Emini Day Trading

After doing a lot of research about which contract allows the most flexibility in trading, I have decided to focus my efforts on one single futures contract: The e-mini S&P 500 Futures Contract:

Here is why:

· The e mini S&P futures contract tracks the common cash index of the S&P 500.

So instead on focusing on specific stocks, which there are way too many, I like trading the overall direction of the market.

· The liquidity is sufficient enough for the small and the large trader, and one  could easily trade in and out in seconds.

· No shorting restrictions, and there are no “borrowing fees” associated with shorting the contract.

· Margins are a fraction compared to stocks, especially when you consider the entire value of the contract. So essentially, you don’t need a fortune to trade the markets.

However, my favorite feature is the ability to trade the E-minis without the same old traditional indicators.  You can trade the contract utilizing price action.

Let me explain:  I have found that because of the liquidity, the rapidness of the market, and the support and resistance that is formed throughout the day, I don’t have to clutter my charts with the old indicators that many stock traders use.

The size of the contract is as follows: X the level of the Index, so one full point is equivalent to , while the tick value is .5 (4 ticks per one full point).

This is obviously done on one contract. 

The ranges on the E-minis could be rather high throughout the day, which allows some traders to take out many points out of the markets; however my own method allows me to just take 2 to 4 points on a daily basis.

Consider that I could so do this on 5 to 10 contracts.

The method of “Price Action” and the ability to pick a small number of points, in my personal opinion, are rather the way to go, instead of waiting for larger moves. Consistent small moves that lock in profits, is something that many traders should utilize because it will allow for account growth and hopefully avoid the huge high volatility in the account equity.

Another thing to consider is that traders that go for large and extend moves typically have a much higher risk when it comes to the ratio of risk/reward.

Lastly, the advent of the internet and online software for traders allowed me to automate my methodology, so my numbers of the buy and sell, appear in front of me daily without my effort. Naturally, due to the morning volatility in the market, I am typically done by lunch time. Please take a look at my video: http://www.daytradetowin.com/videos.php 

The main reason for its popularity is simple: it is always liquid. It shows all kinds of individual investors trends in security prices since 1896. Falling and rising prices of Dow Jones index come across with the S&P 500. This two major US stock indices show 95% converge.

Dow Jones Index value is very easy to calculate. The Dow Jones creators offer us to perform a usual operation: add up the prices and to divide them afterwards.

Most other indexes are weighted by market capitalization, which means that the change in the company price is multiplied by its size (ie capitalization). As a result, large companies have s greater influence on the index than those that are smaller. The Dow Jones index is only weighed by cost. A change in the price of a small company is as important here as of a huge company. Not everyone considers this an advantage; many analysts call it a drawback and say that the Dow Jones is less perfect than, for example, its main competitor S & P 500.

However, the Dow Jones enjoys great respect among private investors. And this is easy to understand: people like the fact that this index includes those companies which shares are usually bought for investors portfolios – usually very well-known large companies, which names are always on the rumor. Besides, a non-professional prefers to work with a small number of titles. Typically, private investors create their portfolios from the stocks of 20-25 companies, which is why they use the index which analyzes the activities of 30 companies, and that is the Dow Jones, rather than those composed of 500 or even 2000 kinds of securities.

The Dow Jones indices group is still one of the most popular stock market indicators in the U.S.. Securities of at least one of its thirty industrial companies are, as a rule, included in an average investor’s portfolio, as well as a professional manager portfolio. And its not surprising – because these thirty stocks together comprise approximately 1/5 of the value of all U.S. companies shares (about 8 trillion dollars) and about a quarter of all shares listed on the New York Stock Exchange.

Mini-futures contracts on the Dow Jones stock index are traded on CBOT (Chicago), more precisely, on its electronic division – Exchange eCBOT. A contract is traded on the exchange under one symbol. YM is an electronic contract which is traded on the electronic exchange eCBOT from 03:15 to 01:00 MSK. Contracts are concluded for H (March), M (June), U (September), Z (December).

The underlying asset of E-mini DJIA is an American stock index DJIA. E-mini DJIA – one of the most liquid futures contracts, presented at the international stock exchanges. Its trade volume is up to several million contracts per day.

The contract is very liquid and is one of the most popular speculative instruments. A variety of technical analysis methods can be applied to it. Such a tool is said to be very technical.

Long-term players, of course, will apply fundamental analysis methods to predict the dynamics of the index. The behavior of the DJIA is closely linked with the general state of the U.S. economy. Besides, American stock indices are significantly correlated with each other, so you can trade DJIA, based on the behavior of other indices. In particular, the correlation of this index with the S&P500 is nearly 95%.

