Trading different markets…

I took a long signal in today’s wheat session, but the market did not get up and go. As I’ve mentioned before, if this market does not move quickly I like to cut my losses and exit. In this case I was long 4 contracts and I took a 0.5 point loss on 2 of them and a 0.75 point loss on the other two – a nett loss of 2.5 points. 

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One of my clients recently raised the issue of trading with my techniques in different markets. I developed my approach trading the emini Russell 2000 futures, but now focus on the grain markets. I trade wheat at the moment, but I often switch to soybeans.  There are a number of points to consider.

  • I prefer markets with high momentum, high volume trading periods. Some 24 hour electronic markets do not really satisfy this criteria as well as commodity markets during their traditional opening periods – the grains, oil, gold, etc. Many stocks are also good day trading candidates.  You have to decide on the duration of the opening period to watch, which varies from market to market.
  • I never vary my entry signals, which are based on the tactics I like to use around support and resistance levels.  However I do vary my trade management practices based on the characteristics of the particular market. The placement of targets and stops is something which I find can be "tuned" to each individual market, although it is always wise to remember the guiding principle that average losses should be smaller than average wins.
  • Some markets just do not have enough volatility to day trade. You can never make day trading profits in markets which do not move enough. You always need the potential to make substantial profits with a positive average win to average loss ratio, after taking into account the impact of trading costs. (See here)

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