Early success - first day of futures day trading 11.03.2020
I was preparing myself for months before returning to trading. Some of the preparation was covered in my last post - https://www.marketinsides.com/post/pre-trading-preparation-is-everything . Life is full of surprises, after years of no futures trading, I came back to the market in March 2020 - right in the middle of the Covid crisis, with markets trading limit down or limit up almost every day. I have never been one to feel scared from “pulling the trigger” or in other words entering a trade, but these sort of market movements made me somehow uneasy. Everything was so fast, that I was thinking – if I join the selling now and it pulls back it will be bad. On the other hand, if I were to buy, I was going against the trend.
My broker at the time had a GLOBEX package subscription which gave access to COMEX, NYMEX and CME. I think that they probably hadn’t noticed that they had left this package as a choice for clients. It was probably three times cheaper than subscribing to these three exchanges individually. It was great value for money, and it gave me access to a lot more markets. I think they found out about this mistake and next month it was no longer available.
The initial idea was to trade only commodities (mainly Gold and WTI), but having access to CME gave me the opportunity to trade indices as well.
The Connection and setup – always have a backup
My circumstances at the time were - I live in a house and the internet connection back then was based on a 4G router which had 50GB download limit per month. After that the connection speed would be so slow that the web browser would struggle to load the google homepage. Also, the 4G router would crash from time to time, making it stressful, in case I enter a trade and my connection was suddenly gone.
For extra safety, I installed the mobile app of the broker on my phone as a backup. My phone has unlimited 4G, so it wouldn’t have had a problem with running out of data. Therefore, I was able to log in and trade from it, should something happen with my other connection. This is a good tip, and in my opinion, it is good to have a backup internet connection or device, in case something unexpected happens.
The very first trade I opened was a short on E-Mini Light Sweet Crude Oil April 2020. I remember at the time being very bearish on Oil as the market had entered contango. When a commodity market is in contango it means that the price of futures contracts for that market is higher than the spot price, indicating that a market is oversupplied now. This gives an incentive for physical spot traders to buy and store the commodity to sell in the future. The normal state of the market is called backwardation and it illustrates the time value of money – having something now is worth more than having it in a few months’ time.
I was looking at intraday entries for short trades. My first entry was at 33.575 with two contracts. The price wasn’t really moving up or down after my entry, so a little bit later I added two extra contracts at 33.7.
I am not a fan of averaging in, particularly in day trading, because most times you would end up losing more, rather than just booking the loss on the initial trade. However due to the underlying strong bearish fundamentals and the fact that the price didn’t show indications of moving up I did it this time.
Maybe it was also a show of my poor discipline when I returned to trading but in the end, I closed this first trade at 33.475 giving me a net profit of roughly 224 GBP after commissions and exchange fees.
That was the morning session done for me (I was based in a location with GMT+2 time zone at the time).
Moving on to the trades which I did in the afternoon of my first day – I decided to give indices a go. I chose the E-mini S&P 500 March 2020 contract. All the trades which I did on it were short entries with an aim of catching very small price movements by joining the overall downtrend at the time. I also picked some entry points around handle levels (these are big round numbers for example: 2800) and intraday resistance levels.
Here is a list:
2 contracts short at 2771 – closed at 2768.5
1 contract short at 2800.5 – closed at 2795.25
1 contract short at 2776.5. Added one more at 2786.75 (averaging in again, bad discipline) – closed at 2779.5
All these trades were profitable, but I feel that I was chasing more profits, due to closing the first two trades early. This showed in the third trade where I was so concentrated on chasing profits, that rather than closing a losing position and accepting a loss, I averaged in and hoping that the better average price will help me.
In the end the averaging in did help on this first day with the oil trade and with the SP500 trade, but this didn’t do me a favor in the long run, as it reinforced a bad habit.
Back to oil, I did another oil trade, as if making around 800GBP on my first day back trading futures wasn’t enough. The trade showed that I was more committed to protecting the profit I had already made rather than trying to make more money. I did a short entry with 2 contracts on E-mini light sweet crude. The idea was that for the remaining trades of the day, I would close one contract in profit very close to entry to pay for the trade, and then let the second contract run and hopefully increase the overall profit. I entered the trade at 33.15 and closed the first contract at 33.1. The second contract got closed at 33.125 as I moved my stop loss below my entry. Thus overall, this trade after commissions and exchange fees made me less than 1GBP in profit.
I returned to the indices after this Oil trade and decided to try a short on the Nasdaq as it was trading just above 8000 and I believed that this handle was going to be a magnet and the price will reach it before the end of the day. I entered with two contracts on the E-mini Nasdaq-100 at 8068.125. I closed the first contract almost immediately at 8066.25 for a small profit.
Then as discussed earlier – due to not wanting to book a loss, I let the remaining contract run. In the end I closed it for a 200GBP loss. The final trade of the day left a bitter taste, for an overall positive day.
In retrospect it wasn’t something dramatic – Could I have avoided it? – Definitely.
Did I feel like a loser? – yes, I felt that I should have stopped trading after the successful SP500 trades. I remember telling myself that I was going to stop trading for the day, but I kept going. So another breach of discipline.
Another thing to note is that I felt that the size that I was using, was probably too big for my account and considering that I had just started actively trading again. This didn’t stop me from trading that size until a scary experience happened one of the following days.
Here is the summary for the day:
Number of trades: 6
Number of profitable trades: 5
Largest win – 234GBP
Largest loss – 200GBP
Overall Profit or Loss after commissions for the day – 517.36GBP