Day Trading Tips

Daytrader's Bulletin Method - Part VIII

E-Mini Trade Set-ups for S&P 500 & Nasdaq E-mini

Here is the method we recommend for trading the E-mini contract for the S&P 500 and Nasdaq markets.

BREAKOUT MODE TRADE

If we are in breakout mode, take the first trade and use a wide stop; leave it in place a minimum of 15 minutes.

• If the trade moves in your favor, move the stop to breakeven when the market has moved in our direction 4.00 points.
• If you are trading multiple contracts, liquidate a sufficent portion of your position to cover all costs at this point.
• When the trade has moved 6.00 points in your favor, move your stop halfway between our entry and the low of price action.
• Do not move your stop again until after 1:00 CST.

This requires patience and more discipline than most traders possess but is the best approach for trading the E-mini with its very high cost of overhead.

• After 1:00 Central, convert to a 3.00 to 5.00 point trailing stop depending on the size of the retracements the market is making.

Critical to this trade working is that we are in breakout mode and an early entry (at or before 9:30 CST). The trades that we enter later in the day on breakout days, tend to get stopped out more often.

• If you are stopped out of this first trade, take our next trade but only if that trade is taken before or slightly after 11:30 CST.
• Take no trades, if after this 11:30 CST criteria.

INTERMEDIATE TOP OR BOTTOM TRADE

A different trade type is when we mention in the overnight update that an intermediate top or bottom is being put in place or may develop the next trading day. This type of trade is appropriate if you are comfortable with the risks associated with holding contracts overnight and have the account size to successfully hold contracts overnight.

When we state we have an intermediate bottom forming, again use the above criteria but only for our first two long entries. If an intermediate top is a possibility, take only our first two short trades. Of course, if the first trade is not stopped out, you would not take our second trade.

Hold this trade unless we suggest an intermediate top or bottom contrary to your position or unless we mention we are in breakout mode. These trades can be held for 2 to 6 days and can be very large winners but with an attendent increase in initial risk. This is due to the lower percentage of winners (about 30%) but the very large winners (15%) will make up 75 to 80% of profits.

Stop loss location on these trades should be kept to about the midpoint of the most recent day's range for the next trading day's activity. The percentage of winners increase dramatically when we mention an intermediate top or bottom may be in place and we are in breakout mode. This approach is relatively low risk and very high profit.

These longer term approaches are necessary when trading the E-mini with its very large overhead. Multiple contracts are recommended so that trade overhead and a small profit can be accomplished once price has moved favorably while maintaining some contracts for possible windfall profits.