Today’s Lesson: Write a check. Well, not exactly (who does that anymore anyway?). This is about a risk management trick I learned from a really great trader. I can’t remember if it was Larry Williams or Jake Bernstein.

First, never risk more than you can afford to lose both financially and psychologically. Be honest with yourself. If you’re not, you will definitely find out when the losing streak happens. So, take that “per trade” risk and multiply by 4 or 5 to get closer to reality.

Second, and this was Larry or Jake’s trick… when you enter the trade visualize you just wrote a check to Mr. Market for the stop loss amount. It’s gone. Out of the account. You spent it.

The beauty of this “re-framing” is that you will never feel emotional about the loss. You didn’t lose anything. You spent it, just like you do every day for all the other things in life.

Now, if you end up getting out at breakeven after trail-stopping...

Today’s Lesson: Why volume levels work.

Normally when you insert a volume indicator/study on your price chart it appears on the bottom in histogram format. This shows you the volume during the time interval of your chart (5-minute, 60-minute, daily, etc.). This can be useful as dramatic changes in volume may affect price.

If you’re day-trading futures contracts the volume you’re better off using is volume at price (see the chart above). Notice that the majority of transactions occurred at very specific price ranges. These tend to be fantastic reversal and breakout levels.

The key to any trading strategy is to get the “math” in your favor. In other words, the combination of your win/loss percentages (trades) and your average win/loss (dollars) needs to be in your favor. This means you need to manage the risk very well. By using a fine-tuned volume-at-price tool you can laser-focus on great setups with smaller risk. We use tick data for the ultimate...

Today’s Lesson: Sequel to yesterday’s “Get a night job.” Normally I wouldn’t write about the same topic two days in a row, but this was too coincidental to pass up. 

The levels on the chart above were distributed to our team of traders yesterday at 5:15 PM ET. As you can see, price opened the session (light green vertical line) below our desired short level. This gives us the perfect Globex trading opportunity: Set/Forget. Go have dinner. Go to a movie. Go to bed early. Whatever you like!

At 8:15 the trade filled, went only 1 tick against and ran for 50+ points. You can’t get it all, but there is plenty to grab in a run that fast. For Thu 210930 (Plenty can change by the open, be aware.)

For Fri 211001 (Plenty can change by the open, be aware.)

Day Session Analysis: Sentiment is firmly bearish, yet the S&P has bounced back to positive after a 50-point drop. Stats are mixed. Taking trades in either direction. Friday (both sessions...

Today’s Lesson: Get a night job. The futures markets are open 23 hours a day. You probably knew that. What you might NOT know is that the Globex session (from 18:00 to 9:30 ET) trades differently than the day session (9:30 to 16:15 ET). It trades BETTER (just much slower, but you’ll be sleeping anyway so who cares?).

Here’s 5 compelling reasons why you should take on this “night job…”

1. The Globex session is less noisy meaning your stops will be filled less often.
2. The best W/L ratio and highest profit time periods are from 18:00 to 9:30 ET. You can trade until noon, but the results will be less profitable.
3. Breakout trades in the first 30 minutes of the Globex are incredible. Reversals are not.
4. There are 10 “sessions” every week. 5 during the day, 5 Globex. Of those 10, the TOP 4 profit-wise are Globex.
5. You can set/forget your trades before you retire for the night.

If you’re thinking “I don’t have the time to analyze...

Today’s Lesson: Persistence. Let’s use yesterday’s review chart from our trading team’s day session (above). This is a lesson that you’ll get more from if you VISUALIZE being there as we go along. Write down your honest answers.

1. Their first trade was a long entry with a wide stop. The minimum recommended size is 3 contracts. How do you FEEL about that before you enter the order? The trade stopped out in minutes. How do you feel AFTER the loss?
2. You’re expected to reverse your view and go short with the same risk. How do you FEEL about this next trade? And how do you feel as it goes against you nearly to your stop? Are you thinking positive or negative? The trade catches momentum and runs clean to the next level. 20-point winner. You get all your loss back and then some. How do you feel?
3. You’re expected to reverse your view AGAIN and go long. A bit less risk. How do you feel? The trade takes a while to move up but offers 13 points. You end...

