Dabbling in day trading again on this historic day

[caption id="attachment_334" align="aligncenter" width="500" caption="ES Setup"][ES Setup][][/caption]

I mentioned previously about avoiding volatility. But with VIX about 75 now, I couldn't help but to take the opportunity to day trade. I know, I know, I said I wouldn't do it again. So I'm only trading an account withpaper money.

To illustrate the abundance of day trading opportunities these days, I just launched my trading screen and within minutes I can see a viable setup.

On the 1 minute chart on the left, notice the small doji at \$844 with a high volume. Also off the chart is a low of \$837 for the day in the morning. So \$840 is an effective support for the moment. Since the doji at \$844 is above \$840, this is a good sign for the time being.

So I placed buy orders around \$845 for the next few minutes and exiting below \$850 (obvious resistance), with intent to get back later in if it breaks \$850 strongly. This went on for a few minutes, and I traded in the range taking small profits twice, until the price broke to \$841.50, which I stopped at a loss at around \$842.50.

However, noticing it's in a steady climb from then on, I entered a long at \$845 again, with stop at \$841, for a longer trade. The price rose to \$853.75, bounced back to \$850, and started dropping. I exited my long at a small profit at \$849.50 on a retracement.

ES keeps dropping for those seconds until \$845.75 and bounced right back to \$851. That was a good sign. I believe the initial \$850 break and retracement was just a technical bounce. So I went in again at \$851 a bit later intending to ride it up to \$860.

That trade went as planned and I exited at \$858. I reversed and went short at \$861 with a tight stop at \$863. The stop got hit and the price went up to \$866.

I decided to stop there since the trading screen didn't lean much to on-the-spot analysis. I'm not asking for a full charting screen though, that would be overkill for day trading. Simplicity is key. I'd be happy if they had 1-min and 15 min candlestick charts with 2-line EMA, MACD, Stochastic, and volume information. In the end, I'm \$162.50 richer in paper money after 12 trades.

Although it's a profitable session, I think I took way too many trades to reach that.

Since my trading platform is very basic and isn't meant for day trading, I didn't even have a chart on the trading matrix. I just looked at the price movements and occasionally flip back to the chart. However, I do have one good indicator for use... which is the price of Goldman Sachs (GS). Long story short, we're in a financial driven crisis and GS (along with MS and others) is one of the two surviving investment banks (of original 5) in this mess. GS were off the lows of the day and moving up very slowly throughout the few minutes which I day traded. That was a good enough bullish sign for me to go long.

[ES Setup]: http://traderpau.files.wordpress.com/2008/10/2008-10-10-es.png

Reward Risk of Popular Index Futures

                **ER2**    **YM**      **ES**     **EMD**

10min ATR 2.7 32 4 2.6 Daily ATR 26 341 42 25 \$ / point \$100.00 \$5.00 \$50.00 \$100.00 Reward/Risk 9.63 10.66 10.5 9.62

I'm using the intra-day ATR as a risk factor because I'm assuming them as noise. I use 10 min. as the basis because that's about the time period I use. The reward is the max daily swing, which is the daily ATR.

As you can see, the reward/risk is about the same for all the liquid index futures. However, I'm leaning toward YM because of the smaller contract size and it seems more stable lately. I'll watch the markets closely from now on.