c06 JWBT016-Busby October 10, 2008 20:38 Printer: TBD
78 STRATEGIES TO WIN
at the CME. I always look for opportunities to make the Face Peel trade
because it tends to be a good one for my students and me.Off to the Races
Another futures breakout trade that I enjoy is a Nasdaq trade that I call “Off
to the Races.” Again this is a futures trade, and it is definitely a day trade.
The Nasdaq futures are a derivative of the Nasdaq 100 index. They are also
traded at the CME, and the hours of operation are the same as those for the
S&P futures. There are several Nasdaq contracts. A big contract trades for
$100 per point and a mini contract for $20 per point. Margin requirements
are similar to those for the S&P. Therefore, there is good leverage to allow
traders to maximize trading dollars.
This trade is executed in the morning one hour after the exchange
opens. I look to make this trade under the following conditions: the NYSE
issues and the Nasdaq issues (these indicators are explained in Chapter 4)
must be either greater than or less than 500 and the overall market must
be trending either up or down. In other words, this is a trending trade. The
criteria seem simple, but the trade, when it sets up, can be a good one.
I made this trade on March 26, 2008. On that date, oil news had been re-
leased. Every Wednesday morning the Energy Information Administration
reports the oil inventory numbers. March 26, 2008, was one of those re-
porting days. The Nasdaq (NQM8) was trading at 1810.75. The NYSE issues
were extremely negative at−1062 (JINT.Z) and the Nasdaq issues were
almost as bad at−904 (JIQT.Z). With the issues reading so strongly nega-
tive, I would not suggest taking a long position. I went short at 1811 on the
Nasdaq. I was targeting an ultimate profit of 15 points. However, to reduce
risk and insure some green. I bought back some of my contracts with a six-
or seven-point gain. My initial stop/loss was 20 points above my entry price.
That represents 20 percent of the average true range (ATR), and I never like
to risk much more than that amount on any trade. After liquidating one-
third of my contracts for six or seven points of profit, I moved my stop/loss
order down 10 points. Now my risk was only 10 points on each remaining
contract. As prices continued to move in my favor, I trailed the market and
insured that this trade would be a moneymaker for me. Figure 6.9 shows
the prices that were recorded on the RoadMapTMsoftware just after 9:30.The Fast Dance
The “Fast Dance” is a Dow trade that I enter and exit very quickly. The Dow
is traded at the Chicago Board of Trade (CBOT). In 2007, the CBOT merged