E-mini trading presents a unique set of challenges to the individual investor. In the morning, from 9:30 a.m. until noon, US/Eastern, the E-mini is usually at its most volatile. From noon until about 2:30 p.m., the market is often slower. After 2:30 p.m., the market tends to slow yet again. Then right before market closes, volatility can increase with traders making final moves.
With this understanding of price action, John Paul from DayTradeToWin.com has always favored the morning session. In fact, his first e-mini trading course ever offered was “At the Open.” This strategy is still taught today as the ATO in his eight week Mentoship Program. He believes the morning is the best time to trade because it offers more consistent volatility then other periods. The market has to move for a trader to make money. If the market chops back and forth with low volatility, an investor can constantly chase failing trades.
One of the ways to take advantage of the morning trading session is to use a tool like the Average True Range. This tool, also called the ATR, provides an indication of volatility. If the ATR is between 1 and 5 points (while the Period value is set to 4), then the market is “good to trade,” according to John Paul. If below 1, it’s too slow. Above 5, and the market is very unstable. On the chart, the ATR appears at the bottom as a zig-zagging green line.
Manage E-mini Trading Risk by Scaling the ATR
John Paul recommends adjusting the profit target and stop loss according to the current ATR value. If the market is less volatile, consider reducing the profit target. The market should be able to reach the profit target given current conditions. Trading requires focus, so after you enter a trade, be ready to stay at your computer to see it through. Generally, most of the trades John Paul takes are over within 20 minutes.
The Atlas Line, seen in the video above, can provide many types of signals. Firstly, you have the main Dbl Bar Long and Dbl Bar Short trades. These appear when price intersects the dashed line and closes twice above or below it, respectively. When you see one of these signals, the idea is that a big move may occur. This allows you to get in front of the trade instead of entering after the market has already finished an upward or downward trend. If the market is continuing away from the Atlas Line, you may see small S and P signals. These represent Strength and Pullback trades.
E-mini trading offers plenty of opportunities, but you have to know where to look and get in at the right time. Furthermore, John Paul’s training can keep you from making silly mistakes like guessing highs lows, trading without having a proper stop loss in place, and much more. His next Group Mentorship class begins Nov. 3, 2016 and is on Tuesdays and Thursdays from 3 p.m. to 4 p.m. EDT.