US Dollar/Japanese Yen

Over the holidays we saw continued strength in the trend as the dollar yen continues to follow mid and long term trend signals. Going into the end of this week’s trading we are looking for entries into the short term. Keep an eye on this pair should we get a breakdown of the bullish short term trend.

E-mini trading isn’t just about systems and strategies. Automated systems have their place in financial markets but the programs available to retail traders are extremely poor performers. Trading requires user participation. Discretionary trading is the easiest way to make profits in the market. Unfortunately along with user participation comes user error and one of the most common forms of user error is over trading. Over exposure to the markets can lead to serious financial loss and avoiding over trading will help out any trader.

Over trading is often seen when a trader experiences an unsuccessful trade early in the day. If a trader starts out poorly, confidence shrinks, bad judgement set in, and from there problems start to occur. The trader tries to get their money back or prove a point to themselves that they were correct in their analysis and this starts the avalanche of losses. The end effect can be devastating.

There are a few tips that will help you keep from over trading:

1. Be Flexible

Being flexible in the market means having the ability to change bias in a matter of seconds. Emini traders need to know when they are wrong in their analysis and then have the discipline to change their trading plan or strategy for the day to align with their new bias.

2. Set A Trade Limit

Over trading comes from a lack of preparation.  Traders need to have a game plan for the trading day. They need to identify important levels before they trade. All analysis should be done before you begin taking positions. Along with all this preparation work comes setting a daily trade limit. If you know the levels you want before the start of the day you can set yourself a daily trade limit. Once that limit is reached you know you need to step away from the market. This can prevent you from over trading if a few trades go against you early on.

3. Broaden Your Horizons

Traders just starting out should focus on one trading instrument. The idea being that if you focus all your time and energy on one instrument you will become a master of that particular price action and chart. This is true to a certain extent. As a trader progresses it can be beneficial to broaden your horizons and begin to take on new trading vehicles such as forex or currency futures. No market moves all the time and spreading your focus will keep you from over trading a single instrument.

Over trading is a serious problem and if left unchecked can produce some nasty results. Early recognition and coming up with preventative measures can save your account. Make sure you are getting the most out of your trading by following these simple tips and you won’t regret it.

The e-mini markets are controlled by the collective human emotion which operates within its controlled environment. Outside forces that affect humans will also effect the markets. Weather changes and the seasonal changes can mean market behavior shifts for better or worse. Experienced traders know that different market conditions call for different approaches to trading.

Trading cycles are always in play no matter what time frame you are looking at. Every day markets open according to a certain cycle and the buying and selling leads to another cycle. The intraday cycle is one of the most important cycles to recognize and trade early on if you are going to have any success in the business. There are larger cycles playing out at the same time. Weekly cycles play a key role in reversals and support and resistance establishment. Monthly cycles are normally the easiest to identify because they happen over such a long period of time and there is such a large pool of data available.

One of the most obvious and easiest cycles to identify is the seasonal cycle. Weather changes and the human behaviour that goes along with those changes are crucial elements to understand when discussing seasonal trading. If a trader is aware of the swings in market behaviour from season to season they can position themselves to take advantage of it. So how do the various seasons affect the e-mini markets?

Winter

A slower season for the markets there is usually a lack of volatility as institutions and fund managers lay low. The winter is often characterized as being a spot for overall trend continuation in the markets. As liquidity and participation dries up so too should your trading. Concentrate on staying with the trend and eliminating any temptation of over trading.

Spring

New life brings new trades and spring time is often referred to as the heart of the trading year. Major participation and good volume means large trading ranges and plenty of opportunities to establish solid positions across the markets. Good traders will earn the majority of their trading profits for the year in the 4 months of spring. Knowing the conditions to expect ahead of time allows traders to concentrate and focus heavily on their trading during this time to ensure they get the most out of it.

Summer

The worst time of the year to be a short term trader. The heat brings with it extremely low volume and unpredictable markets as normally important technical levels no longer see the same participation from intelligent traders. Big money and institutions look at the summer period as a transitional one and focus on capital preservation rather than risk taking. July and August are traditionally the slowest in the markets.

Fall

As traders come back from vacation the markets are lifted with a sense of optimism. Trading during the fall is much like spring trading. Ranges are often blown out and serious moves that would have taken weeks during the summer months can happen in days. Going into the end of the year traders who are up on the year can afford to take on extra risk and traders with a net loss are desperate to turn it round before the new year. Focus on quality set ups and you can find success in the fall markets.

Seasonal market cycles have a large role to play in price action on the monthly, weekly, and even daily charts. Traders need to understand what type of market they are trading in order to get the maximum out of their specific strategy. Scalping the slow periods and letting winners run during the major seasons can exponentially increase a trader’s bottom line. Learn to understand what cycle the market is in and you will become a better trader