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Emini Trading Basics – How to Day Trade E-mini Futures

What is a futures contract?
Futures contracts can sound confusing for new traders.  To explain what a futures contract is, I like to use the analogy of a home purchase contract.  When you buy a home, you first sign a contract that lays our the purchase price, property specs, and other information pertaining to the sale.  Then, 30 or 40 days later, you “take delivery” or actually close on the house by paying the seller and taking ownership of the property.  Futures operate in the same way.  Except we’re not holding the contract for 30 days.  Actually, sometimes we’re only holding the contract for 10-30 minutes!

What are E-minis?
E-minis are also known as “stock index futures” that are traded 100% electronically (not in a trading pit on an exchange).  The benefit to this is you have access to all the same information as everyone else.  A stock index is simply and index (or group) of stocks).  For example, the S&P 500 is an index of 500 stocks.  There is a futures contract based on the S&P 500.  The “mini” means it’s 1/5 the size of the standard futures contract traded in Chicago.

The S&P 500 E-mini
The E-mini S&P 500 is one of the most popular e-mini indexes with professional traders.  The reason is because the ES (e-mini S&P 500) has very high volume and volatility.  These are a traders two best friends, because movement (volatility), and a lot of market participants (volume), means big opportunity for traders.  Also, the e-minis markets are highly leveraged, which is a great thing if you know what you’re doing, but can be very dangerous for traders without a winning strategy.

“Shorting the markets”
Typically, people thing of making money in the market when price goes up, right?  Just like buying low and selling high.  You can also make money when the market goes down.  This is called “shorting” the market.  You’re essentially selling something that you don’t yet own, then buying it back at a lower price.   It is very easy and simple to short the e-minis markets.  Other markets, such as the stock market, have had restrictions on short-selling, which can be a huge problem for traders.

Tools Of The Trade
With recent advances in technology, we (individual traders) now have access to the same tools and information as the professional traders at the trading floor.  You can literally trade from anywhere in the world with an internet connection, and be on a completely level playing field with everyone else trading the same market.  All you need to become a professional e-mini trader is an off-the-shelf computer, high-speed internet connection, and a desire to succeed.  We set all of our members up with the charting, data feeds, and education tools needed to trade the markets.

Getting started
The E-mini markets are often referred to as “the professionals’ market”.  The high leverage and volatility makes it appealing to traders, but novice traders with little or no trading have a good chance of losing money.  At the Emini Academy, we show you the proper way to trade the markets for consistent profits.  There is a lot of misinformation on the web, and we’re setting out to revolutionize the way traders learn to trade E-minis.  Feel free to join us for free and get started on your path to financial freedom!

Feel free to browse around our free emini day trading articles and resources.  You’ll find information on everything from the basics of eminis to specific trading strategies and tips.

Emini Trading Articles:

Emini Day Trading Basics
Emini Trading – A brief history and overview
How to Becomes a Professional Trader
Tips and Advice for Search For an Online Trading Course
Emini Academy FAQ’s
Are You a Confident Trader?
Day Trading with the MACD indicator
How To Find a Good Emini Broker

There are many options when it comes to choosing an e-mini day trading broker that can deliver great service and competitive pricing.  There are a few important tips you should keep in mind when you’re shopping for your day trading brokerage:

Commissions: The most obvious thing to take into consideration is the cost associated when using a broker.  For day traders, the most expensive cost is the commissions.  There are many different types of commissions, and it’s important to know your costs before you start investing.

If you’re trading e-mini futures, then you’ll more than likely end up paying a flat commission per contract traded.  Basically, you will pay a commission to your broker for each contract traded, regardless of how many contracts you trade at a time.  If your broker is charging $2.00 per side, then you’d end up paying $4.00 for every “round turn”.

For example, if you bought 20 emini Dow contracts you would end up paying $2.00 per contract, or $40.00 total.  When you liquidate (or sell) your 20 contracts, you’ll pay another $40.00.  Thus, your total brokerage commission would be $80 round turn for 20 contracts.

Margin: When daytrading futures, you will be trading on “margin”.  Essentially, you’re not investing money into a company.  Rather, with e-minis you are trading contracts that require some sort of deposit.  Your broker doesn’t take the margin money out of your account.  Instead, they make sure you have enough margin money in your account to support the amount of contracts your trading.

For example, let’s assume your brokers minimum margin requirement is $1,000 per S&P 500 e-mini contract.  If you were trading 10 contracts, then you would be required to keep a minimum of $10,000 (10 contracts x $1,000) in your account at all times.  If your account ever dips below the minimum margin requirement, then your broker can liquidate your position without notice.  After all, if you don’t have enough money to cover your position, then the broker is required to provide the funds to the Chicago Board of Trade.

Data Feed: If you’re intra-day trading futures, stocks, or any other kind of equity, then you must have a real-time data feed.  Some brokers provide delayed feeds, but you need real-time data from the exchange.  Believe it or not, not all data feeds are created equally.

A lot of professional traders use tick charts which measure the amount of transactions, not time.  And to accurately utilize tick charts, you need to have what we refer to as an “unbundled data feed”.  This means that you’re counting each and every transactions.  Some data feed providers will bundle data, or group trades together.

For example, a bundled data feed could show 1 transaction of 10 contracts, but in reality there are 10 transactions of 1 contract each.  If you were to compare two tick charts side-by-side, then you would see a significant difference.

Service: In today’s day in age people demand great service.  And it’s no different when choosing an e-mini broker.  You should have access to the trade desk where you can call in orders if needed.  Let’s say your internet connection goes out and you can’t close out your trade.  You’d need to be able to get your broker on the phone immediately to close out your position.

To sum it up, a good emini broker will provide competitive commissions, reasonable margins, a fast and reliable data feed, and great service.  If you need a recommendation for our preferred brokers, feel free to call or email my team directly.