Emini Momentum Trading Philosophy
E-mini momentum trading can go hand in hand with swing trading, but it is subtly different. E-mini momentum trading is a trading methodology which attempts to profit from the continuing momentum of trends in the futures market, using of course e-mini futures contracts (which could be index funds such as those that are pegged to the e-mini S&P 500 index). If you engage in e-mini momentum investing, you take the approach that large increases in an underlying security’s price is going to be followed up by yet more gains, while large decreases are going to be followed up by yet further declines.
So, if you’re doing e-mini momentum investing, you’re attempting to capture and secure gains by holding “hot” contracts and selling “cold” contracts. In order to achieve this you’ll need to know how to take a long position for a contract underpinned by an asset that has displayed an upward trending price and how to short sell a contract underpinned by an asset that has been caught in a downtrend. The theory behind e-mini momentum trading is that once a trend has been established, there is a higher probability that it is going to keep on going in that direction than that it will move against that trend.
Eventually, of course, the trend will end. But as a momentum investor, you take the attitude that you have no idea when that is going to be and that it is much more likely to be later rather than sooner. And you want to make your profits sooner!
Remember that e-mini momentum trading is contrarian trading. Contrarian trading philosophy, which is proven to be the most successful trading philosophy but, for some reason (it seems to be fear) the least-followed, says that you get in when most others are getting out, you get out when most others are getting in, and you make a move when others are holding still. So, in the case of e-mini momentum trading, you assume that that people will keep on following the trend, unable to decide when it will and just hoping that it will reverse. You make a decisive move when they are holding still, waiting or just following along with what others are doing.
One thing that you’ll need to learn and keep in mind about e-mini momentum trading is that market momentum isn’t just about price of an underlying asset, it also considers volume. Momentum is thus overall market sentiment, or at least a measurement of it. One you learn how to spot momentum trends in the markets, you’ll be able to engage in successful e-mini momentum trading. Don’t neglect your research and your simulation practice on market momentum.
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