SP500 Emini Futures Hit New Historic High
May 23, 2014 at 1:18 PM (QQQ)(DIA)(SPY)(GLD)(FB)
S&P 500 Emini Posts All Time Historic High
Despite dire warnings from the likes of Dennis Gartman and others, in spite of "low volume" traffic, oblivious even to "holiday trading" conditions, the S&P Emini "ES" drifted up to our Weekly Trading Zone at 1897/1898 where it closed the week in virgin territory. Markets will open Sunday night for Globex trading and close Monday morning in observance of Memorial Day. The Tuesday session opens @ 6pm EDT Monday evening.
S&P 500 Emini - All Time Historic High
Price initially closed above the 1882/1883 Weekly Zone on May 21st at 2pm EDT. The first leg took us to 1890.50. Price pulled back to the Zone, confirming support and the move was on. The next high was 1894 followed by a 38% Fibonacci retracement to 1890 and then a grueling 21 hour "drift" to the next Weekly Trading Zone overhead.
Looking at a historical chart like the one above, it would seem the simplest way to trade Emini Futures would be to simply buy and sell at the Zone. Although you are correct, it can be more difficult than it appears. The 38% Fib Retracement could just as easily have turned into a gut wrenching 50% correction, a 61.8% pullback, or a full blown reversal erasing 11 full points of unrealized profit. Not fun.
The key is multiple contracts. In his book "Trading in the Zone", Mark Douglas talks about paying yourself something, as soon as you can. Developing a strategy that allows you to scale out of a position is the best way to achieve this. It can be a complex algo, or as simple as dividing the potential move (Zone to Zone) into thirds or even fourths. You will not get the perfect price, but you will get paid as long as the trade continues in the proper direction. Also determine before you enter, at what point you will bring your stop to break even. Some strategies do not move the hard stop until 50 to 75% of the target has been achieved.
We take the written Business Plan and Trading Plan so seriously, it's baked right into our curriculum. Every successful business has a written business plan and your trading business should be no different. Would you believe 90% of those who attempt to become Professional Traders never write a business plan or a trading plan? Where have you heard that 90% statistic mentioned before in regards to trading success? In light of this perspective, is it any wonder?
Don't fool yourself. To become a successful trader will take hard work and determination. To learn more about starting your own Emini Trading Business, Apply Here.
Emini Zone to Zone
Let's look briefly across the 4 indices from this week and see how having this information before the market opens every Monday, can change our trading forever. Once the Zones are published, they do not change. As time permits, do wander through our blog back to 2011 and see how consistent the performance has been.
Russell - All we're looking at here are the Zone to Zone moves for the week. The first move labeled 1 to 2, was a 7 point move from 1107 to 1114. Next, 2 to 3 good for another 7 and 3 to 4 is another 7. In case you're counting, hat's 21 points. The Russell pays $100 per point. 4 to 5 covered 2 Zones for a total of 25 points and 5 to 6 was good for 17. From 6 to 7 we came up a little shy (1 point) for 16 points and then the return trip from 7 to 8 gives us another 16.
This is also where we ran into a little tricky behavior. Consider you might have been stopped out for 2 points, once maybe even twice. 9 to 10 was a clean 7 points and at 10 again a potential stop out. As the week closed we were making a run for the highest Weekly Zone and simply ran out of time. The move however was still good for 10 points. All together - 112 potential points @ $100 per point = $11,200.00 per contract traded.
Of course there were some trades that got stopped out and you do have to sleep. If you caught haldf that would be 66 points. If you caught just 1/3 that's still 37 points X $100 per point or $3,700 per contract. If you're a 10 contract trader that's a nice week.
The question is... can you do it? The lines are on the chart before the opening bell every Monday. After that, it's simply a matter of waiting for price to fill in the blanks. Of course your job is to make sure you're trading in the same direction as the market. The question is... can you do it?
Russell Weekly Trading Zones
Dow - I didn't number these, but the flow is pretty easy to follow. The first swing was fom the Zone @ 16435/16440 to 16395/16400. Easy math - 35 points. The Dow pays $5 per point for a $175.00 move per contract. 2nd swing $175. 3rd swing was 60 points or $300. Number 4 covered 2 Zones for 100 points or $500 per contract. Swing 5 was 35 points - $175. Swing 6 covered 2 Zones for 100 points - $500. #7 was part of an Alert we put out which turned into a 180 point rally from where we triggered in. As far as just the Zones we covered 3 for 160 points - $800 per contract. The market got tricky at #8 and most likely stopped you out at least once. The next leg up, Zone to Zone #9 was 55 points - $275 and a reversal (#10) back down to the Zone for another 55 - $275 and #11 took us back up to the Zone for another 55- $275. As we rallied into the sunset the market simply ran out of time as we made it 20 points on our way up to the highest Weekly Zone on the Dow - YM.
Total available would be 710 points @ $5 per point or $3,550 per contract traded. Remember, daily margin for the Dow / S&P / Russell and Nasdaq is $500. The "day" starts @ 6pm EDT. If you caught 1/3 of the movement that's still $1,183 per contract. For the 10 contract trader, that's a nice check to take home to mama. I feel obligated to remind you that the lines are drawn before the opening bell every Monday morning and they do not change. Wander through the blog and see what we've done for the past 3-4 years. Don't get the impression this is easy money, it isn't. It is however, real money, but you have to show up and have the conviction to take the trade and let your Stop tell you when you're on the wrong side of the trade.
Dow Weekly Trading Zones
Nasdaq - 25 point initial Zone to Zone move followed by 15 / 15 / 15 / 15 and an overshoot most likely leading to being stopped out. Back on track the next Zone to Zone move was again 15 followed by 40 and we actually closed above the highest Weekly Trading Zone in this market by 5.75 points. Such an occurrence is somewhat rare, but as we can see from the chart, it does happen.
Total available points - 140 X $20 per point = $2,800.00 per contract. Considering Stops and Sleep, 1/3 of the potential would be $933.00. Again we are struck by the twinkle in the eye of the 10 contract trader.
Nasdaq Weekly Trading Zones
S&P 500 Emini - The initial Zone to Zone move from 1871 to 1882 was good for 11 points, then back down for another 11. This area was obviously unexpected and would most probably Stop Out even the most astute trader. Heading higher we post those same 11 points yet again, followed by the weeks final Zone to Zone move, good for 14 points. All together the potential was there for 47 points @ $50 per point or $2,350.00. Using our most humble number of only 1/3, we arrive at $783 making the S&P trader this week, the pauper at the party.
We've spoken a number of times in this article of the 10 contract trader. The dollar amount required during the day session for such a position is $5,000 (10 contracts X $500 per contract). At the closing bell one can exit their position and simply re-enter the market moments later when the "new day" begins. This maneuver will cost you a few dollars extra in commission, but does prevent you from being exposed to the full $5k initial margin. At $6 per round turn X 4 days, as you will not re-enter on Friday, the additional cost is $24 per contract, per week. Money well spent in my humble opinion.
As opportunities unfold we will keep you posted.
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