Sunday, January 25, 2009

Day Trading the E-mini S&P 500 Index Futures

For some reason, this new year hit me like a ton of bricks. Maybe it's that whole turning 40 thing. I'll publicly proclaim that my goal is to quit working for a corporation (even though I like it, it has been good to me and I'm good at it) and just trade all day long (the only thing that could possibly beat getting good pay for doing the same thing over and over and over again.

Daytrading is a little more in tune with the things that interested me when I was 11 and used to finish my paper route on summer mornings, spread open the Business section of the Boston Globe and track my favorite stocks. Not that everything in there was understandable but the stock market always had a magical lure for me.

Just wanted to display the set-up for a paper trading exercise with real live data before showing any particular trades. (And the trading has been going well.)

It's a little intimidating, but the focus will be on the losers. I may even develop a trend coding system like Screw-Up A, Screw-up B.

I've been focusing on 4 elements to trading the day's action.

#1 Price Action - looking for candle set ups, knowing where the market is, MAJOR (multi week) support resistance. Been trading the 5 minute but monitoring the 15 minute candles.

#2 Volume, where is the volume? Is the move backed by volume? What was the volume the last time support/resistance held? What is the volume now? Is the volume to the hupside or downside? I get my volume analysis methodology from the guy over here: . Tom OBrien is a big ToS fan and Tom Sosnoff of does a show on his network on Tuesday's at 11 am.

#3 Linear Regression 50 Channel. Not sure where I picked up this little ditty, but I have been SHOCKED at how good it is at showing overbought/over sold, resistance areas. I will also use Fibonacci Retracement levels and when they coincide with the linear regression that, to me, is a powerful confluence of support/resistance.

#4 CCI (-14, 100, 100) I use this is a "Trigger". I learned about this in the Advanced Technical Analysis coursework at Investools where they talk about a CCI 6-14 Sling Shot Method of trading. I tried to use that system on straight puts/calls but that was a disaster. (I did notice, however, that it worked great for my spread trades when combined with the 30 Moving Average)

note: screen shot is from thinkorswim desktop application showing 3 days of /ES mini trading with 15 minute candles, overlapped volume in light blue, the Linear Regression Channel in yellow and the CCI at the bottom. Looking around at other trading blogs, it has shocked me how great thinkorswim is and how everyone else sucks.

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