ES Emini: Make a Fortune on Single Set-Ups

It seems every trader I talk to has a favorite trade set-up that he/she claims has never lost money. Common sense dictates that such a statement is pure nonsense. I always think to myself "surely the trade has lost money at least once."

Or is it nonsense?

The toughest concept for most novice, and many experience traders is one of simplicity; Every trade taken has a probability of success. Some trade set-ups are far more likely to turn a profit than others. In its simplest application, a trade would not normally decide to go long when the market is in a sharp decline, as that trade has a low probability of success. On the other hand, a trade with the trend or price action might well have a higher probability of success. But there is a problem with trading in the probabilistic sense, and that lies in the revelation that there are no 100% trades. But one could certainly make a great living if he/she found a trade that was, say, 70% successful. Of course, even a trade with a 70% probability has a component of failure to be dealt with, and coming to grips with a 30% failure rate is difficult to conceptualize.

So what do you do with this information?

Perhaps adding a momentum oscillator as a screening device would improve your probability. In my trading I use the Stochastic and Commmodity Channel Index to screen price action set-ups for reliability. Maybe you could add a rate of change indicator, or a trend velocity indicator to enhance your chances or success. In my trading I am reluctant to take countertrend trades. I have found a far lower percentage of successful trades occur when trying to outguess the direction of the market by picking when it is going to change directions. No, for me the most successful trading occurs when I am trading with the trend. To aid my discernment of trading trends, I add an 89 period Simple Moving Average (SMA) to the mix and chart that average right in the price action. If the price action is significantly above the SMA I concentrate on long trades, and if the price action is significantly below the 89 period I concentrate on short trades. The key word in the previous sentence is "significantly", if the price action is swinging above and below the SMA I have no preferance for long or short, as I am looking for an attractive set-up.

So are there certain trades that generally are good "in and of themselves?"

There are several lone set-up trades I use that I swear have never lost money. I know the statement is false, but let me have some fun. So where does that leave you? Learn a great system, execute it flawlessly and realize there are no sure things in trading and be ready to adjust to any situation in trading.