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 trade from anywhere in the world with an internet connection, and be on a level playing field with everyone else trading the same market. All you need to start trading e-minis is an off-the-shelf computer, high-speed internet connection, and a desire to succeed. At the Emini Academy, we set 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 there are significant risks associates with the futures markets. While trading software can help traders find opportunities with high profit potential, discipline and risk management in a crucial part of any traders’ business plan.
