Every day I review the e mini index futures market before 9.30am est (when the cash market opens and volume floods in) to determine a strategic plan for my trading day.

Yes it is important to trade what you see and be wary of strict, inflexible bias - but it is more important to trade without the irrational turmoil of over-reaction and emotional triggers. By making a strategic plan you skew the probabilities in your favour.

So the first thing to do is establish likely Support and Resistance Levels - Prices where the market is likely to stall and go sideways or reverse.

SUPPORT & RESISTANCE LEVELS

The basic principle of Support & Resistance is sell at resistance, buy at support. To identify levels for the day I use

1. Moving Averages on large time frames (Weekly, Daily) I use these to create a structured view of the current market because they are dynamic, that is they reflect the current status of the market

But why should an "imaginary line" predict a turning point? That's the $64 million dollar question.

There are all sorts of scientific answers, for instance Fibonacci or Elliot wave theory. Essentially they amount to recurring patterns in nature and people (I prefer using moving averages to Fibonacci or Elliot wave because I find moving averages less subjective and more simple to apply).

In any activity, thought, action or emotion, people only move a certain distance in one direction before they take a break, or re-evaluate, or reverse direction. And what is the market other than a bunch of people.

Of course it could just be a self-fulfilling prophecy, i.e everyone is looking at that same line, commonly used moving average, expecting the market to stall there, so they exit a position and stop buying, or selling and surprise, surprise, the market stalls!

2. Chart patterns on large time frames again head and shoulders, double tops and bottoms for instance.

Using the moving averages and chart patterns I establish Trading Zones.

LONG, SHORT, NO-TRADE ZONES

When trading e mini index futures you have three choices, buy, sell, don't trade. So before the market opens, I prepare three trading zones...

• a high probability zone for longs - where to buy as the market is more likely to trend up
  
• where to look for high probability shorts - where to sell, the market will trend down
  
• a chop zone, up, down, up, down, consequently high risk and best not traded as your stops will get hit again and again, stacking up loses
  

Being prepared means you make high probability, strategic trades, not emotional reactions.

ENTRY, STOPLOSS AND TARGET POINTS

So by knowing your zones, once the market opens, you can quickly establish good entry prices plus stop loss and target points – from which you can calculate a trade’s profit ratio e.g. a 1 point stop loss risked with a 3 point target equals a profit ratio of 3:1, a healthy trade, worth taking.

You must take high profit ratio trades because the market can do absolutely anything, you are dealing with the infinite potential of the future. So some trades will be losers. It's unavoidable. By taking high profit ratio trades, even with fewer winners than losers you still have a greater chance of ending the day profitable.

KEEP IT SIMPLE, UNEMOTIONAL

Using moving averages and price action to identify support & resistance keeps your system succinct yet dynamic and you avoid the lagging nature of more complex indicators. The less, but more immediate, the data you focus on, the more you will be in-tune with the market and your trading day will be less stressful. This greatly reduces the risk of destructive psychological behaviours like revenge trading, chasing, hunting for an ego affirmation reversal.

SO BE PREPARED, IT'S WHAT THE PROFFESSIONALS DO