading sessions.

Liquidity is one characteristic of the futures market which is always present. Thousands of contracts are bought and sold each day without wild price swings making them extremely attractive to short term traders.

Volatility is another condition which is needed for scalpers to trade successfully. The index futures market can be highly volatile in some instances like when an FOMC announcement is released other financial news hits the news wires.

At times such as these, the wise trader stands aside and lets the market sort out the news before considering a new trade.

However, the futures markets has enough volatility on normal trading days which allow the scalp trader to enter and exit the market multiple times everyday.

The scalp trader learns to exploit these characteristics of the futures market and profit.

By exercising discipline and obeying the rules of their trading system such as exiting the market when stop losses are hit and not swinging for the fences and focusing on small profits, scalping futures with emini contracts is an excellent way to profit from the financial markets.

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