Getting started on the YM

[yongp]

Hi,

I've just started to trade the US index futures namely YM, ES and ER four months ago on a day trade basis but to my dismal, i've wiped out my account effortlessly. Hence, I've grounded myself for the whole month to get my acts together.

I'm using the volume chart on Tradestation (i.e 421 shares or 2000 shares per bar instead of a 5 min interval bar) and focused on a 1,2,3 reversal set-up.

Being new, I would greatly appreciate if anyone could help me with the following:
- which market is safer for beginners: YM, ES or ER?
- what bar interval is advisable to day trade
- what can you do to avoid over trading and managing emotions

thanks heaps!

 

[Mr.J-Arthur]

Hello, welcome

YM is safer for beginners because it is less leverage. Had you came here first, you wouldn't have blown your account! ES and ER are highly leveraged so stand away from those markets for now.

The YM offers 1-2 big trades a day and a few small profitable scalps. I trade the YM and it provides me with some good chunk change.

Let me give you an idea of how I like to trade the YM. Each morning I look for direction by using moving averages. I use 9, 28, 50, and 100. If the 9 has already crossed under the MA's I try shorting the opening. Today YM dropped over 40 points at the opening. Today was mostly down and choppy.
I was stopped out too soon because my STOP loss was too close. Make sure to let your trades ride, but keep a stop @1% of total account (for me that's 10 points! 20 points max).

1 minute chart is okay to use, but I also use a 5 minute too.

With the YM, you'll also need to watch CRUDE for your entry and exit as well. When crude ran up in the morning, YM made a clear channel downwards. It's an inverse relationship OIL goes up, DOW goes down. DOW goes up, oil goes down.

PICK your trades wisely.
That's how I avoid overtrading.
Once I make a minimum of 1% I stop trading, until I see "easy opportunities." I leave my desk for small intervals while staying on "watch mode."

You need to build a trading plan with some risk management.
For example:

100k account total
risk 10% of account per trade or less=10k or less (3 YM contracts at most, start with just 1)
MAXIMUM drawdown is 1% of total account=1k (this stop is 200pts on 1 contract, it gets more narrow as you add more contracts on)

If you have a 10k account, then your stop is @100 points for 1 contract or 1/2% @ 50 points (AMPLE WIGGLE ROOM).

It's simple math. You would have to screw up 100 trades losing a max of 1% to blow your account. or 200 losing trades at 1/2%. Odds are in your favor to find goos trades before that happens. I use the moving average cross overs almost strictly, as well as eyeing crude OIL.

The reason you blew your account is not because you used risk management. I can guess you probably let your trades go against you by 10% or more. The point size on ES is 50$ which is HUGE for small acounts...10k account would be stopped out @ 2 ES points or 8 ticks...NO WIGGLE ROOM.

I trade 1 contract at a time, which is nearly all the capitol I choose to use. No matter how much capitol you have, it's possible to make it work. You must be really good to be able to survive and thrive with less than 10k. No major slip ups! Chin up!

 

[yongp]

Hello, welcome

YM is safer for beginners because it is less leverage. Had you came here first, you wouldn't have blown your account! ES and ER are highly leveraged so stand away from those markets for now.

The YM offers 1-2 big trades a day and a few small profitable scalps. I trade the YM and it provides me with some good chunk change.

Let me give you an idea of how I like to trade the YM. Each morning I look for direction by using moving averages. I use 9, 28, 50, and 100. If the 9 has already crossed under the MA's I try shorting the opening. Today YM dropped over 40 points at the opening. Today was mostly down and choppy.
I was stopped out too soon because my STOP loss was too close. Make sure to let your trades ride, but keep a stop @1% of total account (for me that's 10 points! 20 points max).

1 minute chart is okay to use, but I also use a 5 minute too.

With the YM, you'll also need to watch CRUDE for your entry and exit as well. When crude ran up in the morning, YM made a clear channel downwards. It's an inverse relationship OIL goes up, DOW goes down. DOW goes up, oil goes down.

