E-mini Day Trading: It's A Mindset

By Author: David Adams
Total Articles: 41
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There is no shortage of talk about the type of person that should trade, personality traits that are conducive to trading, and overall trading technique. My general observation is that traders portray their profession as something akin to brain surgery. There are, in fact, very technical and complex trading systems employed by professional traders and they certainly would not be a good choice for a trader who plans to day trade from his or her home. But I tend to disagree with the complexity argument in trading, and believe that effective trading is the result of a proper mindset and thorough preparation. And really, neither is terribly difficult.

First and foremost, a good trader realizes that day trading e-mini contracts is not a get rich scheme. Further, if you approach trading and highly aggressive manner in hopes of striking it rich you will fail. You have the wrong mindset. A good trader fully understands that consistent trading is the key to winning trades. Aggressive trading usually entails initiating low probability trades with predictable results. A good home trader will stick with trading with the trend and ...
... being highly selective in the trades he or she takes during that trending period. There can be no substitution for this methodology, because aggressive trading inevitably results in catastrophic results.

And what causes aggressive trading?

It's the old get-rich-quick mentality many traders believe. Oddly enough, I don't necessarily blame this condition on the individual trader. I was perusing some of the trading education programs this morning and was shocked at some of the claims the programs were putting forth. Many advertised that you could double your money in a single month, and others claimed they averaged 35 points per day on the ES e-mini contract. This is a real head scratcher, as I know of no methodology, or at least no sound methodology, that will allow a trader to attain these sort of rates of return. Potential traders are misled as to the potential they may realize if they sign up for Course A or Course B. The claims of many of these trading practitioners are well beyond what any day trader can expect. Personally, I suggest that earning 4 to 6 points every day, on a consistent basis, would qualify you as a competent trader. Incidentally, depending upon the number of contracts he or she traded, you would make a tidy sum with this much smaller prediction of potential earnings.

So why do trading programs make such ridiculous claims?

Under certain market conditions you can have a very hot streak, usually because the market conditions favor your style of trading. However, the market is far from a static creature and once the conditions change your style may not jive with what the market is offering. So in defense of the claimants of outrageous fortune, they may have gone through a hot streak and feel they have attained market nirvana. Of course, the streaks are short-lived and reality sets in with the inevitable results. Aggressive trading can be profitable at certain times, but over the long run the trader is doomed. The important thing to remember is to develop a consistent methodology and a mindset that supports that methodology.

What do you mean by a mindset?

I believe having realistic expectations about what you can do in the market and what you can't do in the market is essential for success. If you are considering trading e-mini contracts for a living, money management and emotional management are two of the most important factors in your success. The get rich quick mindset is not part of a successful trading mindset, nor is the emotional mindset that accompanies the get-rich-quick philosophy. Instead, the best traders I know have a consistent and conservative viewpoint toward trading the e-mini market. Tight money management is essential to stay viable in trading, which means not over trading or overextending the limits of your trading account. Further, traders with the proper mindset are not seduced into trading large contract numbers, instead they stick with trading 5 to 7% of their account on a given trade. Risk more than that, and you will be exiting the market involuntarily in short order. Good trading more resembles the turtle than the hare in the famous turtle and hare parable. We trade for the long run, and expect to make money over the long run. A good trader may have some exceptional days that are similar to the get-rich-quick guys, but those are the exceptions not the rules. In baseball terms, we are singles hitters and occasionally hit a homerun.

In summary, the proper mindset in trading is conservative and pragmatic. We trade with a time-tested system and never over extend our accounts or our trading abilities. We trade with the trend and avoid bucking the trend. In the truest sense, we are boring.

I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit.



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