Trading Lesson 9

Successful e-mini day trading

Electronic trading is here to stay. Just a few months ago the Chicago Mercantile Exchange and the Chicago Board of Trade were announcing a potential merger. There combined activity tops a trillion dollars worth of contracts bought and sold every month. Out of the blue comes a second suitor ICE, a premier electronic direct network, that intends to out bid the Board of Trade. What does this all mean?

The end of commodities and futures trading as we know it.

Ever since the emini's were introduced the lament is the pit traders are going the way of the dinosaur. Now with the development of electronic sugar and coffee contracts on the NYBOT and electronic grain markets, the reality is that all markets will be traded electronically eventually and retail traders better know how to protect themselves.

While pit traders are disappearing their techniques on how to protect themselves against market fluctuations are more important than ever. The most important technique is "the hedge". While pit traders make their money from scalping the markets, they never leave themselves unprotected. The "hedge" is a simple technique that is underutilized by retail day traders.

It's simple.

1. Pick a market's long term direction
2. Purchase a slightly out of the money option with time value following that market's long term direction
3. Daytrade only the countertrends.
4. Use stops and limits to protect and enter markets.
5. Reap profits from short term momentum and long-term trend trading.

This technique "the hedge" is powerful in its simplicity. No more chasing the markets, no more being whipsawed, no more worries about stop or limit placement.

As with most simple things it will take getting used to. But you will easily double or triple your oppportunity for profits.



If you would like to see some charts on "the hedge" in action send an email with the subject "the hedge" to info@liverpoolgroup.com