Emini Day Trading - How I Day Trade For A Living

My Emini day trading methodology is explained in the following article.

No two traders are alike. No two traders have the same psychology, risk tolerance, trading capital, aptitude or dedication. If you want to be a trader, you need to develop your own trading methodology - rules that suit your personality and your circumstances.

My day trading rules are constantly evolving, so this page is updated from time to time. In summary:

  • I just trade S&P500 index Emini futures (ES) - which simplifies decision making
  • My day trades are discretionary - my swing trades are system-based
  • Entry signals are based on cycles and volume patterns in multiple time frames
  • I risk 2.5% per trade - 4 point stop loss and 1 contract per US$8k equity
  • My profit target is 4 points but increased to 6 or 8 points if I catch a "runner"
  • I start my trading day looking for one trade while the European markets are open
  • Then I look for a second trade starting 30 minutes after the day session opens
  • Finally I look for a third trade in the last hour of the day session
  • I stop trading after I've made my profit target and wait for the next window

Emini Day Trading Download PDF

The charts below show a recent trade and illustrate my Emini day trading methodology. You might also want to check out other articles on the Better Hilbert Sine Wave, my Better Volume Indicator and Volume Patterns.

 

Day Trading with Multiple Time Frames

The biggest moves happen when signals on several time frames converge. The time frames I follow intra-day are 233, 699 and 2,097 ticks - and I include the after hours data in my tick charts.

The 233 starting point is chosen because it's a Fibonacci number. Then each higher time frame is 3 times the lower time frame. So the 2,097 tick chart is 9 times (3 x 3) larger than the 233 tick starting point.

The usual multiple for moving from lower to higher time frame is 5. This was probably chosen because of the daily to weekly relationship; it's also close to the weekly to monthly relationship. However, in practice I've found that 3 times is faster at identifying significant events coinciding on multiple time frames.

I use tick charts for day trading because my cycle indicator (Better Sine Wave) and volume indicator (Better Volume) give better signals. I don't want whipsaw trades during periods of low activity - after hours and lunch time - and the tick charts get around this problem.

 

Emini Day Trade - 2,097 Tick Time Frame

Emini Day Trading Image 1

Emini Day Trading: 2,097 tick chart

The chart above shows my highest time frame (2,097 ticks) and a short entry signal. The Better Sine Wave has signaled a cyclical top and this coincides with a high probability volume pattern, in this case the "No Demand" pattern. The "No Demand" volume pattern occurs when the Emini makes a new high but on lower volume and smaller range.

I am also checking the Better Volume indicator in this time frame, but have not included it in the chart because no volume signal was generated. I'm looking for Volume Climax and Volume Churn patterns though using this indicator.

 

Emini Day Trade - 699 Tick Time Frame

Emini Day Trading Image 2

Emini Day Trading: 699 tick chart

In the next lower time frame (699 ticks) we also have a sell signal. The Better Sine Wave has signaled an "End of Trend" cyclical top and automatically printed the "End" text on the chart.

In addition, the Better Volume indicator shows two Climax Volume bars (red) followed by Volume Churn (green). This shows that a surge of buying into new highs has been met by increased selling volume. The result in a relatively high volume bar with relatively low range - hence high volume churn.

 

Emini Day Trade - 233 Tick Time Frame

Emini Day Trading Image 3

Emini Day Trading: 233 tick chart

This is my lowest time frame (233 ticks) and again we have a sell signal. The Better Sine Wave is showing a cyclical top with a small overshoot (red dot). Leading into that topping pattern was a Climax Volume bar followed by high Volume Churn, similar to the 699 tick time frame. So we now have sell signals on multiple time frames:

  • Cyclical turn and "No Demand" volume pattern in 2,097 tick time frame
  • End of Trend pattern with Climax Volume and Volume Churn in 699 tick time frame
  • Cycle overshoot and Climax Volume with Volume Churn in 233 tick time frame

The short entry was executed when the Low Churn bar (white) appeared. Low Volume Churn bars occur when the bar's range is relatively large but the volume is relatively low. Sellers are trying to get out quickly and there are not many buy orders left behind in the queue that will support price. The trade is entered at market with corresponding profit target and stop loss orders.

 

Emini Day Trading - Money Management

Emini Day Trading Money Management Image

Emini Day Trading "Sweet Spot" (green)

My stop loss is always 4 points and since I trade 1 Emini contract for every US$8k of equity, this corresponds to a 2.5% risk (4x$50/$8,000 = 2.5%). I never move my stop loss. In practice, my biggest weakness is that I tend to enter the market too early. So sometimes I need the 4 points of "wiggle room".

The spreadsheet image above shows the performance metrics I'm trying to hit on the average trade. The horizontal axis is percentage of trades that are profitable. The vertical axis is the profit target. The figures in the matrix are the average trade profit per Emini contract. The calculations assume:

  • 1 Emini contract traded
  • Stop loss of 4 points
  • Round trip brokerage costs of $4.80

I'm trying to achieve an average profit target of between 4.50 and 6.50 points and a percentage profitable between 60% and 75%. This is my "sweet spot" where the average profit (win or loss) ranges from $50 to $189 per contract traded.

In addition to these money management rules, I have a rule to prevent over-trading. I stop trading after making 4 points of profit in any window of opportunity. A window of opportunity can be during the European market open, after the first 30 minutes of the day session or in the last hour of the day session.

 

And Finally, Day Trading Platform

Emini Day Trading Hotkey Image

Day Trading Hotkey Settings

Although I use TradeStation for charting, I do not use them as my broker. Instead I use Interactive Brokers and their Trader Workstation program for order entry.

I have the platform setup with hotkeys to buy or sell at market, then automatically enter profit target and stop loss orders. These are linked orders so when either one is triggered the other is automatically canceled ("one cancels all" or OCA).

The entry and exit orders are for 100% of my position, as I don't scale in or out of day trades. I find the Emini too volatile to use trailing stops to capture the size of swings I'm looking for. Instead I try to use the Emini's volatility to hit my profit target, get out and wait for another setup.

The hotkey solution to order entry has reduced my stress day trading enormously. As soon as I get an entry signal I hit "B" or "S" on my keyboard and I'm filled. I no longer worry about getting a good fill and the exit orders are sitting there. Trading platforms and internet connections do go down and this solution is the best I've found.

I won't change the exit orders unless a trade moves immediately in my favor and starts to "run" - for example if a significant trend line is broken. In this case I'll move my profit target from 4 to as much as 8 points. The target I pick will be based on previous areas of Emini support or resistance.

 

Check out other articles on the Better Hilbert Sine Wave, my Better Volume Indicator and Volume Patterns. Good luck with your Emini day trading.

 

Like this article? Sign up for Free Email Updates or subscribe to the RSS Feed.


Popular Emini Trading Articles

Free Emini Trading Report

Emini Trading Report
Emini Trading - Free Report Coming Soon!

Subscribe to Emini-Watch