PICK your trades wisely.
That's how I avoid overtrading.
Once I make a minimum of 1% I stop trading, until I see "easy opportunities." I leave my desk for small intervals while staying on "watch mode."

You need to build a trading plan with some risk management.
For example:

100k account total
risk 10% of account per trade or less=10k or less (3 YM contracts at most, start with just 1)
MAXIMUM drawdown is 1% of total account=1k (this stop is 200pts on 1 contract, it gets more narrow as you add more contracts on)

If you have a 10k account, then your stop is @100 points for 1 contract or 1/2% @ 50 points (AMPLE WIGGLE ROOM).

It's simple math. You would have to screw up 100 trades losing a max of 1% to blow your account. or 200 losing trades at 1/2%. Odds are in your favor to find goos trades before that happens. I use the moving average cross overs almost strictly, as well as eyeing crude OIL.

The reason you blew your account is not because you used risk management. I can guess you probably let your trades go against you by 10% or more. The point size on ES is 50$ which is HUGE for small acounts...10k account would be stopped out @ 2 ES points or 8 ticks...NO WIGGLE ROOM.

I trade 1 contract at a time, which is nearly all the capitol I choose to use. No matter how much capitol you have, it's possible to make it work. You must be really good to be able to survive and thrive with less than 10k. No major slip ups! Chin up!

Hi Mr.J-Arthur,

Thanks for the reply.

I'd supposed account size does have a strong psychological impact to our emotion. I started off with a $5k account hoping to day trade and make $100 everyday. Your disciplined approach and prudent exposure of 1 contract hit me on the head. I blew my account recently from trading 78 YM contracts within the same day. I know, it's suicidal.

Am in a process of understanding myself and whether I could make it on Trading.

thanks again, yongp

 

[fifty2aces]

Hi Mr.J-Arthur,

Thanks for the reply.

I'd supposed account size does have a strong psychological impact to our emotion. I started off with a $5k account hoping to day trade and make $100 everyday. Your disciplined approach and prudent exposure of 1 contract hit me on the head. I blew my account recently from trading 78 YM contracts within the same day. I know, it's suicidal.

Am in a process of understanding myself and whether I could make it on Trading.

thanks again, yongp

Two reasons you shouldn't set a daily target:

1) It creates too much pressure to trade - rather than waiting for good setups, you'll be trying to take marginal trades just to hit the target. At the same time, you might be reluctant to take a great setup after you hit your target, due to the fear of losing, and therefore not hitting the target.
2) One day is not a long time - unless you do a lot of trades a day, you won't really be getting a big enough sample size to expect consistent results. If you must set a target, make it over a longer period, or a particular number of trades. Better yet - don't set a target, just take good trades, and avoid bad ones.


Also, you should really demo trade any approach before risking real money. A lot of people will say it's not the same, and they're right, but think of it as soldiers training for a war - it's not the same, but you'd be stupid not to prepare - if you can't do it in training, how will you manage when the pressure's on?

 

[shorty]

With the YM, you'll also need to watch CRUDE for your entry and exit as well. When crude ran up in the morning, YM made a clear channel downwards. It's an inverse relationship OIL goes up, DOW goes down. DOW goes up, oil goes down.

Not knocking your trading style at all. Crude is big news at the moment and everyone is talking about how it has a great inverse relationship to YM, Spoos etc.....but it's a dangerous presumption to make long term. A quick glance at a Crude chart over the past 5 years or so will show u that crude has rocketed up....but so has ES and YM !!

 

[Mr.J-Arthur]

Not knocking your trading style at all. Crude is big news at the moment and everyone is talking about how it has a great inverse relationship to YM, Spoos etc.....but it's a dangerous presumption to make long term. A quick glance at a Crude chart over the past 5 years or so will show u that crude has rocketed up....but so has ES and YM !!

