Futures Trading Across Higher Time Frames

You've decided that futures trading is how you want to participate in the financial markets and the emini contract is your chosen trading instrument. Great! Index futures are a top notch way to make a good living in the markets but you must first decide on a strategy.


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Part of your strategy will be choosing a time frame in which to trade. Large profits are the goal of every trader and this can surely be accomplished if the trader exercises commitment and discipline.

When deciding upon a time frame, the common approach is to choose one that is best suited to the trader's risk tolerance and trading goals. However, regardless of what time frame you choose to focus on, by analyzing the futures market across numerous time frames you can enhance your winning percentages.

A frequent error common to new traders is executing a trade while watching market action in a single time frame. All traders in every financial market, no matter if they are trading futures, stocks, options or currencies have an ideal time frame they favor.

Assesing The Market With Differing Time Frames

Scalping enthusiast could benefit by assessing market conditions with the 5 minute chart in tandem with the one minute chart. Higher chart levels can enhance your view and provide information you may not be seeing at lower level time frames.

A day trader that favors the 15 minute chart should check out the 30 minute and hourly charts as well to improve his view of market internals.

By analyzing the market across at least two higher time frames we can better check for confirmation of the move we are anticipating. Essentially, the higher time frames acting as confirmation is a signal we can use before executing a trade which shows the strength of the set up in both your favored and higher time frames.

If you are a day trader that generally holds a position for extended periods throughout the daily session riding trend for the day using a hourly chart, it is wise to check the daily and weekly time periods as well.

The same goes for the scalper. If you are using a 3 minute chart, you should be using the five and ten minute charts also. With futures trading, some people have three different time frames open all at the same time as well as the NYSE TICK and TRIN charts.

However, trading systems which are based on simplicity typically are the best systems. Over analyzing can create information overload where too much information can cause hesitation and bad judgment resulting in bad execution.

Utilizing more than three higher time frames is more often than not, overkill. Over thinking the set-up presented by the market can make you second guess and miss an opportunity to enter and exit with a profitable trade.

If you are in the habit of trading with one time frame, odds are favorable you're struggling or you would not be reading an article about trading across multiple time frames. Once you start utilizing higher time frames, it will take some trial and error to become comfortable using a different method.

However, the results may well be surprising. You can only trade with the information you have and with a single time frame you do not have all the information you need to increase your winning percentages.

You are more then likely not seeing many opportunities when they present themselves through a one-dimensional view. A three dimensional view is far superior since it provides a wider scope of the market, helping you to react when opportunity is present. Emini future trading using higher time frames in conjunction with the time you favor can only enhance your trading.

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The Best Trading System - Selecting One

A trading system can be as simple or as complex as you wish, however, simple systems tend to do better since they eliminate information overload. If we take in too much information, the decision process becomes difficult which results in bad execution or hesitation, causing losses.

So it is best to exercise some degree of caution when choosing a trading methodology. Simplicity is ideal when we are searching for the best emini trading system to meet our needs.

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If simplicity is the goal, system design is the criteria we should look to first. Is the design of the system built with user-friendliness in mind? Nothing is more frustrating than watching the market and dealing with a difficult system.

It should flow easily between the different modules that make up a system. Your futures broker should provide fast execution when your system reveals a trade set-up and work well with your charting software or time and sales feeds.

Data feeds should be in real-time which require dependable Internet connections from a reputable Internet Service Provider. A back-up Internet connection is recommended should your ISP fail.

If you've ever been in a trade and lose your connection, frantic can best describe the feeling a trader experiences when his ISP goes down. A back up connection is a must since major losses can be the result.

The best emini trading system, as you can see, is not just a single module or one size fits all. Interaction between various tools is a requirement as outlined above.

Trading methodology is the heart of the system. Choosing a time frame to trade will be part of your system. Traditionally, day trading is the method most often associated with index futures trading, with many traders choosing scalping as their approach to the futures market.

Choosing to take small profits many times throughout the day while the daily cash market is open. Others will open positions and trade the overnight sessions when trading is much slower. Some use a combination of both scalp trading and classic day trading throughout the day.

The use of traditional Japanese candlestick charts are used by most index futures traders, while some experienced traders will use only a time and sales screen. Others use a combination of charts, indicators and oscillators to determine when to enter and exit the futures market.

Pivot points around areas of strong/minor support and resistance is another often used methodology and is very productive. As you can see, the choices are varied and trading is available to just about any methodology favored by the individual trader.

Having the best trading system that fits your personality and trading style is what we are after as futures traders. The market is complex no doubt. It is fickle and ruled entirely by the emotions of greed and fear which creates a paradox.

While we see the evidence of emotion every day in the market, we seek out a trading method which eliminates the emotional aspect of trading. Our ideal is to react only to the conditions presented by the market in technical terms, not through fear or greed.

Your system should be of such design that you automatically submit trades based only on technical analysis, without hesitation. Hesitation is the result of emotion which more often than not translates into bad execution and loss.

