Futures Trading - Methods to Trade The S&P 500 and E-mini Futures Contracts, PART 3


by Thomas Cathey - Date: 2007-03-06 - Word Count: 441 Share This!

After twelve years of watching and day-trading the S&P 500 almost every day, I've come to some conclusions of what works and what doesn't. These methods can also be applied to other markets as well, for both long and short-term trading.


The big money is not made because you bought a futures contract correctly in the beginning, though it helps, but rather when the market panics in your favor during the next climax. The move usually starts slow and ends fast. In the following paragraphs, I will talk in terms of buying and being long, though, simply reverse everything for short positions.

The key is to keep your entry sharp and as close to the bottom as possible to take the least hit when you are wrong and need to liquidate. Good trading entries are about losing the least when wrong. Good exits are about making the most when you are right.

Sitting on your hands for the complete profitable move is the hardest part of all, even if the move works to your expectations. A break-even stop, once the futures market has gone two points in your favor is helpful, depending on volatility, of course. Try to always sell into strength, when everyone else wants it. If you use stops (not MIT's) for entry and exit as a habit, your profits are greatly diminished and commissions, spreads and slippage will probably make you a break-even trader over time. This is short term futures day trading we're talking about, not long term stuff.

You want to strive to put your hand in the fire for entry, and feel like you are leaving early when selling into a short term buying panic. Getting out should make you feel like a sucker who should be holding onto the gravy train. But if you've done your homework and recognize a new turning point as it unfolds, you can confidently learn to sell out into strength.

There are days when every futures trade you make is executed like a pro. Look to make two good trades a day, and sometimes three. Of course we will be wrong sometimes. There are days when we should know not trade. The limit is two to three losers in a row, then quit.

I will never consider myself a pro. I am forever a student of the market. Don't forget that even the best day-traders feel like dunces every few days. Keep improving your edge and those times will get fewer.

Part Four of Four Parts - Next


There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.



Related Tags: money, finance, stocks, trading, investing, forex, stock trading, futures, mutual funds, commodity trading, commodities, commodity broker, commodity futures contracts, e-mini, s&p 500

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