Haha, Shorty, YM has not rocketed up over the past 5 years! please do your research. The normal sized DOW has been coming down ever since 10/10/07 thus, YM has been coming down (before that everything was fine, I blame the recession mostly). The USA stock markets are all in recession mode, and that means USA's CPI Index is also up. Recessions are known for a run up in commodities in general, but the commodity bubble may be slowly shrinking after expanding so fast.

This is actually much more complex than you think Shorty. Currently the USD is in Rally Mode. When the USD gets strong, the price of commodities starts to slide.
USD UP->OIL, gasoline, gold, silver all go down! It's simple. So if USD is in Rally Mode, then US Stocks (ES, YM, ER2, ETC) will rally up and Oil typically doesn't go up during a USD rally (of course there may be a few exceptions on rare occaisons).

Don't worry, I don't take offense Today I bagged 124 points on YM, not to be a bragger but my method must be working.

I don't go strictly off of OIL, because sometimes the relationship DOES become dislocated, however today was perfect for using a combo of MA's and using OIL's slide to our advantage. I trade a set of MA crossovers to find trends....9,28,50,100,200.

Shorty, Not to knock you, but you're a new member it seems with 16 posts. Check out the DOW 2008 thread, that's where YM traders post their speculations,trading methods, trades and p/l. I'll show you how it's done :cheesy:

Cheers!

 

[shorty]

Haha, Shorty, YM has not rocketed up over the past 5 years! please do your research.

This is actually much more complex than you think Shorty.

Cheers!

Ok, I kept it polite but I kinda thought I'd get a numbskull response
Maybe you haven't been trading too long, but the Dow was 7500 in 2003.....oil was c $30.....surely they can't both have risen ??? I've kept it nice n simple for ya !! It's a bit more complex than YOU obviously think

 

[yongp]

Two reasons you shouldn't set a daily target:

1) It creates too much pressure to trade - rather than waiting for good setups, you'll be trying to take marginal trades just to hit the target. At the same time, you might be reluctant to take a great setup after you hit your target, due to the fear of losing, and therefore not hitting the target.
2) One day is not a long time - unless you do a lot of trades a day, you won't really be getting a big enough sample size to expect consistent results. If you must set a target, make it over a longer period, or a particular number of trades. Better yet - don't set a target, just take good trades, and avoid bad ones.


Also, you should really demo trade any approach before risking real money. A lot of people will say it's not the same, and they're right, but think of it as soldiers training for a war - it's not the same, but you'd be stupid not to prepare - if you can't do it in training, how will you manage when the pressure's on?

Fifty2aces,
The trading period that I'm looking at would be from 9:30 to 12 am ET because I'm in Asia. How many trades a day would you advise? in the absence of a daily profit target, what do you use to trigger a "stop trading for the day"?

thanks

 

[fifty2aces]

Fifty2aces,
The trading period that I'm looking at would be from 9:30 to 12 am ET because I'm in Asia. How many trades a day would you advise? in the absence of a daily profit target, what do you use to trigger a "stop trading for the day"?

thanks

It's impossible to say how many trades you should take, since this depends on your strategy, however you'll have to pay commissions on each trade, and these can stack up quickly, so often less is more.

As for when to stop trading for the day, either when the market closes, or any time you feel that you are not trading well (e.g. lacking discipline). It is probably a good idea to have a maximum daily stop loss as well, so if you lose a certain amount (say 3 trades in a row) you stop trading and try to figure out what went wrong - whether you were making mistakes, or just unlucky.

 

[Mr.J-Arthur]

Ok, I kept it polite but I kinda thought I'd get a numbskull response
Maybe you haven't been trading too long, but the Dow was 7500 in 2003.....oil was c $30.....surely they can't both have risen ??? I've kept it nice n simple for ya !! It's a bit more complex than YOU obviously think

Shorty, in 2003 the conditions were different. Right now we are in a recession in the US...so when commodity bubble looks to be shrinking, people hop on stocks and mini dow.

