Bridging the Gap between Sim and E-minis

 

I make it a practice to never recommend any particular market as being suitable for your trading. It's none of my business what you choose to trade. I don't offer financial advise and to do so would be completely irresponsible as I have no insight into your individual needs or circumstances. (For more, see here for my Disclaimer and Terms & Conditions.)

However, I do care that you survive the learning curve.

So if you've made an independent decision to trade a market, and there is a lower risk option available, then please start there.

Prove success at the smaller level first. And build up to full size contracts and larger position sizes.

E-mini traders – don't trade the E-mini's until you've confirmed you can trade the Micro E-mini's. Forex traders – don't trade full size lots until you've confirmed you can trade the mini or micro lots.

If you do have edge, you'll transition quickly to larger size.

But until that is proven, please:

LOWER RISK.

AND INCREASE YOUR ODDS OF SURVIVING THE LEARNING CURVE.

The gap between sim and full-size contracts is quite large (in terms of risk). Make use of these "smaller" markets to bridge the gap and make the transition to live trading just a little smoother.

I was contacted by a trader who has recently gone live but then preceded to bleed his account into a 30% drawdown.

He's not trading the YTC strategy. I was pleased to hear that!

And I was most pleased to hear that he was smart enough to stop trading at 30% loss.

But here's what really annoyed me.

Although his 5-figure account size is sufficient for trading E-minis with 3 contracts, as a new trader he has no right to be starting there when other options are available.

New traders – PLEASE – always start live with the smallest position sizes available. And build from there, slowly and incrementally, as success and consistency are proven at each level.

Since May, the CME has offered Micro E-mini contracts.

MES – Micro E-Mini S&P 500 – the micro equivalent of the ES

MYM – Micro E-Mini Dow – the micro equivalent of the YM

MNQ – Micro E-Mini NASDAQ – the micro equivalent of the NQ

M2K – Micro E-Mini Russell – the micro equivalent of the RTY

All micro contracts being 10 times smaller in size than the equivalent E-mini.

See here for contract specifications – MES, MYM, MNQ, M2K.

Yes… the same markets… almost exactly the same charts… but 10 times smaller.

The number one rule for trading is to survive to trade another day (IIRC this was a lesson I got from Larry Williams). I highly recommend you adopt this rule in your own trading. But as a new trader who has yet to establish a proven track record, it's even more important.

Start small. And build from there slowly and incrementally.

I've finally managed to play with the MNQ in recent weeks.

The following was the 14th October, the Columbus Day holiday. Holidays are typically a "stand aside" day for me due to the potential for low volume, narrow range and largely unfavourable conditions.

So I just "played" with MNQ while doing other work.

<image: Micro E-Mini Futures>

<image: Micro E-Mini Futures>

<image: Micro E-Mini Futures>

<image: Micro E-Mini Futures>

<image: Micro E-Mini Futures>

<image: Micro E-Mini Futures>

<image: Micro E-Mini Futures>

<image: Micro E-Mini Futures>

 

I'm going to use MNQ for testing, alongside NQ. New trade ideas. And different trade management plans.

I've never been good at trading multiple markets at once, on these low timeframes. But with this idea the analysis for both is essentially the same, so I'm aiming to trade NQ and "test and develop" MNQ at the same time.

I'm also going to include more MNQ trades in the newsletter and blog, to hopefully show you that it's not only ok to trade, but a damn good market for bridging the gap from sim to E-minis.

Back to our trader with the drawdown.

He's taking a break to:

  • Clear his mind
  • Replenish his funds
  • Review the cause of his failure
  • Define solutions
  • Restart on sim
  • And transition to micro contracts, building slowly from there, increasing size incrementally as success and consistency is proven at each level.

 

A smarter plan.

A more survivable plan.

If you're just starting out, or approaching the stage where you transition from sim to live markets, consider adopting a similar slow and steady progression plan.

Lower risk. And increase your odds of surviving the learning curve.

Happy trading,

Lance Beggs

 


 

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YourTradingCoach - Admin

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