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The 2 Point Theory

Trends

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Fred Shockness
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12 views

The 2 Point Theory

Trends

Uploaded by

Fred Shockness
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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The 2 Point Theory

Financial Breakdown
Michael Fabiano

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Contents
Preface:................................................................................................................................................................... 3
Introduction To E-Mini S&P 500 Futures Trading ......................................................... 5
Understanding The 2 Point Theory .............................................................................................. 6
Core Strategy.................................................................................................................................................... 8
Market Hours and Flexibility ....................................................... 9
Planning Trades ...................................................................... 10
Conclusion and Next Steps................................................................................................................ 11
Key Takeaways:...................................................................... 11
Next Steps: ............................................................................ 12

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Preface:

The 2 Point Theory is a culmination of my 12-year journey in the


dynamic world of futures trading, enriched by the experience of guiding
thousands of students in their trading endeavors.

When I first embarked on this journey, like many, I perceived trading as


a direct and straightforward path to financial success. Over the years,
this perspective has evolved profoundly. I have realized that trading is
not a mere sprint towards wealth; it is a marathon that demands
patience, dedication, and above all, discipline.

In my interactions with new traders, a common theme often emerges.


Many enter the trading arena with the belief that success is instant and

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easy. This mindset, unfortunately, overlooks the true nature of trading –
it is not a get-rich-quick scheme but a sophisticated discipline that
requires time to master.

Another revelation that often surprises aspiring traders is the relatively


modest capital required to start trading futures. This accessibility,
however, comes with its own set of challenges. The most significant
being the lack of realistic goal setting. Without clear, attainable
objectives, navigating the trading landscape can be overwhelming and
directionless.

This eBook is an endeavor to demystify futures trading and provide a


practical, realistic approach. It is an approach born from years of
explaining the intricacies of the market and crystallized through my
collaboration with Patrick Assalone at Target Trading Academy. Patrick’s
expertise in money management and his educational approach have
been instrumental in shaping "The 2 Point Theory."

"The 2 Point Theory" is not just a trading strategy; it is a mindset shift.


It is about understanding the market's rhythm, recognizing the power of
disciplined trading, and realizing that success in trading is as much
about managing expectations as it is about managing investments.

As you turn these pages, I invite you to embark on this journey with an
open mind and a commitment to learning. Whether you are new to
trading or looking to refine your approach, this eBook aims to set you
on a path of informed, strategic, and disciplined trading.

To your trading success,

Michael Fabiano

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Introduction To E-Mini S&P 500 Futures
Trading

Futures trading is a derivative investment strategy that involves


speculating on the future price of an asset. It offers several benefits
such as leverage, liquidity, and the ability to profit in both rising and
falling markets.

One popular instrument for beginners in futures trading is the e-


mini-S&P 500. This futures contract allows traders to speculate on
the future value of the S&P 500 index. It is a more accessible version
of the standard S&P 500 futures contract, making it ideal for new

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traders who want to enter the futures market.

The e-mini-S&P 500 futures trading offers the opportunity for traders
to gain exposure to the broader stock market with a small capital
outlay. Additionally, its active trading hours and high liquidity make it
an attractive choice for day traders and those looking to engage in
short-term trading strategies.

In the following chapters, we will explore key strategies and


concepts, including The 2 Point Theory, to provide a comprehensive
understanding of futures trading and equip beginners with the
essential knowledge to start their trading journey.

Understanding The 2 Point Theory

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In futures trading, the 2 Point Theory stands as a fundamental concept
that allows traders to profit from minimal point movements. This theory
is particularly applicable in the context of e-mini-S&P 500 futures
trading, where slight price fluctuations can result in significant gains.

The 2 Point Theory operates on the principle that even small


movements in points can translate into substantial profits when
leveraged through contracts. It emphasizes the potential for traders
to capitalize on minimal fluctuations in the market, leading to
consistent and incremental gains.

For instance, by starting with two contracts at two points, traders can
aim for a daily gain of $200 (calculated as 2 points x $50 x 2 contracts),
a weekly gain of $1,000 (5 days x $200), a monthly gain of $4,000 (4
weeks x $1,000), and an
annual gain of $48,000 (12 months x $4,000). As profits accumulate,
traders have the option to increase the number of contracts to further
amplify their gains.

This strategic progression involves scaling up to four contracts once a


cumulative profit of $2,000 is reached with two contracts and
subsequently to six contracts after achieving an additional $2,000
profit. By doing so, the potential daily, weekly, monthly, and annual
gains follow a corresponding increase, further illustrating the power of
the 2 Point Theory in futures trading.

The 2 Point Theory not only provides a practical approach to profit


generation but also serves as an entry point for beginners to
understand the intricacies of futures trading. It forms the basis for a
structured and manageable strategy that complements the inherent
volatility of the futures market, empowering traders to navigate and
capitalize on price movements effectively.

