I get to talk with a sizeable number of individuals considering a career in trading and what I hear from most individuals is absolutely shocking. Most have read a popular macd histogram DIY trading book and feel they have a system in place that will reward them, at the very least, with handsome profits and, with any luck, they expect to strike it rich. E-mini trading is not about hope and it’s not about luck; it’s about what you know and applying that knowledge to your trading.
To be a successful in e-mini trading you need; a great computer, superior software, and a mentor willing to show you how the market works.
A couple of weeks ago I took a day off and visited a friend, an ex-floor trader, who is an institutional trader for one of the big 3 investment banks. I had a chance to tour his trading room, which held 30 or so traders who are paid for Performance. On Wall Street, no performance=no job. In short, these guys are good and I am glad I am out of that rat race, but after 22+ years in the same position it brought back some great memories.
Want to know what I didn’t see? These performance based traders and the massive bonuses they can garner did not use:
RSI, Stochastic indicators, moving averages, Fibonacci numbers (though one trader indicated he is mildly interested in Fibonacci), Force Index, ADX, Momentum indicators, CCI, ATR, MACD, VWAP, Elliott Wave, Gann Lines, Japanese candlestick patterns, head and shoulders patterns or any chart pattern besides range compression, Bollinger Bands and just about any other generic indicator you can find on your trading platform’s list of indicators.
If the very best traders’ chuckle at the use of these dated indicators, what does that say about your chances using the above referenced tools? Of course, they encouraged me, in jest, to teach new traders all about the MACD so they would have fodder to provide liquidity in their trades.
Would you like to know what they were all, every single one, staring at? Sophisticated order flow software along with SAR to indicate possible entries. Oh, and they almost always win, as several of the traders were long forgotten traders in my life and were more than happy to share their performance stats with me and speculate about how much money they may garner in bonuses. I have to say that the bonuses are far more lavish than they were in my institutional trading days.
Here is a basic philosophy you need to succeed in e-mini trading:
A Powerful and Dependable Computer
Time and time again I watch new traders fire up their laptops running XP and expect to be able to trade effectively. Here is what I use: a Falcon EXTREME with an i7 processor and 32 GB of RAM. I run six monitors, cross firing graphics cards, Universal Power Supply (with 30 minutes of run time if we lose power), the best surge protection device I could buy, and then a second back-up computer of similar specs.
Believe it or not, all this gear was not all that expensive and easily obtained. Unless you are Al Brooks and have his unique intuition into how the market works, I don’t suggest using a single laptop.
Does my computer sound too extravagant? Well, my computer is the most important aspect of my business and if it fails, well, so do I.
In recent years, order flow software has finally appeared for retail use. I can remember starting up my first trading platform after I took an early buy-out from institutional trading and the horror that I experienced. I thought it was a joke, or something Fred Flintstone designed back in the dark ages. Yet day in and day out, this is what I see traders trying use. Keep this in mind: 90% of beginning traders fail and they are using the Fred Flintstone method of trading. Yet, the methodology is still being taught as the Holy Grail. Instead of using these lagging indicators (and despite claims to the contrary, the Stochastic Indicator lags) why not invest in the best software you can afford and give yourself a chance for success? I use a fairly busy chart and hear from room visitors that they are looking for a simple system. While e-mini trading certainly isn’t brain surgery, I don’t think you would want your surgeon hacking at your skull with a Bowie knife and a hack saw… yet that is what many people seek in a trading system. Information is power, and you can’t know too much. Use as many tools as you can handle to isolate and measure variables and look for convergence, it’s that simple.