S&P E-mini Futures (ES) Trades: 7-28-09

I took two trades today off the open in ES. Here’s the chart:

2009-07-28_ES_trades

I used a 133 tick chart of ES. You can see my Shaded Opening Range Indicator on there (set from 0930 to 0931), as well as my Volatility-Based Trailing Stop. I’ve also got two exponential moving averages: one is a 5 period and the other a 20 period. But instead of using the close in the EMA calculations, I’m using the pivot point of each bar, or (H + L + C) / 3. I got the idea from John Person’s book, Candlestick and Pivot Point Trading Triggers + CD-ROM: Setups for Stock, Forex, and Futures Markets. Finally, you see a study I called PACD (Pivot-based Average Convergence Divergence). Nothing too exciting–just the MACD using hlc3 to compute the EMA’s instead of close, but I changed the inputs to match the EMA’s (5, 20, and an arbitrarily chosen 5 signal line). This is showing if the 5 EMA is above the 20 EMA or vice versa, and could be used in place of the EMA’s eventually. None of this is set in stone, and it is a bit discretionary, but it’s working for me.

The first trade was a short on a pullback inside the 1min OR. The Volatility Stop was pointing short, and the NYSE A-D ratio and Tick were down and going lower. The market was fading the A-D line, but I expected the futures to fall, and 969 was the overnight low, 2 points below my target. Soon after entry, everything switched directions, but I still waited to see if it would go my way. I was within one tick of being stopped out for a bit, and then got a push back lower. I stayed with it, but in hindsight, the Volatility Stop switched directions and the 5/20 hlc3 EMA’s had crossed over (or equivalently, the PACD went above zero). I should have bailed out there for a smaller 1 or 2 tick loss, but I stayed with the original stop and it was hit, -5 ticks. Then I went long on a bounce off the OR high, stop under the OR low. This time the internals were with me, and the PACD and Volatility Stop were as well. I set a profit target for 8 ticks, and was filled. If I had margin for multiple contracts, I could have traded two, sold one at this first target and let the other go with a trailing stop, and I could have had a point or two more, but I’m happy to stop with a net positive day at +3 ticks or 0.75 points. For my personality and where I’m at as a trader, I’d rather be net positive by a fraction every day than be up big some days and down big some others. That will change down the road as I pursue net profit over time as the primary goal, but consistency and confidence is what I want to gain right now, not bags of money. Consistency first, moneybags afterwards.

My strategy lately has been to play for smaller profits, and keep wider stop losses–the exact opposite of the 1:5 Risk:Reward home run trades I have historically tried. I never would hit my targets, and I often got stopped out. So I’m bringing the two closer together, and it’s working. I intend on watching the tape and getting out in a controlled manner (like I should have on the first trade) if things aren’t shaping up as planned. The stop loss is just in case of disaster. I also don’t get greedy and take the money when it’s there at a closer target, which is different than in my past. So far so good!

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3 Responses to “S&P E-mini Futures (ES) Trades: 7-28-09”

  1. manaau Says:

    For the win! I’ve been papertrading YM, nice that it is “only” $5 a tick, and an advantage to have only that for the spread. I was also able to produce a fairly low drawdown system for it, while the same system optimized for ES produced double the gains, but 7x the drawdown – well past my quit threshold. Have been sitting in at eminiaddict’s trade room, definitely recommended

  2. Webby Says:

    Prospectus,

    Looks good.

    Could you give some tips on how you managed to get the chart setup as shown with one larger on the left and the two smaller on the right side ?

    I’ve been struggling to get this type of chart layout but the layout box selection at the top left in TOS seems to only allow multiples of 2 vertically or horizontally, not a mix as in your chart above.

    Help appreciated.

  3. Prospectus Says:

    Go to the “Flexible grid” screen from the charts tab and then click the wrench icon. Then each panel has three icons over it. One adds a panel below the current one, one adds a panel to the right of the current one, and one deletes the current panel. In this view, you can resize panels by dragging the borders, too.

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