Daily Potential

Someone commented on my earlier post ‘Don’t make fun of the small winners’ that a 5 point daily profit target on the E-Mini S&P 500 was absurd.  It is my firm belief that this daily profit target is not only achievable but that it is very conservative as well.  Indeed I have been day trading the ES for about a month and a half at this point and although I am still a novice and only trading in simulation, I have achieved that daily target in over 75% of my trading days.  In early October my end-of-day tally even reached in excess of 45 points per day.  With time and practice my goal is to acquire the necessary proficiency to gather 5 points consistently and move on to live trading.  Another important aspect is the actual daily potential of the ES.  For this I have developed a simple indicator that looks at the average true range over the trading day and multiplies it by the ‘big point value’ of the instrument.  In the graph below I show how this indicator is used to identify the daily potential on the ES.  Interestingly, the indicator also shows when, in the trading day, the ES tends to have its largest swings.

This chart shows that over this past week the ES has offered a daily potential of anywhere from $900 to $1,500 per contract.  Given that my goal is to gather 5 points or $250 from this instrument, or less than 25% of the ES daily potential, I strongly believe that the goal is both achievable and actually conservative.  One may also notice that the biggest swings in the ES tend to happen towards the end of the trading session, offering some unique, although erratic, trading opportunities.