30 for a barrel of oil?! That's not crazy shorty. At that price the economy can still grow. It's nuts when oil runs up from 80/90 bbl to 150/bbl! At such a high price it stifles growth in our economy and drives up the price of goods. Why do stocks go down? Because non-oil companies actually lose money because oil has risen so fast. How can you post quartly profit for stock investors when you can't even sell products? Everything is shipped using oil as fuel....computers, xbox, food, clothing and guess who pays for that cost? The consumer!

If oil runs up to 150 again, I can't even think of being long on YM, because it doesn't make sense. If oil was 30$ for a barrel, our economy would be expanding and growing.

Do you see the general argument here? High commodity prices kill our economy if they rise up too hard and fast. In 2003 oil did not go up 50%! There cannot be growth if oil goes back up to 150...
oil was around 80/90, so at one point it was nearly double in price, because of a weak USD and political/global tensions.

My USD argument still holds true, which makes the crude/market index ralationship work.
You really can't refute the fact that USD up=commods down or USD down=commods up.
USD up=commods down=stocks up (almost always)....
It's fact. You must be able to admit USD has a relationship with US stocks...and thethat clues us in on commods and how they effect stocks. I always think of commods as an extension of currency, politics and news all combined and smashed together.

Plus, by shorting the market when oil rises too fast too hard, it's basically a bet that high commods will hurt our companies and it's basically adding to this mess called a recession. So you'll have to convince traders for the short term to stop shorting market when oil surges up...
why try to convince everyone? just follow the trend.

In the short term this method works. Along with using moving average cross overs. Yesterday I made some big points, and how? I got in when oil started to show weakness and what do you know! YM broke out while oil slid! So I don't care about the 2003 market...markets are always changing and right now this actually works (with a few exceptions I have seen). I am speaking about intraday trading, not investing over long term.

This has to do with the outlook on the economy and how traders trade that outlook on our economy.
Jeez, don't be a numbskull only kidding.

If you trade the YM currently, YOU MUST have the QM oil chart up to atleast take in account the POSSIBLE relationship. And then used with moving averages you should be able to make a crap load of points. Remember, YM isn't just mini dow...it's dow STOCKS and stocks dont like a weak USD...OIL likes weak USD. Stocks also don't like high commod prices because that means USD is weak!

It's cause and effect. and currently, oil is KING.

like i said, join our DOW 2008 thread and I'll show you everything I do...
oil is one of many indicators. And hey, i'm doing something right here because I'm up nearly 20% from last friday on my total account value.

like i said it's complex. We're trying to get in the heads of other traders currently...not in 2003. To make money right now we need to know how these other guys think! So on the days that oil goes down, what does that do? It makes everyone a little more optimistic (haha, unless they are invested in oil stock or bought oil futures at the high peak!)

Look at yesterday's intraday data of /QM and /YM and tell me that there's no relationship...

heck, look at this whole week for data. when oil rallies, YM goes for a slide!
don't disregard this theory for the short term (it should work for long as we're in a recession and maybe longer).

EDIT: I say we're getting in the heads of other traders, so whether it is actually logical doesn't matter. The theory is logical, but more importantly everyone makes the connection for this current recession based market.
Trading is far from "logical." For example DID YOU SEE YM DROP BEFORE MARKET OPEN? and then it was pumped up to make all those points back...do you know why? MARKET MAKERS. And they move the market.
They "make" the market, so maybe it's these guys who go long when oil gets weak intraday and then we all hop on and go for a ride!

if traders based their position off of the weather in NYC....I would just follow along, so we're all crazy imbiciles to some extent. I could care less why it goes up, but it's good to find other markets that can be correlated side by side...inversely or directly. USD and stocks is a direct relationship. USD and commods is an inverse relationship.

cheers, I'm having some beer, today the YM market is in a choppy range. no good to trade a choppy market.

