How a Professional E-Mini Trader Finds Great Trades (Part 5)

08/27/2010 12:01 am EST

Focus: STRATEGIES

Timothy Morge

President, MarketGeometry.com

(Continued from Part 4 )

Thursday also brings no action that Shane finds interesting enough to open a trade in the e-mini S&Ps. But by Friday's live Market Geometry mid-day mentoring session, he is carefully watching an area where if price is going to exhibit a change in behavior, it will probably be there.

chart

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This is the price area off the original reaction line 2 where the early-week rally began. Price has left some markers, triple tops, and a multi-pivot line connecting some bottoms and tops, all of which Shane is watching closely. If he sees price show strength and can find a trade entry setup with an acceptable risk/reward and initial stop, he'll attempt a trade in this area.

chart

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Once price breaks above the triple tops, Shane feels confident the original reaction line 2 will hold—as it did earlier in the week. He diagrams his trade out live in the mid-day session. This trade will have a risk/reward of four-to-one, which is quite nice. Risk/reward ratios above three-to-one really help keep your trading account balance healthy.

Now Shane has to wait to see if price will fill his limit buy order and give him a trade—winner or loser—in the e-mini S&Ps this week.

chart

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Price finally let Shane into a trade in the e-mini S&P futures just after the live market maps session ended that Friday afternoon. He netted seven e-mini S&P points on this trade with  a very nice risk/reward ratio of four-to-one. And although many people might think he spent the week kicking furniture because of missed opportunities, he had several nice trades in the US ten-year note futures, so in truth, he had a very nice week trading.

I hope some of you take away an understanding that the market does what it wants and that using your focus and energy being angry about not getting filled, or about being away from the screen when a trade you were stalking finally hits and you miss it, is only a waste of your focus and energy. Professional traders live with this day in and day out; those who are consistently profitable learn that this is a part of trading. How do we deal with it? We make our market maps, study the markets, do research, and manage the trades professionally that the market allows us to enter.

I hope it was interesting watching an entire week's set of charts and potential trade entries from a trader who I’ve taught and mentored. He's now a full-time professional trader, and I certainly respect his charting abilities, as well as the way he has mastered himself, which is the most difficult part of becoming a consistently profitable trader.

That's why my tagline since 1987 has been "Master Your Tools, Master Yourself."®

I wish you good trading!

By Tim Morge of MarketGeometry.com

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