Trading Index Futures Successfully
(May also be applied to stocks)
1) Expect a LOT of movement and noise
2) Have a small enough position size to comfortably (unemotionally) sit through the noise
3) Retests are usually much smaller risk entries
4) Retests of higher time frames areas with retests on one’s lower trading time often make the best setups
5) Timing is critical. Don’t be late or early with entries and exits. Strive for flawless, precise execution! Always have multiple small risk entry locations identified in advance.
6) Buy/ Join the Bid or Sell/ Join the Ask for the best fills (unless action is fast)
7) Don't add late in a run especially on a breakout. Only add early in the run or with a constructive pullback / retest of a significant or important area
8) Don’t add to losers. Adding to losers usually involves increasing one’s position size much larger than originally planned. Which is completely different than intentionally scaling into a position at various price areas to achieve a decent dollar cost average or improve timing.
9) Always monitor higher time frames (critical support, resistance, moving averages, etc.) to keep perspective. Time frames like the 1-minute chart have their place but most traders use them incorrectly and choke winners.
10) Don’t be nervous and neurotic about giving back some profits while the move plays out. If one has a decent profit cushion and stops are at breakeven or better, then it is essentially a risk-free trade. Even better if some partial profits have been booked by selling a few contracts into strength. The trick here is to either:
Have a scalping mentality and take profits quickly or
Be very patient until targets are nearby / close / hit. (Sometimes close is close enough.) But never switch back and forth between the two approaches in mid-trade.
That said, both techniques can be use if planned before initiating the trade. Before entering clearly define exactly how many contracts will be held as a scalp and how many for a longer potential run. Then stick to it.
11) Always have several offensive and defensive selling areas / scenarios mapped out in advance. Have multiple profit / retest targets identified. Know what kind of weak or strong price action you’d expect to see at those areas.
12) Have a scalping mindset when fading the trend. Take profits more quickly when fighting a trend.
13) Keep it simple. Don’t trade around a core position unless you have the experience, skill and discipline to pull it off.
