Which E-Mini Trading Indicator Gives Traders A Clear View of the Next Market Move?

The goal of any e-mini trading system is to demonstrate the ability to accurately forecast the timing and direction of price movement. To be sure, there are literally thousands of trading systems that claim to place e-mini traders in a position to place trades that are timely and profitable. After all, why place a trade without having a reasonable expectation of making money in e-mini trading? For that matter, why bother even trading when you can just put it in the bank with no risk? Money in the bank is deposited knowing that no predictive value is required; your cash sits in an account and earns a guaranteed rate of return for a specified period of time.

So, why do individuals step into the e-mini trading arena and put their money at risk?

Individuals trade because they believe that the trading system they utilize gives them a unique opportunity to predict the direction of the market and make more money than they could earn at the bank. Or, I could phrase it more simply: people are greedy. The futures market offers an opportunity for the skilled trader to make fantastic profits when compared to the paltry return banks are offering, and that is an attractive enticement for anyone to enter the markets. Usually these individuals have either developed a system and thoroughly back tested it with superior results; or purchased a “sure fire” trading system from someone who has assured them (or convinced them) sufficiently to put their hard earned money at risk in the markets. To be sure, there are hundreds of systems utilizing tools like the Elliot Wave, Fibonacci retracements and extensions, pivot points or the phases of the moon and stars. Don’t laugh, one of the most famous technical traders to live advocates astrological market prediction at this point in his career.

If predictive systems are so effective, as their designers or purveyors claim, why do 90% of traders fail within three months?

The answer to this question is very simple; there is no predictive trading system that works with any degree of accuracy. Consider this: excluding breakeven trades, which are rare and usually the result of trading in the wrong direction and getting out by the skin of your teeth, e-mini trading should have a typical binary outcome. You should have a 50/50 chance of winning or losing; either the market goes up or the market goes down and you either win or lose, so even a mildly successful system should give you an advantage that increases your winning percentage. This is the tactic sellers of trading systems use to convince the uninitiated to purchase a trading system that can run upwards of $10,000, in some cases. The question is, do these systems have some indicator built in (here to forth unknown) that can accurately predict market direction in e-mini trading?

My unequivocal answer to this question is a somewhat sheepish, Nope! In 25+ years I have yet to see a system that can predict the market with any degree of accuracy or depth. If such a system existed, the algos’ would have their computers running at break neck speed and be piling up the cash faster than the Federal Reserve Bank can print it. Instead, institutional computer traders work on the principle of the bully pulpit, using High Frequency Trading algorithms to overwhelm the market to garner several ticks and then rapidly exit their trades with small gains. If you can gather enough money and hire sophisticated algo designers, you are home free with an ATM-like machine working non-stop to help you accumulate cash while you play golf.

Here is the bottom line for retail traders; most don’t have the size futures trading account to engage in High Frequency Traders and fail to realize that a truly predictive trading system does not exist. That being said, the logical question should be “okay Mr. Know-it all, how come some traders are so profitable?”

The not-so-obvious answer is that most successful traders react to the market, as oppose trying to predict its direction. I know this distinction is very subtle, but it the common characteristic of all the successful traders, both famous and anonymous, with whom I have rubbed elbows. These highly successful traders don’t rely on hocus pocus indicators or intuition to guide them in their trading decisions; instead, they allow market conditions to develop with which they have had past success in trading and react to the market. This style of trading may use some real-time tools to confirm successful traders’ reactive trading style; but they don’t start the day with a grand illusion that their insight into market dynamics will lead them to take long trades because their system indicated the market is going breakout long. Instead, they observe and react to markets as they develop and trade to capture what the market is offering. My mentor once told me, “the market often hands out money freely, but you will never succeed trying to steal money from the market.” In short, take what the market offers and stay on the sidelines when the market doesn’t offer opportunities. That statement should be on every written trading plan, along with another gem my mentor offered; “anytime you are sure you know in advance what the market is going to do, turn off the computer and go golfing.” This advice is timeless.

In summary, I have pointed out that indicators or e-mini trading systems have no real predictive characteristics. However, I have stated that traders who react with to what the market offers often times are superior traders. Predictive vs. Reactive: maybe it’s only a style of thinking to which I write about, but either way there are no predictive systems available to the retail e-mini trader that have proven terribly effective. As always, best of luck in your trading.

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