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.