E-Mini Training: A Common Trade That Often Ends in Disaster

If you have traded for any period of time, you start noticing where other e-mini traders are setting up to take trades. Sometimes I am very impressed with the positioning some traders utilize to enter trades; sometimes not so much. Of course, in my personal trading (and I am sure that most traders feel this way) I have specific trades that have been successful for me; on the other hand, I have several trades that many claim to be solid trades that I just cannot seem to execute properly.

But there is one particular trade that I see on a regular basis, and is usually executed by smaller e-mini traders, judging from the time and sales dialog box. This trade is often referred to as a “bounce” trade and often occurs along important or significant lines of support and resistance. I generally see this trade over the lunch hour and during periods of low volume trading. 대여계좌

The trade is a relatively simple one. Often times, when the price has moved through a significant support/resistance line, it is not uncommon to the price action retrace back to the recently pierced support/resistance line and then resume in its original direction. I cannot quote with any degree of accuracy the success/failure rate on this trade, though I have seen many small e-mini traders take substantial losses when trying to execute this trade.

The bounce trade can often require an e-mini trader to take an entry position in the opposite direction that the market is currently moving; and this entry is usually against this trend. Not an auspicious way to start a trade, to say the least. But lacking any major active e-mini traders (since the volume is generally low) the price oftentimes has a tendency to back up to the just pierced support/resistance line and then bounce 5 or 6 ticks back in the direction of the original price movement. For small traders, this 5 or 6 tick gain is just what the doctor ordered.

But there are a number of problems that should be considered with the trade, and careful consideration and care should be utilized before implementing this trade, because:

– The bounce trade is often against the trend, which significantly lowers your chance for success.
– The bounce trade is generally executed over lunchtime (when small traders are active and their trading has a disproportionately large effect on market price.) But trading during low volume periods can be, at best, a difficult proposition. Market orders that would normally have little effect on price can, because of the low volume, create more dramatic price movement than most traders would normally suspect.
– This build up of small traders add at a print distinct price level creates a situation that can become a position of danger, especially if a bona fide floor trader who takes an interest in moving the market in the opposite direction of the expected bounce. What started as a simple 5 or 6 tick scalp can leave a small trader pressing the limits of his stop/loss position

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