THE E-MINI DAY TRADING PLAN
Day Trading beginner
How does a futures day trader know when to buy and sell? To put it simply, by
following a
trading plan.
Just as a business plan outlines the details of a proposed business, a trading plan outlines a structure for trading.
A trading plan specifies when to get into a trade, either long or short, and when to close a trade, either at a profit or
loss.
A trading plan can be developed from scratch or learned through
courses or books. For example, Building your E-mini Futures Trading Strategy is a
free video that provides insights into constructing your own trading plan.
The principal requisite of a trading plan is that it be profitable overall. This does not mean that every trade need be a winner.
Rather, the relative size and frequency of losses and gains must be such that, over time, a net profit results. For example,
assume that only half of the trades of an E-mini® S&P 500® day trading plan are profitable. If the average profit exceeds the average
loss, then overall trading will be profitable.
A trading plan can be discretionary or systematic. Discretionary plans rely solely on the "gut feeling" of the
trader. For a variety of reasons,
most traders have gravitated to using some type of systematic plan.
Systematic trading plans quantify the conditions or criteria for a trade signal to be generated
with the intent of eliminating the discretionary element from the trading decision. In many cases, the plan builds upon
the study of technical analysis with the goal of identifying
a proprietary trade indicator that gives an edge over other traders. Many systematic trading plans
are programmed via computer to run continuously and automatically generate a buy or sell signal for the trader.
In some cases, it may even be possible to interface the trading program directly with the trading platform so that trades are executed
without even requiring the trader's intervention.
Whatever type of trading pan is used and regardless of its origin, it should be first tested
under simulated but real-life conditions prior
to risking actual dollars. This will also enable the day trader to develop
some skill in implementing the plan. While the profitability and consistency of a discretionary plan depends entirely on the trader,
a systematic plan can be back-tested
on historical data to provide an indication of performance. It can then be amended, if necessary, in an attempt to improve overall profitability.
There are no guarantees of profitability in the world of futures day trading, but the discipline of a trading plan goes a long way toward making
a day trader successful.
|
Trading plans are individualistic, based on such factors as personal experience, available risk capital and tolerance toward risk.
For this reason, trading plans usually differ from one trader to another. Consequently, a trader must develop a trading plan that works best for them.
Among other things, this requires patience, rigid adherence to the rules of the plan, meticulous record keeping of trading performance (which is valuable feedback)
and an open mind to try new methods.
|
Day Trading beginner
A Spread Trading Plan. The Euro-denominated E-mini S&P 500 index futures was listed for trading on October 27, 2008 and trades
along with the venerable E-mini S&P 500 futures on the CME Globex electronic trading system.
This paper, prepared by the Research and Product Development division of CME Group,
considers the opportunities available in spread trading the E-mini S&P 500 futures with its Euro-denominated counterpart.
(Adobe Acrobat required.)
|
|
The following trademarks and service marks are owned by Chicago Mercantile Exchange Inc.: CHICAGO MERCANTILE EXCHANGE®,
CME E-mini®, CME®, E-mini® and Globex®. The following are trademarks of The McGraw-Hill Companies: S&P®, S&P 500®.