It is important that before trading the Emini, one must have a strategy prepared before making any live trade. To develop a strategy, the trader must decide what his strength and weakness. Once the trader has determined what his strength, he can implement a strategy that is tailored to it. Many traders have claimed that their strategy work. The most important thing about developing a strategy is that it must work long term. Any short term gain can only be temporary as the market is irrational and can change anytime. The trader may believe that his strategy work when in fact it was only temporary.
To develop a strategy, a strategy must know his basic such as buying and selling. He must be familiar with his platform and know how to use it well. The trader must know his chart, what time frame he is planning to trade and tick. He must decide how he is going to execute a trade, and how to exit a trade when he is wrong. The trader must know where to place his stops when he enters the market, and how to adjust or trail his stops once price starts moving. It is very important that traders must know his exit, without a set target he may be trading blind and not know when to take profit or when to cut his loss.
Many traders today trade the news. They feel that it is important to give the market some sort of direction. For example, if the news came out with bad housing economic data, in most cases, the market will drop. Sometime the market may drop instantly, and sometime it may take a few minutes or hours for the market to digest the news. Trading the news should be use in conjunction with the chart. For example, if the news is bad and price is already at the support. Price may bounce off the support before dropping. If the trader trades the news and decided to short at the support, he may get in at a bad price and may be down a few points in his trade. It is important that he wait until the market react to the news before shorting.
Some professional traders only trade the chart. They do not use any technical or indicators. Some of the professional have been trading the Emini for so long they know how price will react. For example, most traders like to trade off support and resistance. This is used by drawing a line at the high connecting with a previous reaction high or drawing the low connecting the low with previous reaction low. Many traders believe that price will repel off the resistance line and bounce off the support line. This is known as trading the chart. There are no indicators to tell them when to sell and when to buy. This is known as pure price action. Basically, it’s just watching price move.
There are some traders that like to trade charts and there are traders that like to trade indicators. Those traders that trade the indicators rely on the indicators to help guide them when to buy and when to sell. Some indicators produce buy signal and some indicators show overbought and oversold levels. Whatever the indicators are, it is important to use them in conjunction with other indicators as there are many of them. Many of the indicators produce signal at different times. Most indicators used are considered lagging indicators. It is important to use indicators that are exponential since it is weighted to the most recent price action.