Do me a favor and look at coffee contract today. See how it tanks 5% in a relative short time? If that happened to you with 28 lots, you'd be owing about $60,000 to the exchange/clearing house minus your account
Everyone assumes S&P is very liquid - it is, until a major event. Market HAS HALTED before and opens much lower.
$400 margin in S&P 500 is less than 1% of price movement. You're already leverage 10:1 by using futures, you really want to go to 100:1? BTW you probably got lucky today because you got out in time. There are times when the market will move 3 points in a single direction in 15 seconds leaving you little time to react. A 7 point move and your account is gone with 28 lots. your broker will love your commissions though
The following user says Thank You to paganini for this post:
I use both depend on the market sentiment on that day.
Of course I admit I am not perfect at this as I am still learning.
Here is my thinking in ES yesterday :
The overall market is weak for the last few weeks, one head person in Europe resigned, Obama speech can not get the market up on the Globex session so my overall estimate would be a down day, of course I can be wrong ( no thing will gurantee that ),market is down on Thursday so there may be a down montentum.
Big down trend move already happened about 5-5:30am until 6:30 at the start of primary session. In early trading, I can be quick to get 2-3 ticks on each trade as always the first one hour is very acive with big volume. Since it has been down from the Globex session and it gets down to the first support line within 15 mins, there is a good chance for a rebound up to 38.2% on fabonacci retracement. That is where I can go short with averaging in because it is just a rebounce. One the second down leg, ES goes down for 15 mins and a critital candle stick bar appear about 7:20am at the support level, it is ready to back up again. ( I failed to see that ) probably for a good 15 mins.
This is where I can averaging-in short with big lots because after 15 mins rally, there is a good chance for a pull-back for a few minutes. This critical few minutes is more than enough for me to close out the shorts.
Then it contitnues to go up but it may be out of breadth. Only a few up bars for about 5 mins and a few down bars then I can make a few 2-ticks quick trades.
Then it consolidates in the narrow range for 10 mins about 8am, ready for a big up or down move. Here comes the down trap , it goes up strong for two bars with big volumes, reach the resistance level very quick and fail to "gunning the stops", big boy quickly dump it back down clearing out multiple support levels. At this time period I test the idea of averaging-in long ( this is a mistake since the emotion set in, I failed to see the weekness of each down bar with no desire of volume for a rebound ).
I admit this is a big mistake taking me out more than $1000 off profit. Never fall in to this trap again, I should have gone short all the way with mutiple lots.
Anyway I recover somewhat since it is already cleared all the stops with strong move around 8:40 to 9:00.
I know it will have a long leg of rebound since SP500 hardly falls more than 35 points without a rebound to clear out some late weak shorts. I have to go to work so it is not bad for a $3,500 day.
Why do you insist on trading this way, when everyone points out you should not?
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My English vocabulary is limited so I will borrow the term from "Bluemele" martingale.
It is all about martingale when everyday two elements (buy and sell) of the mass struggle to take advantage over the other side.
My way is not perfect, it has some flaws. One of the major flaw is failing to go with the trend when the signal is cleared.
I do not have to modify codes in a indicators to do this. The enemy is within me.
Next time I will try to add a way "roll in with the punch".
Martingale is the best way to start from zero in no time.
And the comment that concerns me the most is "I know it will have a long leg of rebound since SP500 hardly falls more than 35 points without a rebound" is interesting.
The problem with futures traders who start with futures don't have good backtesting data most times. They don't understand what has happened the last 15 years and what is 'possible'. That is why I think all traders should start on MT4 and get the backdata and really go through most market conditions that have existed since electronic trading has been popular.
I have a feeling you have not vetted this system for long enough with historical data. I wish you well and I hope you truly make a killing. Good luck!