Soybean meal futures generally move higher in spring, a covered call strategy offers traders a relat...
Trade Futures with Just One Chart
04/12/2012 2:30 pm EST
Futures traders can be misled or suffer “analysis paralysis” by looking at too many different charts and time frames, says Al Brooks, who instead chooses just one chart and time frame and still identifies a number of tradable set-ups.
We’re talking time frames and the E-mini, either day sessions versus the Globex with Al Brooks, who is going to explain to us the difference and how he likes to trade them.
This is a question that comes up fairly regularly. Traders ask me if I’m trading the 24-hour chart, the Globex, or if I’m just trading the day session chart?
Especially in the first hour of the day, a lot of times they’ll be doing opposite things. The Globex chart could be in a bear trend and the day session could be in a bull trend. So do I worry about both charts or do I simply pick one?
To me, I always pick one chart. It doesn’t matter if it’s the Globex; it doesn’t matter if it’s the day session.
As far as time frame goes, traders always ask me, “Why not look at the five-minute chart and the 15-minute chart?” So why not use a chart based on ticks, like 1000 ticks per bar, or some Fibonacci number; or why not use a chart based on volume, like 5000 contracts per bar or 1000 contracts per bar; or why not try to outsmart everyone else and use a chart based on some odd time frame like 17 minutes or 13 minutes?
See also: Try These Lesser-Known Time Frames
To me, if you take away the time frame and just look at any chart, they’re all the same. There are thousands of ways to construct a chart for what’s taking place during the day, and it doesn’t matter which chart you take. There will be plenty of set-ups on every chart.
I realize that by trading the five-minute chart, I’m missing all kinds of other set-ups on the one-minute chart, the three-minute chart, the volume charts, and all kinds of other charts. I don’t worry about it because on the chart that I’m looking at, there will probably be 20 potential limit-order entry trades and ten to 15 potential stop-entry trades, and that’s more than what I could possibly hope to have.
If I look at every conceivable chart, I can end up with hundreds of set-ups, but I wouldn’t be able to trade them anyway. So, to me, any chart and any time frame—Globex chart, day chart, charts constructed on volume, on ticks, on time; it doesn’t matter—they all have plenty of good set-ups if you know how to read the price action.
So you simply look at the chart that you have in front of you and don’t worry about the hundreds of other set-ups that you’re missing on all of those other time frames. Any one chart will have plenty of set-ups, and if you just focus on one chart, there will be plenty of opportunities to make money.
So it sounds like the great curse when there are so many options, and with technology the way it is, traders can follow virtually anything. Your point here, I’m sure, resonates with everyone that, yes, there are always opportunities, but you need to focus on how you’re going to attack those opportunities.
Just pick one, and every chart will have plenty of trades on it if you know what to look for.
If you just concentrate on doing really well with one chart, I think you’re in the best place to make money. Don’t worry about all the other stuff that you’re missing. You’re going to be missing 99% of what’s happening on all those other charts, and it’s irrelevant. You can make plenty of money from one chart.
Related Articles on FUTURES
Commodity trading gets a bad rap due to the risk involved in the futures and options markets. But th...
Bitcoin futures contracts are set to begin trading before the end of the year and perhaps as soon as...
We have found a way to play the upside in corn with a low margin, an appealing profit potential and ...