DJIA index is extremely technical, because of its popularity among speculators. This index is one of the main instruments for day trading, meaning, for multiple purchases and sales in a single day. We must take into account the fact that with the opening of trade on the NYSE stock exchange liquidity increases, and the index becomes even more mobile. During the first hour of trade the number of fluctuations as a rule increases and afterwards for some time the index is difficult to analyze with standard classical technical analysis tools. Still, the greatest volatility of this instrument is observed in the second half of the trading session, moreover, during the last hour of trade gaps may take place. The liquidity of YM increases dramatically when European players enter the market.

The dynamics of the DJIA is influenced by many factors. Among them are macro-economic indicators of U.S. and world economy, earnings reports of American companies, and authorities declarations. War, terrorism, natural disasters influence not only the currency market but the stock market as well.

From the perspective of macroeconomics the following indicators are important to us:
- State of the foreign exchange market;
- Gross domestic and gross national product;
- Inflation, unemployment and interest rates, exports and imports;
- The value of public spending and borrowing in the financial market.

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The Futures trade every day information sheet takes advantage of both BULLISH & BEARISH short term explosive moves in Indian Stock & Index Futures to extract maximum profits from short term trends lasting from a few days to weeks. The Futures trade information sheet is perfect for the futures trader who would like to trade both BULLISH & BEARISH short term swings or trends, in Indian stock and index futures, lasting anywhere from a few days to weeks. Make sure out the presentation of the Futures Trading every day information sheet and see how you can take advantage of short term explosive moves in Indian Stock & Index Futures to extract maximum profits from short term trends lasting from a few days to weeks.

General features of the Futures Trading information sheet are, Provides trading signals for both the current (near) month and next month futures contracts in all the Index and Stock Futures listed on the NSE. We are so confident of our trading signals that we track the performance of all the trading signals that we generate in the newsletter every trading day (see the % Return column in the newsletter).  It includes the Pyramiding trade method to help you extract maximum profits from any trended move. Pyramid trade is the procedure of using profit generated from an existing position to acquire additional positions. To rapidly achieve exponential gains this results in a “doubling” of your position during each pyramid iteration.

Of different stocks and indices it is calibrated to the individual characteristics. Entry opportunities it monitors market status for initial. Whipsaws and It scans market data and determines the optimal entry point to guard against unwise trades. Present market data with information from the current bar and once you have entered a trade, the newsletter compares past. Enabling you to maximize gains and minimize losses and using this information, the newsletter’s money management algorithm generates, automatically tightens stop-loss and exit points when profit potential has been realized.

Is not optimized or curved to fit past data the trading algorithm of this newsletter. But leads the market It does not depend on pattern recognition algorithms, they are about to unfold pinpointing potential trading opportunities as. It quickly analyzes the market and generates buy, sell, and exit trades just as the trend is changing and stop signals that are in tune with the market’s current flow so that traders can enter. May potentially catch a bigger portion of each move Trends are identified as they are developing so traders.

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The S&P 500 index is one of the most tracked indexes in the world and it consists of 500 Large-Cap publicly traded corporations. Majority of these companies are American largest public companies traded on the New York Stock Exchange (NYSE) and Nasdaq Exchange. The S&P 500 index is considered as the best index that describes the U.S stock market sentiment by those investors who uses index technical analysis to track the market trend.

The S&P 500 index started to be calculated in 1923. Yet, at that time only 423 companies were included into the index and due to the complex calculations this index was calculated and published on a weekly basis only. Smaller S&P 90 index (90 companies) was calculated and published on a daily basis after the market closes. In the 60s the computer development made it possible to perform the complex calculations in real time and on March 1957 the S&P 500 was officially introduced to the world and started to be tracked in real time.

Opposing to the big indexes such as Russell 2000 the S&P 500 companies are selected by the committee by certain criteria. The main criteria are that the company has to be large and publicly traded on the NYSE or the NASDAQ, the company has to represent one of the branches of the U.S. economy and the companies’ shares have to be quite liquid and available on the stock market.

The S&P 500 index ticker symbol is (^SPX). With introducing of the ETFs (Exchange Traded Funds), with development of the options and futures markets, the traders have various ways of investing into the S&P 500 index besides buying shares of the companies from the basket of the index. One of the most popular ways of investing into the index is trading the ETFs. The Standard & Poor’s Depositary Receipts (SPDRs) is Exchange trade Funds that track the S&P 500 index. The SPDRs is a traded under the SPY ticker and called as S&P 500 index tracking stock.

Another popular, yet more risky” way of investing into the S&P 500 index is to trade the options on the S&P 500, SPY options, S&P 500 e-mini futures.

The most popular S&P 500 index tracking funds are Rydex and ProFunds funds. They have become very popular among IRA investors, because they allow using pension funds to trade bear market and to leverage the investment. As you may see, technical analysis applied to this index may help in many types of trading.