 

[longhi18]

I've traded YM and ER2 successfully for 2 years. I trade what i'm trading and nothing else. Not knocking your style Mr. J as it has seemed to work for you. My point is, find your style and stick to it. Obviously we all have different trading preferences and styles, none of which are right nor wrong as long as you comfortable.

This is my style. Too me, it is understood that oil and index futures are inveresely related. If I wanted to trade oil, I would trade oil. Not watch oil to see what indices are doing. (The moves are never lagged, ie. rally in oil yields and instant fall in indices. What good is that?) Quant programmers have all the statistical arb between crude and indices down pretty well.

This is my perspective, again I respect all views of the market. Our goal isn't to say whos right or wrong, but it is to provide consistent results.

 

[Mr.J-Arthur]

The drop in oil today certainly helped the YM index. It's just market sentiment and how people feel.
My system isn't that radical, and I talk about it because it does serve to be helpful. Sometimes there can be ripples in the market, but it's hard to prove what is exactly causing the ripple.
Don't tear it down, it's an element of how this "herd" thinks! If other herd member notice it, then it becomes true in a sense. There are many truisms in our market, as well as contradictions..
I wish there was a holy grail, but then who would actually share it? There's no perfect method, except for using observations and taking notes.

perception. Some traders have systems based off of planetary movement and alignment of the stars..haha, so the systems used are all unique. There's not one single edge...I use MA's as well and that is one of many edges to be used.

Either way, the YM is awesome for the beginner. Profit can be stacked up easily if done right. Today was incredibly volitile...

 

[traderjoe777]

My own feeling is that Amex stock index ETFs are much better for beginning traders than the corresponding emini futures contracts, even though the latter are more commonly touted. In other words, SPY instead of ES, QQQQ rather than NQ, and DIA instead of YM. The reasoning here is that stocks provide the ability to titrate risk by allowing you to take very small positions (such as 50 or 100 shares per trade) until you have a trading system or systems which you have back-tested and feel comfortable with. Regarding what you said about wiping out your account "effortlessly", I know the feeling. I went through about $30K in less than a year with index eminis back in 2000, which was really no fun at all. First law of leverage is that its a double edged sword and will often shred beginning traders to ribbons in no time. Think about it....if you've got the minimum recommended $5K in your account for trading one ES contract, then taking a daytrade stop loss of only $250 means you've just blown 5 percent of your capital on a single trade! Most pros recommend an absolute maximum loss per trade equal to no greater than 2 percent your total equity, and one percent or even half a percent is better still. By initially sticking with 50 shares of an ETF rather than one of the much more expensive eminis, you reduce those early losses dramatically and are in a much better position to survive and thrive long-term. There is a catch, however, due to the SEC's "pattern daytrading rule". This controversial rule requires you to maintain a minimum balance of $25K for the privilege of unlimited daytrades, but I still feel its worth it in order to keep from decimating your account via high leverage and unreasonably large stop losses. Risk management should always be the number one consideration not only for beginning traders, but for ALL traders.

 

[shorty]

This is the kind of day that's pretty dangerous for the "oil up dow down and vice versa" argument. Oil is up 10 dollars since Tuesday morning. With almost a 10% pump in oil u'd be expecting a fair fall in Dow, but it just wouldn't fall.
Actually, oil bust some fibs today and might go for the next level at 127-8ish..yikes...but the indices also look like they want a bit of a bounce back....could be an interesting few days

 

[philhackett]

Hi,

I've just started to trade the US index futures namely YM, ES and ER four months ago on a day trade basis but to my dismal, i've wiped out my account effortlessly. Hence, I've grounded myself for the whole month to get my acts together.

I'm using the volume chart on Tradestation (i.e 421 shares or 2000 shares per bar instead of a 5 min interval bar) and focused on a 1,2,3 reversal set-up.

Being new, I would greatly appreciate if anyone could help me with the following:
- which market is safer for beginners: YM, ES or ER?
- what bar interval is advisable to day trade
- what can you do to avoid over trading and managing emotions

thanks heaps!

