August 4th, 2010 - Issue #543

In This Issue

1. Day-Trading E-mini Index Futures - 9 Key Trading Concepts by TradingEmini.com
2. Free E-Booklet: 'Sharpen your Trading Skills' by Jim Wyckoff
3. Futures Market: Economic Calendar

1. Day-Trading E-mini Index Futures - 9 Key Trading Concepts by TradingEmini.com

9 Rules to help keep you in the 10% winning club vs 90% of traders who lose money by Tradingemini.com. Trading is inherently risky but by following eight fundamental money management rules you can keep your capital safer while building your trading experience.

1. Look for high volume markets with a thin spread, so orders are filled quickly and it has high volatility, so there are opportunities for 2 to 4 good trades during the day. The E-mini S&P 500 Index Future is a good example of this type of market (Each point is worth $50, split into 4 ticks of $12.50 and there are 4 contracts a year, traded on the Chicago Mercantile Exchange).
2. Only risk 1% of your capital per trade, then your capital can absorb 100 consecutive bad trades. Even the best systems can expect 20% losing trades, so the 1% rule gives you room to maneuver.
3. $10-$15k is the minimum recommended risk capital you should have per E-mini S&P 500 contract traded - then if you lose $1000-$1500 it only represents 10% of you capital, which is recoverable compared to a $3k account where the same loss equals 50% of your account, consequently you are more likely to lose the remainder of your capital rather than recover the loss.
4. Limit the hours you trade - we prefer the first 60-90 minutes, when typically there is a good trend before the lunch time chop - many professional traders trade this time period.
5. Limit the number of trades you make per day - 2-6 is good as the E-mini usually has up to 3 trends per day and you should aim to catch 1-2 out of the 3. Overtrading racks up commission fees and increases the risk of revenge trading. A few ticks loss per trade quickly mounts up - 4 trades fired like a machine gun can easily become four losers, at 8 tick stops, that’s $400 loss, 4% of a $10k account. Patience is key, stalk trades.
6. On any one day stop trading when losses hit 5-10% of capital, which is recoverable, and indicates you are reading the market wrong, so stop, evaluate your errors and record them in your Trading Journal.
7. Keep a Trading Journal, listing all your trades, because over time the mind dismisses bad trades and habits. Include annotated charts, and notes about your emotions. Key things to note: - are you trading your account not the charts, taking desperate trades having made a couple of losers, rather than treating each trade uniquely. - are you taking negligible signals because you have missed a good move, resulting in chasing a trade, which you are stopped out of on a minor retrace, or you opt for a countertrend trade, purely on the thought "it can’t possibly go any higher".
8. Base your stop loss and target strategically from the charts, not an arbitrary number of points. For example use price levels at double tops, swing highs and lows, or pull backs to moving averages. Then you can place tighter stops and take higher profit to risk ratio trades, keeping your focus on the chart, trading what you see not what you want to see, think or feel.
9. Be patient between one EMA, or pivot, to the next. This is one of the hardest things to master. To help, trade at least 2 contracts, keeping 1 for 2-3 pts, whatever your first target is, and then let a runner go with a break-even stop. If it goes your way you add gravy to the first. One good runner is hard to beat with lots of scalps.

2. Free E-Booklet: 'Sharpen your Trading Skills'

by Jim Wyckoff

Register to receive free e-booklet: 'Sharpen your Trading Skills' written by Jim Wyckoff.

This 16 page PDF includes topics like:

• Fibonacci Levels
• Swing Trading
• Order Types
• RSI Indicator
• Plus More..

3. Futures Market: Economic Calendar

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!