Day Trading ES Futures Becoming Popular

Can Day Trading ES Futures Replace Gig Jobs?

Day trading ES futures – especially S&P emini futures – has become a popular activity for people look for a way to make money in a tight job market. Many good-paying jobs have disappeared, replaced by so-called “gig” work that pays minimum wage and no benefits.

As a result, day trading, and particularly day trading ES futures, has attracted huge interest as a way to earn a living comparable to the all-but-nonexistent good-paying jobs. But day trading is a skill that not taught in schools, and so day trading schools sprouted to fulfil the need to educate a growing audience. 

The motivation to learn day trading ES futures is the financial security it can provide, but it can also bring financial loss, as many who have jumped into trading, uneducated and unprepared, have discovered. For all its appeal, day trading requires knowledge, skill, and experience, just like any other job. Novice traders attempting to day trade without taking the time to learn how to trade almost always learn an expensive, but avoidable, lesson in humility as the market shrinks their trading account.

Day Trading ES: Reducing The Risk

Trending vs Volatile Days in the ES Market

Experienced traders look to reduce risk of loss in order to improve their ratio of winning trades. Because day trading ES futures is always risky, inexperienced traders don’t know how to find low-risk trades and lose money. To illustrate this point, I’ll compare two back-to-back days in the emini market, March 10th and March 11th, to demonstrate how radically different the market can act – even on consecutive days.

Trending Market Reduces Trading Risk – Increases Profit Potential

On March 11th, the market started out choppy in the first 15 minutes of trading, and at 9:45 the market trended up for 15 minutes for about 12 points. This corresponded to a not quite oversold stochastic. It was not a particularly low-risk entry as there was not a strong indication of a move to the upside at 9:45. Then at 10 o’clock, corresponding to an overbought stochastic, prices began to slide. I day trade es futures using stochastics, which were in the extreme overbought position,  presenting a relatively low-risk area to place a trade to the downside. Prices continued to decline for the next 15 minutes, with lower lows and lower highs. At about 10:15, a strong push to the upside corresponding to an almost oversold stochastic indicated that the move had exhausted itself and it was time to close the trade. For an experienced trader day trading ES on March 11th, this would’ve resulted in a potential gain of 10 points.

But this price action at 10:15, corresponding to an oversold stochastic also indicated a market reversal. The next candle was a strong move to the upside as confirmation a reversal was taking place. To an experienced trader, this area could be judged to be a relatively low-risk entry to place a trade to the upside.

Placing the trade, the price trended upward for about an hour. Of course, when day trading ES, the future can never be unforseen, but the trade ultimately offered the potential for a 20 to 25 gain. The trend from about 1015 to 1130 was a nice strong trend that we don’t see every day.

However, it’s important to note that an experienced trader could recognize the entry as one offering relatively low-risk to the downside, so that if the price reversal did not occur, the trader could exit with little loss. This combination of a low-risk entry and a subsequent trend in the direction of the trade was worth up to 25 points, or $1,250 profit per contract.

While morning price action on March 11th offered excellent profit potential, another low-risk entry presented itself in the afternoon, this one to the downside. At 2:30 a price top had been established as an area of resistance, and an overbought stochastic indicated a possible price reversal. These were indications for a low-risk entry to the downside; a short trade gave a potential profit of 10 points. Because of the non-volatile market, day traders could recognize low-risk entries.

Market Volatility Increases Trading Risk – Reduces Profit Potential

Low market volatility on March 11th allowed ES day traders to recognize areas of low-risk entries. Without an indication of a low-risk entry, entering a trade would have been risky with a high probability of losing money. Chart-reading ability provided the knowledgeable trader with actionable information resulting in profits.

But the previous day, March 10th, was a far different market, with very choppy price action. ES futures prices on March 10th moved in a highly volatile manner that offered even experienced day traders few recognizable low-risk areas for entering a trade. The only relatively low-risk area was just after 10 AM, where an overbought stochastic corresponded to prices reversing to the downside. However, during the balance of the day, the market did not give any strong indications of low-risk entries. Prudent day traders would hesitate trading in such a market, if at all.

In highly volatile markets, experienced day traders wisely stay out of the market. Not only are low-risk entries difficult to discern, but the absence of trending prices increases risk, and increased risk is the downfall of many an inexperienced trader.

Successful traders only trade when risk is determined to favor a trade. They only enter when a compelling low-risk entry presents itself. On March 10th the only relatively low-risk entry was in the morning at about 10 o’clock to the downside. and even then, prices were choppy, as can be seen from the long shadow to the upside 3 minutes after entering the trade which could’ve resulted in exiting the trade flat.

March 10th and March 11th are examples of why the emini market offers an excellent opportunity for profit, but also can be very dangerous, especially for inexperienced traders.