If you trade 3-5 minute charts and use the following, together, as your trading system and you will find it very difficult to lose money;

eSignal Learning: Trading Educator's Corner -- Joe DiNapoli

file:///C:/Trading%20advice/TraderTalk,%20A%20Simple%20Moving%20Average%20Trading%20System.htm

Using Bollinger Band "Bands" To Gauge Trends

3 minuet charts can produce more trading opportunities than 5 minute charts. Back-test before trading and then trade only One $ or £ or € a Pip for a week or three until you have mastered this simple strategy and your emotions.

Only trade the signals at the start of the trade. If you miss the signal do not enter as you will almost enter at the reversal point.

If you miss the best trading day ever, remember that there will be another one in a day or two.

Phil

 

[Mr.J-Arthur]

The ES is wayyy to heavily leveraged for little traders and new traders. NQ is good for beginners, less market noise and good liquidity and movement.

Shorty- U will be happy to hear that this current market is full of BS, and I can't remember which days this week it was but the relationship changed. The rules have changed...The big boys know we're catching on, so the game changes! Yes this week has been exciting...

there are other forces at work..I am trying to find the grail at the moment.

 

[new_trader]

Hello, welcome

YM is safer for beginners because it is less leverage. Had you came here first, you wouldn't have blown your account! ES and ER are highly leveraged so stand away from those markets for now.

The YM offers 1-2 big trades a day and a few small profitable scalps. I trade the YM and it provides me with some good chunk change.

Let me give you an idea of how I like to trade the YM. Each morning I look for direction by using moving averages. I use 9, 28, 50, and 100. If the 9 has already crossed under the MA's I try shorting the opening. Today YM dropped over 40 points at the opening. Today was mostly down and choppy.
I was stopped out too soon because my STOP loss was too close. Make sure to let your trades ride, but keep a stop @1% of total account (for me that's 10 points! 20 points max).

1 minute chart is okay to use, but I also use a 5 minute too.

With the YM, you'll also need to watch CRUDE for your entry and exit as well. When crude ran up in the morning, YM made a clear channel downwards. It's an inverse relationship OIL goes up, DOW goes down. DOW goes up, oil goes down.

PICK your trades wisely.
That's how I avoid overtrading.
Once I make a minimum of 1% I stop trading, until I see "easy opportunities." I leave my desk for small intervals while staying on "watch mode."

You need to build a trading plan with some risk management.
For example:

100k account total
risk 10% of account per trade or less=10k or less (3 YM contracts at most, start with just 1)
MAXIMUM drawdown is 1% of total account=1k (this stop is 200pts on 1 contract, it gets more narrow as you add more contracts on)

If you have a 10k account, then your stop is @100 points for 1 contract or 1/2% @ 50 points (AMPLE WIGGLE ROOM).

It's simple math. You would have to screw up 100 trades losing a max of 1% to blow your account. or 200 losing trades at 1/2%. Odds are in your favor to find goos trades before that happens. I use the moving average cross overs almost strictly, as well as eyeing crude OIL.

The reason you blew your account is not because you used risk management. I can guess you probably let your trades go against you by 10% or more. The point size on ES is 50$ which is HUGE for small acounts...10k account would be stopped out @ 2 ES points or 8 ticks...NO WIGGLE ROOM.

I trade 1 contract at a time, which is nearly all the capitol I choose to use. No matter how much capitol you have, it's possible to make it work. You must be really good to be able to survive and thrive with less than 10k. No major slip ups! Chin up!

You and your maths

100 losing trades@1% DOES NOT BLOW YOUR ACCOUNT!!!

There is no such thing as a safer market for beginners! There is no such thing as a safer market for anyone!

Wiggle room? What is that?

Choose one instrument and study it well. Stick with it despite the temptation to stray to a 'simpler' instrument. Trade with a close stop and endeavour to make them tighter as you progress.

Trading isn't easy, there are no shortcuts and there are no, repeat, NO simple ways to make money in this profession.