A good trading system will assist you in determining when to place trades based on market dynamics and technical conditions, not financial news reports, crowd mentality or geopolitical events.

Is there a perfect index futures trading system? No. Is there a trading system that will help you become a proficient? Absolutely! Odds are if you are reading this, you have some experience in the financial markets, most likely as a stock day trader, swing trader or just a long term investor.

Although if you're a long term investor, it is recommended you first read up on technical analysis since you are more likely coming from a fundamental background rather than a technical analysis background.

Short term traders live and die by technical analysis and some education in this area is important before venturing into index futures trading.

As a trader, you can build your own system or you can choose to adopt one of the better trading systems available. However you choose to proceed, finding the best emini trading system will boil down to personal choice and what best suits your trading needs and goals.

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Trading Eminis - How To Win When You Are A New Index Futures Trader

Trading eminis is a vocation which has been proven time and again that just about anyone can learn to be profitable. However, there is one underlying fact that new traders fail to acknowledge when they first begin.

Almost all will lose money initially. Why? Because most will jump into the index futures markets without the necessary knowledge to trade successfully.

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Most will have some background and possibly some varying degree of success in trading stocks. Index futures have the liquidity and movement each day which entice these new traders since stocks may be stagnant and range bound for days on end.

Futures have the ability to generate profits everyday making them the ideal day trading instrument and the number one reason novice traders jump in unprepared.

Which Contract To Trade?

Most realize in order to be successful, they will need to quickly get up to speed and seek out basic information about the futures markets. For example they may acquire information to determine which  contract they prefer to trade such as the DOW YM or the S&P 500 ES contract.

Or they may search the Internet for a live trading room and trade alongside as the moderator calls out trades. Of course most of these live trading rooms charge hundreds of dollars in monthly subscription fees, placing a strain on the new trader's funding sources with most blowing out their brokerage account within the first month or two, quickly leaving the futures markets in frustration.

Trading profitably takes work on the part of the new trader. Being impatient is probably the largest factor attributed to why most new traders fail, never to return to the index futures markets. Sure, they know huge gains can be made on a daily basis, but won't take the necessary time to understand and learn the dynamics of this fascinating market.

Knowledge is key to becoming successful at mini index futures trading!

Keep It Simple

Even more importantly, simple strategies are usually the ones that work the best far more than a tedious and complex system. The good news is, a simple trading system can be learned and traded successfully in a matter of a few weeks, providing the new traders approaches with the right frame of mind.

Most new traders are not unlike small children when Christmas is approaching. Visions of presents under the tree on Christmas morning is what dominates the minds of small children at Christmas time each year. New emini traders have visions of huge gains and piles of money which distract them from what they should be focusing on...learning to trade well.

Trading well has been covered many times here on this website for one very important reason - profits are a by-product of trading well!

Trading Well Begins With The Trader

However, trading well does not begin with adopting a system or strategy, it begins within the mind of the futures trader. The novice trader must first adopt a plan for approaching the market and it begins first with trading discipline.

What do we mean when we talk about discipline where trading is concerned? It's very easy when we first start out as index future traders to easily be swayed by a moving market.

For example, say you are using pivot points or levels of major and minor support or resistance. During the afternoon session when the New York lunch comes to an end as all of the major players return the market starts to show some life after the lunchtime blues.

The market at times can take off quickly and blow through a pivot point or level and the new trader hesitates, not entering the market as planned.

An undisciplined trader will many times force a trade out of frustration and enter the market right when the NYSE TICK is at an extreme and the move is reaching exhaustion, finding himself holding a position at the high of the day as the market recedes as sellers begin shorting the pullback.

The novice trader will then either exit quickly as excitement turns to fear or further increase his loss by holding the position hoping the market will return to the high of the day before the market closes.

The point here is, the undisciplined trader forced a trade because he failed to enter the market based on his trading plan, let emotion take over when he saw the market going up and couldn't restrain himself thinking of the cash he could be making.

The disciplined trader would have stuck to his trading plan and stayed on the sidelines if he missed his planned entry point. He understands the market will always be there and another opportunity is always right around the corner, especially with the amount of liquidity provided in the futures market.

The point is,,,,trade as a disciplined trader and trading eminis can be as profitable as you need it to be.

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Learning Index Futures Trading With A Focus On Trading Well

Make no mistake, the odds of long term success at short term trading stands firmly against most all who enter the financial markets. Each year, beginning traders set out with a plan to educate themselves about emini futures trading with most soon realizing index futures trading is one of the most difficult challenges they’ve ever experienced.

Once they reach this realization most will throw in the towel, ending their short trading careers in frustration, while a serious few will stay in the futures game long enough to learn how to trade and become successful.

Will you become one of the few serious winners or will you go home with the losers?

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Profiting consistently in the index futures markets demands standing against the crowd mentality which requires a level of commitment and dedication most cannot successfully achieve.

Learn To Trade Well

By beginning to build on these skills early in your trading career, you will be one step ahead and on your way to trading well. Trading well is what successful traders strive for everyday in the markets with profits being the result of trading well.

