The 'system' is simple -- for daytrading ES emini futures only --- plot a 10 sma AND 10 ema. That's it!
When the ema crosses, enter the trade for a 1 point goal per crossover in either direction. You'd be amazed how consistent it is. It's that simple. There are deeper rules for the 'system' itself put to me by a friend who works for GS. But I just trade it this way for scalping 1 point ($50) moves.
1 point per contract means you're investing about $3000 per trade. 5 contracts requires about $15k depending on your broker's margin requirements for futures. 5 contracts at 1 point gets you $50x5= $250 each trade. I have had only 1 trade in probably 40+ in the last week since I've been doing it that didn't work.
Now that said, if you got about $25k to trade with, want to know how to make about $3 to $4k a month?
Covered ES e-mini call trades. Talk about a cash machine.
I have no idea where to get ES emini option chains other than through IB's workstation in which you need an account. They cost $1.81 per contract. But here's what I do month after month --
ES futures options trade twice a month. They expire on the typical 3rd Friday and then the following week. What you want to do is have the money to buy at least 5 ES contracts with the expiration at least 2 months out. ES contracts expire every 3 months (Dec, March, June, Sep). Every month the index (SPX) will have some kind of selloff. Forget the recent selloffs you're used to. The typical one will only be about max 50 to 70 points within any month timeframe. When you get an RSI reading (2 period to 5 period) under 20, then you buy 5 contracts. That will cost you about $15k. Then you are going to find the call option that expires within 4 weeks, perferrably 3, at least 70 points in the money. That's your cushion that will rarely - if ever - get put at risk in that 3 to 4 week timeframe. Remember, 70 points on the SPX is basically the same as 700 on the DOW. That's a big and RARE move. The last 3 months of the 2008 were an anomoly.
That 70 point in the money call option will typically always have at least 11 to 15 points time value over the net cost of the ES future you bought. I just did this for March 20 expiration today. I bought 10 ES March e-mini contracts at 765 and sold the March 20(both expire the same day) 695 calls for $82. Add $82 to 695 and you get 777 for your take out price.
777 - the 765 I paid for the ES and you basically have a 12 point (in my opinion) guaranteed profit. Each point pays you $50. $50x 10 = $5000.
Now I should have done this yesterday because the options were pricing in a larger move on Obama's speech. They had nearly a 20 point spread from the base cost of the Emini and that was on the 695 calls! I could have gotten short the 650s for that 12 points. The SPX going to 650 in 3 weeks? C'mon.
Now the down side to doing this is the drawdown while in the trade. You have to get used to being upside down and locked in that upside down situation until nearly expiration day. It's just the way it works. But it's cash in the bank month after month.
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