Practical Overview

As mentioned in lesson #3, your goal for this practical portion of the class is to execute 100 trades on your simulator over the next week or so. By doing this, you will accomplish the following:

1. Increase your comfort level with your selected trading platform.
2. Learn to quickly enter different types of orders without having to stop and think about how to do it, and what it means.
3. Start on the road to mastering looking at the charts, while simultaneously executing a trade.
4. Start to internalize the rhythms of a single market.

You should have your environment all set up now, and your chart and simulator workspace configured. If this has not been completed, please read lesson #3 now. Once completed, you should have a 500 tick chart of the e-mini S&P March 2016 contract with Keltner Bands set at +/- 2.5 ATRs around the center band, and a MACD indicator set below the price (in the lower pane of your charting window.) It should look something like this:

Please note: We used the March 2016 e-Mini S&P contract as an example, but you should use the contract which has the most volume since you might be reading this lesson after the March 2016 contract expires.

Note: Since this is a day-trading course, you will need to have access to your trading platform and charts when the market is open during US daytime hours.

Drill #1: Entering Market Orders

The easiest order to enter is a market order. Your trading platform likely allows you to enter this type of order with one click of a button (assuming the symbol is already in your order ticket or ladder), with an optional confirmation message.

You will enter a market order to purchase 1 contract of the e-mini S&P contract (usually symbol ESH16 or similar) when the following condition(s) are met:

• Price pushes below the lower Keltner band and then —
• The bar closes, i.e.: the bar that has pushed below the lower Keltner band has completed, and a new bar is starting to form.

You will exit the trade with a SELL market order as soon as price meets any ONE of the following conditions:

• The first bar where the entire bar closes above the lower Keltner band, and you have a gain in the trade. In other words, the low of the price bar should be above the lower Keltner band, and you have at least one tick of profit.
• Immediately when price touches the middle Keltner band, and you are still showing a loss.

Obviously, we are not concerned with profitability in this exercise, and in fact, the rules as outlined above for this exercise will not be profitable over the long term in the real world. This is just a drill, designed to get you conditioned to entering orders in the real world while price is moving around the chart.

If this drill is done properly, you will be entering long trades in both rising and falling markets, as well as in both slow and fast markets. Watching for the conditions outlined above to develop will start to give you a feel for how the e-mini S&P market moves in the real world, i.e., it will start to help you to develop your “gut feel”, which is important for a discretionary day-trader.

You should try to enter and exit at least 25 of these market orders over the next few days. If you do that, you would have completed a total of 50 market orders. That is more training than most beginning traders do before entering a live trade!

Bonus:  You can give yourself bonus points if you keep a spreadsheet of all the trades you make.

Note that your reaction time will make a difference — if you only have 1 tick of profit when the full bar closes above the lower Keltner band, then it is possible that by the time you enter the market order and the exchange fills the order, you would end up in a loss. This is the reality of trading for just tiny gains. Usually you will exit these trades with a combination of limit and market orders, but our drill for this lesson is just market orders.

The blue boxes above show additional examples of the condition you are looking for before entering a market order. The red arrow shows the exit from an unprofitable trade initiated in the area of the first blue box. Actually, if you wanted to be a stickler, that red arrow should be a few bars to the right where price touches the middle band).

The blue boxes above show other three other examples of the condition you are looking for, before entering a market order.