Most index futures traders use various techniques that comprise a trading system to execute potential trades. By learning to read and understand the dynamics of the market as well as developing an understanding of the internal and external forces which impact the markets, will they set themselves apart from the those that have less commitment to trading well.

The index futures market is one of extremes with traders experiencing winning and losing on a daily basis since all experienced traders know losing trades are a part of trading well. Losses are a part of futures trading and to be expected.

How the trader handles losses is the difference between a successful trader and someone who will not last long in the game. The emotional up and downs, so much a part of the markets, drives many rookies to a quick exit.

Once you learn how to handle your losing trades and accept losses equally with controlling your emotions, you’ve matured as a trader.

Learning to trade well is the key to the game. Beginners come into the futures markets raw and reckless with no clear understanding of market dynamics and most importantly, with no trading system or an expectancy.

Learn from mental mistakes. Make notes on bad executions, cut losses short and use trailing stops. Learn to exercise discipline since lack of this important skill can end a trading career far more rapidly than a lack of trading knowledge.

Many new and inexperienced traders often find themselves in a cycle of winning and losing bigger, over-trading to “get back” what they lost on the previous trade, eventually blowing out their trading account. At this point the trader will either give up or commit to gaining the skills through trading education to become successful.

Use a Trading Mentor

Locate an experienced trader that’s willing to share his knowledge about the markets. Ask about winning  trading systems, bad habits and losing strategies. Find a mentoring program that utilizes a trading system that can be expanded on once you gain confidence and experience at index mini-sized futures trading.

By joining a mentoring program, beginning traders can learn the system used by the mentor with some offering a live  trading room so the beginner can follow along during live trading sessions. Turn their knowledge into your success and follow their advice. The assistance you receive eliminates throwing money away and many months of frustration.

Trading requires that you learn to crawl before you walk. Unfortunately, many who enter the futures markets each year believe they can walk when they haven’t yet learned to crawl.

The futures trading roadside is littered with the blown out trading accounts of novices who didn’t have what it takes, focused only on the potential profits to be made rather than learning to trade well.

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Dump The Stock Market And Focus On Emini Futures

If you’re reading this page it is probably for one reason - you are bored to tears with trading stocks! Understandable, but we shouldn’t be too hard on stocks since stock trading is where almost every veteran trader began his career before moving on to other trading instruments such as emini futures contracts.

Usually starting as a fundamental investor, searching for specific stocks in favorable sectors or buying on a “hot tip” given to us by a friend, we all begin somewhere and that starting point is almost always the stock market.

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Once we enter the market we undoubtedly become hooked although not in a reckless and gambling sort of way (there are exceptions and they don‘t last long), but in more of a analytical and rational sense, which turns us into students of the financial markets.

Falling In Love With The Markets

We grow to love the ebb and flow as bulls and bears fight it out each day. The successful veteran trader has learned profits are the result of trading well. He understands that profits are a byproduct of his skill and concentrates on developing a system that fits his personality and tolerance levels. And for most, it began with a simple stock purchase.

Once that first stock is purchased, one of three things is going to happen. 1)The investor is going to sell the stock at a profit or loss then walk away. 2) Continue to invest as a long term fundamental investor -concerned only with companies and the bottom line or they will become number three.

A life long adherent of technical analysis who could give two cents if a company goes bust or what geopolitical event is currently upsetting the world markets. Long or short ,the technical trader doesn’t care about anything except being on the correct side of the market and he does this with technical analysis.

After cutting their teeth on stock trading, many find it boring and labor intensive since stock trading requires hours of chart scanning to find potential stocks to trade. Liquidity and volatility can be an ever present problem for stock traders since stocks may trade sideways, with very little movement for days or weeks, even months. Eventually, some stock traders seek out a different approach to the market by utilizing a different financial instrument.

Lessons

Lesson one - the futures market is liquid enough for a trader to make profitable trades several times daily. Long or short, profitable trades can be executed in every daily session which is why index futures trading has exploded since their introduction in 1997.

Day trading is a popular method used by index future traders, with some executing a trade at the open and riding the day’s trend all the way to the close while others will employ a scalping strategy, entering and exiting the market rapidly, often making several trades daily.

Whether you are a full time stock day trader, swing trader or a hard core fundamental long term investor, mini futures trading offers and excellent opportunity for short term profits. Emini contracts are available to trade for all of the Indexes: S&P 500, NASDAQ, DOW and The Russell, all of which offer enough liquidity to enter and exit the market several times daily.

With lower margin requirements than the full-sized index futures contract, the mini index contract is available to those that don’t have the $25,000 minimum required to open a stock day trading account, which eliminates many people that would otherwise participate in the stock market on a daily basis.

If you’re bored with trading stocks and looking for a new financial instrument to trade, you should consider mini futures trading. With enough liquidity on a daily basis to trade several times each session, more than enough opportunity exist to profit.

Since the trader often focuses on one index contract such as the Dow YM, he eliminates hours of research which otherwise would be required to locate stocks to trade.

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