E-Mini Trading: Finding High Probability Setups

A quick scan of any of the popular online bookstores will produce a plethora of writers who claim to have a distinct set of high probability e-mini trading setups. For these traders, these setups are probably very successful and profitable. Unfortunately, any of these e-mini trading setups require a sizable software purchase or intricate analysis of candlestick formations. Whether all of these e-mini trading setups are profitable is beyond the scope of this article, but I am interested in presenting some generic setups that have been successful for a wide range of traders.

I emphasize trading with the trend and rely upon momentum for most of my profitable trades. I find when I trade against the trend, except in a few specific trades, I end up with a marginally profitable or unprofitable e-mini trade. For that reason, I’m going to recommend learning 2 “with the trend” trades and one countertrend trade that I have found to be reliable in my personal trading.

These traits include:

• Breakout and breakdown trades in and around areas of support/resistance
• Entering a trade in the trend after a retracement
• The Ambush Trade

Breakdown Trades in and around Areas of Support/Resistance

I probably don’t trade is often as some e-mini traders because I don’t feel there aren’t that many high probability setups available each day. But one of my favorite setups is at the open of the session and there is a support/resistance line in the proximity of the direction of the markets initial move. I will generally set a buy stop or sell stop 4 or 5 ticks above or below the resistance or support and wait for the price to come to my entry. I pay special attention to volume in this trade and like to see increasing volume is the price nears the support resistance line. Sheer momentum will often carry a price action 10 to 12 ticks past my entry for a nice stop. Often times, there is a great deal of institutional and professional trading volume in these moves and they are very successful.

Entering a Trade in the Trend after a Retracement

During the course of a trend it is common, almost probable, that the trending action will take a short break and retrace some of the ground it has gained. This makes sense, as at some point e-mini traders will begin to take profits and the trend will take a temporary sideways or downward break. Depending upon which author you care to read, the trend resumes about 70% or 80% of the time. So, as the retracement in a trend begins to wane, it is an ideal time to reenter the market in the direction of the trend and ride the second leg of the trend for a profit. I would say that this is probably the most common trade I take on a daily basis and it has a high degree of success.

The Ambush Trade

The ambush trade is one of the few countertrend e-mini trades that I truly have a high degree of confidence in initiating. With this trade the e-mini trader can draw a Fibonacci continuum on graph and wait until the countertrend retracement reaches between 50% and 62%. There is a high probability in this zone, commonly referred to as the ambush zone that the market will once again resume in the direction of the trend. This is a trade I take routinely when the price action has reached 55% of the entire length of the trend as measured by the Fibonacci retracement path.

A quick note here about probability is in order; because there is no such thing in will trading is a guaranteed trade. Every trade has a higher or lower probability of succeeding or failing. (Though it is hard to measure empirically) Even the best setups can fail miserably and disappoint. This does not, however, deter me from taking the same trade should I see it set up again. I understand probability, and even the best setups have a certain component of failure and their probability.

In summary, we have looked at two “with the trend” trades and identified the conditions that need to be present for them to have the highest potential for success. We have also looked at one “against the trend” trade that has a high potential for success. Since trading is based on probability, we know that even the best setups have the potential for failure and except that is a part of and e-mini trader’s mentality.