200 EMA Futures Trading Exit Strategy

I’m not sure the significance of this indicator across other futures instruments, but one in particular yields nice opportunities. The instrument that I generally keep this too is the E-mini S&P 500 or /ES. Just as anything else, I strive to combine this with some other analysis.

The indicator as basic as it sounds has provided me with more than just entry prices. In fact my most common use for it is within my exit strategies. The indicator I’m referring to is the 200 period moving average. The moving average itself provides support and resistance across other time frames, but I’m directly referring to its use on a 1 minute chart. Why the 1 minute chart, you’re probably asking?

Why The 1 Minute Exit Strategy For Initial Profits

No specific reason other than this is where I’ve actually used it. I trade based off my analysis from three charts. The charts I generally have on my screen are the 1 minute, 5 minute and 60 minute chart. For me the one minute provides the closest areas of resistance or support for me to make decisions on eliminating risk. Any shorter a time frame may not yield enough separation and any longer I may become greedy on initial risk off targets.

As I alluded to above the most specific and most evident way I utilize the 200 moving average is once I’ve entered into a position. I would say this is possibly opposite to the way you yourself utilize this indicator. As an example and to get a better idea I’m going to try to outlay a situation that occurs almost on a daily basis.

Example

I’ve just entered into a short position coming out of an upward channel as seen below.

Letting The Market Take Me Out With Stop Orders VS. Limit Orders

We won’t discuss entry here because there can truly be any reason for entry, but how you manage a trade in our eyes creates more successful traders. We know that we never simply exit a trade rather we let the market take us out. So we know that the initial T1(Target 1) is not a simple exit order at the 200 EMA. We have moved a stop order down without being greedy and without crowding the trade by too much.

Generally if I feel strongly that the 200 EMA might hold I may place a stop to lock in profits at around 3-4 ticks above price as it approaches. We also that an approach of a support or resistance may yield quick price action thus this must be done with confidence and quickly. Before price arrives we must have made our decision as to how we will play the trade.

Eliminate Initial Trading Risk With 200 EMA

As noted before the 200 EMA in this case can be a useful target for initial risk off targets thus we take advantage of that before we get any jump in price. At this point we see that price decides to make a move higher off of the green 200 EMA reaching as high as our “entry”. At this point if we have previously eliminated risk completely we may have been stopped out at break even on your final contract(s). No worries here, as we’ve already made progress towards success and we move on. If not we know that once price makes its next move lower than our initial target we have an area for which to begin eliminating even more risk.

We can now begin to spot out potential areas of previous support to use as new resistance. These areas will be important to keep the position on until we’ve reached the next form of resistance where stops will again be moved up to 2-3 ticks from price. Using the 200 EMA as a target is in our opinion a nice way to eliminate initial risk to allow an more stress free trade mentality. Knowing that “Trade mentality” and comfort being of importance to clear decision making and profitable trading.

Two Quick Points On Using The Moving Average Exit Strategy

As a final note on the 200 EMA as an exit strategy I make two quick points. First of all an approach to a few ticks from the moving average itself is the same as a tag of the 200 EMA. Thus I’m typically placing orders to lock in profits as we approach and not necessarily programmed to take at the exact mark. My second point is this moving average is both useful for initial and final targets. All basic rules regarding greed and taking profits applies. I’m simply not a stickler for an exact tag of the 200 EMA as I exit.