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Core Strategy

In the core strategy of The 2 Point Theory, the financial breakdown


of the trading approach is detailed as follows:

TWO CONTRACTS AT TWO POINTS:


• Daily Gain: $200 (2 points x $50 x 2 contracts)
• Weekly Gain: $1,000 (5 days x $200)
• Monthly Gain: $4,000 (4 weeks x $1,000)
• Annual Gain: $48,000 (12 months x $4,000)

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FOUR CONTRACTS:

After reaching a cumulative profit of $2,000 with two contracts, the


strategy suggests increasing to four contracts.
• Daily Gain: $400 (2 points x $50 x 4 contracts)
• Weekly Gain: $2,000 (5 days x $400)
• Monthly Gain: $8,000 (4 weeks x $2,000)
• Annual Gain: $96,000 (12 months x $8,000)

SIX CONTRACTS:

After an additional $2,000 profit, scaling up to six contracts is


recommended.

• Daily Gain: $600 (2 points x $50 x 6 contracts)


• Weekly Gain: $3,000 (5 days x $600)
• Monthly Gain: $12,000 (4 weeks x $3,000)
• Annual Gain: $144,000 (12 months x $12,000)

Market Hours and Flexibility

The futures markets provide traders with the flexibility to engage in


trading activities for a remarkable 23 hours and 45 minutes each day.
Notably, the market encompasses the US Day session, which operates
from 9:30 am to 4:15 pm EST, as well as the Globex overnight session
that commences at 4:30 pm EST. This extended trading window allows
for the execution of trades at almost any time of the day, catering to
diverse schedules and time zones.

Furthermore, there exists a notable disparity in trade duration between


the US Day session and the Globex overnight session. During the US
Day session, trades typically transpire within a few minutes, presenting
swift trading opportunities. Conversely, the Globex overnight session
allows for trades with longer durations, extending up to an hour. This
variability in trade duration aligns with the individual preferences and
availability of traders.

An additional advantage of engaging in futures trading is the


convenience it offers in terms of time commitment. Traders can
partake in the markets without the need to dedicate extensive periods

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in front of the computer, fostering adaptability to various lifestyles and
responsibilities. This flexibility in trading hours underscores the
dynamic and accommodating nature of futures trading, catering to a
diverse range of traders.

The feature of market hours and flexibility exemplifies the


suitability of futures trading for individuals seeking adaptable and
convenient trading opportunities.

For information on planning trades and the 2 Point Theory, please refer
to the subsequent section.

Planning Trades

In futures trading, especially when focusing on the e-mini-S&P 500, it is


crucial to plan your trades meticulously the night before. This practice
allows traders to identify high probability trade setups and establish a
clear strategy for the following day. By pre-determining the areas in the
market where they aim to enter and exit a trade, traders can effectively
manage risk and optimize their potential for profit.

A key strategy emphasized in the e-book is the concept of waiting for


the market to reach the predetermined area before executing a trade.
This patient approach is designed to ensure that the trade has a higher
probability of success. By exercising discipline and waiting for the
opportune moment, traders can increase their chances of achieving the
targeted 2 points and then promptly exiting the trade. This strategy not
only fosters a disciplined approach to trading but also aligns with the
principle of prioritizing high probability trades.

By incorporating this information seamlessly into the beginner's guide


to futures trading, the focus remains on providing valuable insights
for novice traders looking to navigate the intricacies of the e-mini-
S&P 500. This emphasis on planning trades the night before and
executing with precision underscores the overarching theme of
strategic and calculated decision making in futures trading.

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Conclusion and Next Steps

After understanding The 2 Point Theory and its application in futures


trading, it is important to consider the key takeaways and the next
steps for implementing this strategy.

Key Takeaways:

• The 2 Point Theory emphasizes gaining profit through minimal


point movements, making it an attractive strategy for beginners in
futures trading.
• By gradually scaling the number of contracts based on cumulative
profits, traders have the potential to increase their daily, weekly,
monthly, and annual gains significantly.

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Next Steps:

For readers interested in implementing The 2 Point Theory in their


futures trading journey, it is recommended to:

1. Start by practicing The 2 Point Theory with two contracts at two


points to understand the dynamics of the strategy and gain
confidence in its application.
2. As profits accumulate, consider increasing the number of
contracts to four and then six, following the outlined financial
breakdown, to maximize potential gains.
3. Implement risk management techniques, to safeguard profits and
minimize potential losses.
4. Continuously monitor market conditions and adapt the strategy as
needed to optimize trading outcomes.

In conclusion, The 2 Point Theory provides a structured approach for


beginners to engage in futures trading, with the potential for
significant financial gains when applied diligently and strategically.
By following the outlined next steps and exercising prudent risk
management, readers can embark on an informed and potentially
profitable futures trading journey.

The 2 Point Theory is exactly how we train students at Target Trading


Academy. We help you set up a trading account with a broker. You can
do so with as little as $50 dollars with our help. Then our program walks
you through these steps and teaches you how to build two different
demo accounts up from $0 to $8000 and the second from $0 to
$14,000. We guide you through each trade. We call out all the high-
volume areas the night before. Then teach you how to take the trades
off those areas. Our rooms are open, and we are working online with
you every day. For more information on how we can help please book a
discovery call and we will show you everything live in real time.

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