Participants in the financial markets all have their favorite indicators used to alert them when the possibility exist for trade entry. In this article, three indicators will be outlined that are utilized by successful traders to provide emini trading signals for market entry and exit.

Pivot Points

Pivot points are a common tool used by many emini index traders. Some traders use pivot points exclusively relying on pivot points in conjunction with only a time and sales screen, forgoing the use of charting software. While others will employ pivot points incorporating them in with their trading platforms to alert them when conditions are favorable for trade exit and entry. Because pivot points show areas of both strong and weak support and resistance, they are a popular choice among successful emini traders.

Relative Strength Indicator

The Relative Strength Indicator or RSI is a graph which usually resides on the lower part of charting software.

Used mostly to determine both oversold and overbought conditions, this widely used indicator displays a reading between zero and one hundred with a line moving between these two numbers. As the line moves up toward the 100 mark, the RSI indicates the market could be moving into overbought territory and the possibility exist that a pull back or market reversal could be at hand. When the line approaches the zero level, indications are favorable that oversold conditions exist and the market could be about to change to the upside as short sellers begin to take profits.

Stochastic

The Stochastic is another indicator similar to the RSI which is a popular choice among emini trading futures market players.

It is also a graph that usually resides in the lower section of charting software. Like the Relative Strength Indicator, both lagging indicators, the Stochastic also has a range of between zero and one hundred. With this tool, conditions are generally believed to be approaching overbought conditions when the Stochastic line crosses 70. In contrast, oversold conditions are said to exist when the Stochastic breaks below 30 and sellers begin to cover short positions.

 When it comes to the emini index trading such as S&P 500 emini index futures (ES), Russell 2000 emini index futures (TFS), e-mini Nasdaq 100 index futures (NQ), mini-sized DJI index futures (YM) or any other futures that track the performance of the indexes, the logical question for many traders and investors is what analysis should be used in the process of making a trading decision.

From one side we have eminis that are traded and from other side we have indexes which are tracked by emini. By asking active traders this question you may find various answers that would favor either of the positions above and every answer could be considered correct from a certain point of view. It is still difficult to get correct answer on this question because it depends on what indicators a trader uses in his/her technical analysis and what time-frame he or she trades.

To better understand the problem with this question I will try to summarize cons and pros that for each type of the analysis either it is emini analysis or index analysis.

1.

Emini index price depends on the price of its benchmark index. As an example ES price is calculated from the S&P 500 index price and it is calculated as times price of the S&P 500 index. Respectfully, if the S&P 500 index price depends on the supply and demand of the stocks from the S&P 500 index backed then the ES emini price does not depend on supply and demand in trading of the ES emini. It does not matter how many traders want to buy or sell ES futures – the ES price trends where the S&P 500 index price go. From this point of view it would be logical to apply technical analysis to indexes with the purpose of trading emini index futures.

2. Since emini price depends on the index price and their price trends move in similar pattern, if a trader uses price based technical indicators, it does not really matter what they applied to – the generated signals will be similar.

3. Volume based and advance/decline based indicators that are applied to the indexes may generate signals that would differ from the signals if similar indicators would be applied to eminis. Furthermore, it would be more correct to use index technical analysis in this case.

4. On very low, intraday timeframe when a trader follows every tick, a trend of emini may slightly differ from the index trend. Even if the emini price will match its index ratio price at the end of the day, for traders who trade very short trades could make sense to analyze emini.

5. Eminis are traded 24/7 and indexes are traded only from 9:30 until 16:00 EST. A trader simply cannot analyze indexes beyond the regular trading hours.

As you see, there are several factors that would favor analysis of the indexes and there are some factors that would favor analysis on emini futures. It is up to a trader to consider what to use in his or her technical analysis.

Here is Rob’s thoughts on the S&P and a great recap of today’s real world trading strategies used in his actual Live Trading Room as he trades right on the screen in front of you! So as we can see, it truly has already been another great week filled withlearning and trading opportunities! Given these critical times in our market, here are more tools, techniques, and great learning opportunities for people to grow as traders and investors and navigate these rotational market periods! The latest analysis and the incredible live trading experience with real money, no simulators or hypothetical results is now available to learn from at TradeTheMarkets.com! www.tradethemarkets.com to learn more on this incredible learning opportunity! This video series is geared towards Investors, Swing Traders, and ultimately Day Traders who want to be armed with key observations for the upcoming major market move that will be happening shortly! Remember: You will consistently hear me reference previous videos during my nightly presentation. That’s because each new video builds upon the last as we demonstrate real world trading and investment analysis. Take the time to review all of our videos to expand your market awareness! You’re welcome to subscribe to our videos to keep up to date on the latest market analysis and techniques. Thousands of your fellow traders have done just that. If you want to be armed with the same education as them, subscribe. Don’t worry, we in no way shape or form …