Friday, February 7, 2014

One Contract Trading Strategy;

In today's video we go over 5 rules for 1-contract trading and the major differences between trading one contract vs. multiple contracts.

There are a few considerations that traders need to make when trading one contract which we cover.

Rule #1:  Risk-Reward Ratio
When you are trading 1-contract you need to make sure you are risking a small fraction of what you expect for a reward.

I suggest you use a minimum of 1:3 Risk to reward, which means I will risk $100 to earn a $300 reward

Rule #2:  Understand Market Personality 
You must have an 'intimate relationship' with which ever market you chose to trade.  The reason for this is that you don't want to have unrealistic expectations for your trades.

If you are trying to scalp crude oil, you can count on price action moving 15-25 ticks in a short period of time...however... if your plan is to scalp the E-mini ES you aren't going to get those 15-25 ticks very easily.

Make sure you know your market you can trade according to its personality.

Rule #3:  Take EVERY qualified entry pattern 
Trading with 1-contract is a 'numbers game' so I need to take every qualified entry pattern to make sure I get all the winning trades I can get.

I know that 70% of my trades are going to be winners, which means 30% of them will be losers... I need to make sure I get ALL of those 70 winners out of 100 trades to make sure I can rely on these ratios.

If I try to cherry-pick the best trades I risk missing the winners and taking the losers.

Rule #4:  Be willing to Make Mistakes
I recommend that you risk less than 3% of your trade account balance on any given trade because EVERYONE makes a mistake once in a while.

When trading 1-contract, we assume this is a smaller trade account (< $5,000) which means we don't have a lot of room to make mistakes.  If we do make a mistake we need to make sure it doesn't cost us more than 3% of our account so we can keep trading to make the money back.

I like to use very fast chart timeframes when I am trading 1-contract because it allows me to use a small stop-loss, and in-turn have much less risk per trade.

Rule #5:  Focus on Growing your account
The goal of trading 1-contract is to grow your account... the goal is NOT to make $1M in the next 10 days...that is unrealistic.

My goal when trading 1-contract is to turn a small account into a larger account that I can then use to trade 2-contracts, and soon 4-contracts, 6-contracts and more!

Also..don't move to a live trade account too soon, make sure you are making consistent returns on a simulator before you try to move to a live account.

My goal for 1-contract trading is to earn 30-ticks per day, which is $300 for most of my favorite markets.  This is an easy goal to achieve every day in our live trade room because most of our trades earn an average over 20-ticks.


Use Market Replay to practice your trading on your own free time, which helps you get into the habit of looking for patterns, and it's perfect for someone who has a busy schedule and cannot watch the live charts during the day.

Use market replay to take over 100-trades to test ideas and see how you do in a live environment.

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