Today’s Lesson: Should you trade multiple strategies?

Given enough money diversification becomes mandatory. You’ve never heard of a hedge fund that ran “one” strategy. But what about those of us with relatively smaller trading accounts? There are pros and cons.

Pros:

1. More trading opportunities. When one strategy is waiting for entry, another may be active. This means more efficient use of your capital AND TIME.
2. Smoother equity curve. No guarantees, but you’re likely to have less severe drawdowns in your account if the strategies you trade are not correlated. This means you’ll FEEL better about your performance and trade with more confidence.
3. “Sunset” protection. If you haven’t already noticed, trading strategies don’t always work forever. The markets are a technology business now. And we know technology advances at lightning speed. You need to constantly learn and apply newness to your strategies. Measure it and establish...

Today’s Lesson: Get in early. Trading is usually counter-intuitive. What you think should work, doesn’t.

Consider the entry on the trade above. The suggested short was 4436.50 with a stop 5.75 points above. Price moved against by only 1 point.

Some traders may not want to risk 5.75 points. The “accepted” solution I’ve heard too many times is this: move your entry deeper into the price level. Wrong.

Hard evidence from over 9000 trade setups says you don’t want to miss those quick price turns. For our Volume Profile strategy, price penetrates the level by a maximum of 1 point 31% of the time before it continues in your desired direction. Think about it. If you’re not entering early you’re giving up 31% of your winning/breakeven trades! It’s way better to move your STOP in from the other side. Morning Edition: This will be updated today (Sunday if today is Friday) at 17:30 for the Globex session.

For Mon 210927 (Plenty can change by...

Today’s Lesson: You need to think ahead so you don’t miss great opportunities. We’ll use a review of yesterday’s team trading session as an example of why this is so (chart above).

1. A solid shorting opportunity at 4420.50 just after the opening bell stopped out. The “decision” whether to take the breakout trade came quickly. Now be honest with yourself on this… do you LIKE making trading decisions immediately after you lose? Is your confidence rock solid? Or are you a bit worried about losing “two in a row?”

Newer traders unaccustomed to the ups and downs of trading results might pass on the breakout, then watch it soar for the rest of the day and get frustrated. “Damn… I’m always picking the wrong trade!”

2. Seasoned traders don’t have this problem because they PLAN AHEAD.

Going into the short trade you should know what you’re going to do NEXT if it fails and triggers the breakout. The...

Today’s Lesson: How to choose your trading asset.

More and more futures contracts are being released in micro size. This is great news. Not just for beginners or those with a modest account, but everyone. Why? Because now you can live “test” your trading strategies on different assets that you might not have traded prior.

Diversification is good. You should do it. The question becomes WHICH other contracts should you trade. Here’s a quick look at filtering for candidates:

1. Volume. Without adequate volume you’ll experience slippage and not perform as well in the real world.
2. Margin. Check with your broker and determine whether your account size can afford the margin required. Keep in mind that all brokers will give you more margin than you should use. Keep your per-trade risk to no more than 2% of your account, even if the margin required allows you to trade excess contracts.
3. Movement. You’re going to make more money with contracts that MOVE....

Today’s Lesson: How to exit with a profit. I’ve interviewed dozens of superb traders on this topic and the answers often conflicted. Understood. Everyone has their own style. Finding your style will take time, trial, and error.

If you prefer to have a few big winners and plenty of smaller losers then this trade was likely a loser, maybe a trail-stop breakeven or small winner at best.

If you prefer more winners, you likely took some money out of this trade and had a modest winner. But where?

One approach our team uses is based on hard evidence. We’ve documented thousands of trades and know with near certainty the probabilities of movement. For the S&P futures, we know that 2 points will be achieved 60% of the time and 4 points 40% of the time.

Given a 7.75-point run, two targets banked 6 points and any remaining contracts gave a little back or exited at breakeven, depending on your stop movement philosophy.

When applying this approach you obviously must adjust...