Friday 3 October 2008

Is Emini Swing Trading Dead?

Is Emini swing trading dead? When I first started this blog my trading was roughly 70:30 swing trading to day trading. I usually held my swing trades for 2 to 4 days and set my profit target between 10 and 20 points. My day trades were all closed out within an hour max and my profit target was 2 to 6 points.

In the last year or so the average daily range has exploded from 10 to 35 points. The chart below shows the Emini's average daily range for both day and night sessions. Last week we had 4 days out of 5 with a range above 50 points, including Monday with a range of 108 points!

Emini Range Image

Daily Range (Emini day & night session)

As a result, I haven't put on a swing trade for months and I'm currently 100% day trading. With the extra volatility I've also widened my stops and profit targets. These are great days for day traders, huge liquidity and large daily swings - and no need to hold positions overnight with news event driven risk.

Emini Momentum Image

Momentum Bullish Divergence (Emini 135 minute)

It's a dangerous business calling tops and bottoms. But I did want to show the 135 minute Emini chart above with my Better Momentum indicator. Most momentum indicators measure price swings, mine measures volume swings. As a move progresses and approaches a turning point the amount of buying or selling momentum declines.

This reduction in buying or selling volume sets up a bullish or bearish divergence pattern. Sometimes the divergence pattern ends quickly and sometimes it becomes protracted and it seems like the market will never reverse. Some moves finally reverse with a spike in momentum in the direction of the original move.

As you can see on the chart above we've got a protracted bullish divergence pattern. We could be close to a final resolution and the beginning of an upswing. We're also getting close to "End of Trend" signals on the US$ versus Euro, Pound and Swiss Franc.

Let's see what happens next week. Good luck with your Emini trading.

How Could I Have Missed This Emini Swing Trade?

I'm annoyed because I missed this Emini swing trade. I've had a bullish bias over the last couple of weeks and it has impacted my trading. I find this happens when:

I've got too many charts open
I'm researching new ideas, or
I let one indicator overly influence my trading

Good trading is about making fewer mistakes and so in the spirit of learning from my mistakes, this is what I missed on this Emini swing trade:

Emini Swing Trade Image

Emini Swing Trade (45 minute chart)

Support at 1,337 was broken on high volume last Friday
We continue to trade below Support and are therefore in a down trend
On Wednesday morning the Hilbert Sine Wave signals a pull back ("PB" text)
After the FOMC announcement we have a high volume rally
But this high volume bar closes off the highs & below resistance
Further weakness on the next bar with a high down volume reversal bar
Should have shorted on the close of this bar or break below the low of this bar
Gap down the next morning and down trend continues
"End of Trend" warning signal and 30+ point move

Note to Self: Trading is easy - you only have 2 choices, long or short. Keep things simple - for me, my Emini swing trading methodology consists of the Hilbert Sine Wave in multiple time frames with volume confirmation.

Good luck with your Emini trading.