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Tuesday, December 6, 2011

Banjo Daytrading - Trading ES with TICKs

To understand this post, you'll need to know something about Market Profile.  If you aren't familiar with it, then google it - too much required to put here for this entry on trading the TICKS (that's the NYSE TICKS).  I also monitor the change in NYSE volume, and the change in the relative advancing vs declining changes for those stocks.

I have been daytrading the E-mini S&P 500 futures for a while.  Their symbol (concurrent) is ES.  The smallest increment in the ES is a tick (not the same thing as the NYSE TICK), which is 0.25.  A point is 1.00, so it is 4 ticks.

You can buy or sell-short as many contracts as you want, as long as your account balance will support it!  Each tick is $12.50 per contract.  So for 1 contract, 1 tick is $12.50, and 1 point (4 ticks) is $50.00.  If you were swinging for the fences and have multiple years of a proven successful record at trading the ES, then as a professional, you might trade as much as 200 contracts!  At that level, 200 x $12.50 means a single tick would be $2,500, and a single point (4 ticks) would be $2,500 x 4 would be $10,000!

Today I had a total net of -3.5 points.  I started trading around 1:45 pm.

So, while you don't know what I actually made or lost today, since the minimum number of contracts is 1, and 1 tick is $12.50 for 1 contract, and 1 point is $50 (4 ticks), and I lost 3.5 points, then you know I lost at least $175 today.  If I traded 3 contracts, then I lost $525.  And that pro trading 200?  He would have lost $35,000!

As mentioned above, it is my goal to watch the TICKs, along with the changes in the Volume and changes in the Advance/Decline value, as well as the actual ES value.  I like to draw trendlines on the TICKs so I can see the trend in the TICKs, as well as drawing trendlines on the ES.  I keep a loose eye on the simple moving averages (sma) for the 20, 50, and 200 period I have the chart set to.  I like to have a 1 min, 5 min, 15 min and 30 min chart open, all at the same time.  I'm aware of, having previously looked at the daily chart, but I don't keep it open.

Prior to the open, I examine the SPY as a proxy on a weekly basis.  This helps me to see longer term trends that I'm operating under and being influenced by.  I find it much easier, for instance, to observe overall direction, and in particular, the change in SPY volume on a weekly time frame.  I note any new trends or trend continuations, closeness to big SMAs like the 200 dma, 50 dma for turning points that may be induced onto today's environment.  I next look at the daily SPY, for the same reason as looking at the weekly, in particular trying to observe any change in sentiment as indicated by volume, while also noting yesterday's high, low, close, and various MarketProfile values (explained in more detail below).  I then look at a rather broad spectrum of overnight futures to get a flavor of what the world thought was going on overnight, as reflected in the futures, as it will carry over into today for a while until new news comes along to change the world's collective opinion:

  • Markets: ES (S&P 500), TF (Russell 2000), YM (Dow industrials), NQ (NASDAQ)
  • Commodities: (GC (gold), CL (oil), HG (copper), LBS (lumber), ZW ( wheat)
  • Foreign Exchange(FX): DX (US dollar), 6E (Euro), 6J (Japan)
  • Treasuries: ZT (2 year), ZN (10 year), ZB (30 year)

Monitoring and trading the ES
On the 30 minute chart, I like to place a price line for the following elements: the VAH (see MarketProfile), VAL, VPOC, R1, S1, and yesterday's high, low and close.  I'll put yesterday's open on the graph if it's not embedded in the middle of everything.

I monitor every candle on the 1 min, 5 min, and 15 min charts.  I try to evaluate their meaning.  I do the same for the TICKs, and I keep an  eye on the VOL change and the ADV/DCN change.

My Loose Rules for me to trade (these are evolving, and as you can see, my results were negative today, but then, I didn't follow my rules too well today...):

Start the day, get a view of the influences in effect:

  • What does the weekly SPY look like?  What big support/resistance, SMAs, and volume are going to influence today?
  •  What does the daily SPY look like?  Same questions as above.
  • What do the market futures look like?
  • What do the commodities futures look like?
  • What do the FX futures look like?

I Only want to go long if:

  • Near the bottom of a VAL, S1 (or S2,...).
  • TICKs are above neutral, generally above 500, and have been above neutral for a while (or swing positive hard, like to 1000 or more).
  • If more confirmation is needed, I like to wait for the ES to have been hitting resistance for a while, now breaking through.
  • There's been some range to today's trading since open.  I do terrible when the range is suppressed.
  • I like to have a range of at least 4 points, from bottom to top, assuming I can get in somewhere near the bottom of the range.
  • I like to have a range on the VAH-VAL to be at least 4 points too, and try to get in near the VAL.
  • I don't want the VPOC too near to my opening the position, as the ES will frequently stall here for long periods of time.  So, I would prefer that there be at least 2 points, and preferably 3 points or more to the VPOC from my entry point.
  • I don't want the VOL and ADV/DCN to be going against me in my direction.  If I'm going long, I don't want them falling.
Only go short if:
  • Opposite of the above.

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