How to Trade E-Mini Futures
The E-Mini (also known by its ticker symbol, ES) is one of the most liquid and heavily traded futures contracts in the world, making it extremely popular among daytraders. Its settlement value at expiration is $50 times the value of the S&P 500 index of US stocks. If the index were, for example, 1000 at expiry, the contract would be notionally worth 1000*$50 = $50,000. This small multiplier (compared to other futures contracts) allows individual investors to participate in stock market moves with a relatively small amount of risk capital. Trading the ES is not for the faint of heart; price moves can be rapid, large and without warning, which means that there is a tremendous amount of both risk and reward available in the E-Mini market.
Other People Are Reading
Instructions
-
-
1
Develop a trading plan. It is imperative that you have a well-researched and well-defined trading plan before you attempt to trade. The market moves very fast; you will not have time to consider what to do while trading, so you need to have a complete plan made in advance. There are many different methodologies for trading futures contracts, so you will need to do some homework and develop a plan that fits your individual personality and trading goals. Technical analysis is very popular for daytrading. Books such as Martin Pring's "Introduction to Technical Analysis" and websites like StockCharts.com can introduce you to technical analysis methodologies used for E-Mini trading. (See References 2 & 3.)
-
2
Test your plan. Before risking real money on your plan, test it on historical data. Backtesting software such as NinjaTrader, Amibroker, MetaStock and many others can test your plan against historic market data and give you an idea of whether a strategy is viable. (See Resources 2 & 3.) Many online brokers offer a "paper-trading" mode where you can look at real live market data but trade with virtual money without placing actual orders. Flaws will inevitably appear in your plan during the testing phase; use the testing phase to fix any problems and adjust your strategy. Don't forget to consider the trade commissions charged by your broker; many high-frequency strategies that look good in backtesting become unprofitable once commissions are figured in.
-
-
3
Open an account with a futures broker. There are many brokers competing for your business. It's worth doing some research to see who offers the best commissions and trading software. Many brokers offer software demos to let you try out their technology before signing up and committing your capital. Try a few and see which one suits your tastes best. Be sure to thoroughly read the commission schedules and disclosure documents.
-
4
Trade your plan. After a substantial amount of work, you will find a plan that seems viable. Now you are ready to begin trading with real money. Stick to your plan and don't deviate from it while trading. Start small, trading just 1 ES contract at a time. Often, plans that look good in testing fail to work in real trading. If your plan works, gradually scale up your trade size.
-
5
Refine your plan. Any strategy won't work forever. Other traders might have developed similar strategies, or the nature of the market may have changed. Be prepared to develop and test new plans as time goes on.
-
1
Tips & Warnings
Don't expect to get rich quick trading E-Minis. You will be competing with seasoned professional traders who have decades of experience from day 1. It will require a tremendous amount of work and dedication to become successful.
Trading futures contracts is lucrative because it is extremely risky. Unlike many other investment classes, when trading futures you can potentially lose much more than your original investment. Make sure you have enough risk capital set aside to absorb any losses and don't risk money you can't afford to lose. Read all risk disclosure documents from your broker thoroughly and make sure you understand them. If in doubt, consult a licensed professional financial advisor.
