Futures Trading Day Trading Checklist

I like to trade gold, and I do so quite often. I don’t like to short gold, but that doesn’t mean that I won’t do it if the circumstances are ideal. However, far more often than not, I am a buyer and not a seller in the gold market. In addition to holding gold for two weeks to six months, I prefer to hold it longer than I do other commodities.

When trading gold, I always log the yearly opening price first. After that, I calculate a 65-day moving average chart from the monthly opens. My tactic is really rather straightforward – if it’s above both the yearly open and 65-day average, I buy; if it’s below them, I sell (though not my favorite route). To protect my asset, I place a stop-loss order at the average from the previous three months’ openings. Afterwards, my aim is to make between $10.00 and $15.00 per contract in profit; then, depending on risk level, either reduce my position or exit entirely.

The yearly opening price should be recorded.

2. Calculate the 65-day moving average.

3. Aim for a profit of $10.00 to $15.00 per contract.

4. Obtain each month’s opening prices.

5. Place a protective stop below the average of the last three monthly opening prices.

After you have reached your profit target, exit all positions or exit enough positions to move your stop to break even and ride the move for the remaining positions.

I utilize an option strategy when trading oil; I consider the yearly opening price and usually refrain from investing until April. In similar fashion to bonds, I keep track of all monthly openings and obtain a three-month moving average. For me it is imperative to meet certain criteria in order to buy: the price must be higher than both the yearly open and the three-month moving average. Whereas selling requires the opposite conditions to be met. Should the market be increasing, instead of buying calls, I put my focus on selling puts; oppositely, if the market is decreasing, I choose to sell calls rather than buy puts.

My intention is to make money on the premium that I receive from trading options. To limit my risk, I prefer to trade options with a time to expiration of 45-60 days and strike prices that are at least $5 away from the market price. For instance, if the current price of oil is $53.00, I would sell my puts at $48.00 and my calls at $58.00. Although oil made for attractive prospects during the years 2004 and 2005, I only choose markets when optimal conditions exist. Note that trading options carries a great deal of risk and should not be done by those who lack either experience or capital to weather losses.

1. Record the opening price for each year.

2. Calculate a moving average based on monthly opens.

3. Sell puts if the price is above the yearly open and above the 3-month moving average.

4. Sell calls if the price is below the yearly open and below the 3-month moving average.

5. Only sell options that are 45 to 60 days away from expiration.

My bond trading strategy begins as each year begins, but I do not execute a bond transaction until at least the month of April because I observe price movements for at least three months prior to entering the market. In order to calculate a three-month moving average of all monthly opens, I record the yearly opening price for 30-year treasury bonds.

Two things are important to me before I execute a trade: I want the bond price to be above or below the yearly open, and I want the three-month moving average price to be in agreement with it. In other words, if the bond price is above the yearly open price and above the three-month moving average, I’d buy it. In the case of prices below the three-month moving average and the yearly opening price, I’d like to sell it.

My protective stop is initially located below the yearly open and three-month moving average by about ten ticks if I am long. Whenever I’m short, my stop is above the open and above the three-month moving average by about ten ticks. Bonds trade in 32-tick increments. When I’m profitable by about 5 percent, I move my stock to break even. Then, I maintain a 5 percent trailing stop. In other words, as the market moves in my direction, I follow with my stop to lock in my profits.

It is important to study and observe all of the trading vehicles discussed in this chapter before you begin trading. Bonds can be tricky. Understand how they move relative to equities and the major indexes. Understand the inherent risks and do not rely solely on profits. Manage risk first.

My method of trading bond futures is summarized in the brief explanation above.

1. Record opening price for the year.

2. Calculate the moving average of each month’s opening price.

3. Buy if the price is above the three-month moving average and above the yearly open.

4. Sell if the price is below the yearly open and the three-month moving average.

Place a protective stop below the three-month moving average by about ten ticks if you are long.

6. Place a protective stop about ten ticks above the three-month moving average if you are short.

7. Once profitable by 5 percent, move the stop to break even.

8. Leave a 5 percent gap between your stop and the market.