Online E-Mini Futures Trading: What Is It?

Perhaps one of the hottest group of trading products these days are the E-Mini Futures. You probably are either trading them, have traded them, or at the very least have heard them mentioned. The S&P E-Mini Futures are basically the 'granddaddy' of this group. Not far behind are the Nasdaq E-Mini and the newer Dow E-Mini Futures.

So, why all the interest and hoopla in online e-mini futures trading?

Volume - The S&P e-mini trades 600,000 to 800,000 contracts per day at the time of this writing. We're talking of hundreds of contracts crossing throughout the trading day. The Nasdaq e-mini has come on strong and now trades frequently over 300,000 contracts per day. High volume makes for a liquid market and a liquid market is ideal for traders.

Narrow Spreads - With the great volumes mentioned above, you have bid and ask spreads that tend to be 0.25 points on the S&P e-mini - which is as narrow as they can get. Placing market orders rarely is a concern. On the Nasdaq it's typically 0.50 points, and that is also the narrowest increment. The Dow e-mini tends to have a bit wider spread but usually seems to be in the 1 to 5 point range. Keep in mind that a one point move on the S&P e-mini is $50, on the Nasdaq $20 and on the Dow $5, so you can see that the spread risk is very minimal.

Leverage - Many brokers allow day traders to have even less than the exchange required margin to day trade these futures contracts. But let's assume you need $5,000 in margin on deposit at a broker to trade one contract. With that $5,000 you have nearly 10 to 1 leverage. In a highly liquid market. You can see why this has become such a popular trading vehicle for day traders as well as for swing traders.

Minimal Margin Requirements - We discussed this above, but in short, you're depositing just a fraction of the actual dollar amount of stock you are controlling at the time you buy or sell an e-mini futures contract.

No Uptick Requirements - Want to go short? No problem. Forget about the up-tick rules. Those can drive an active trader a bit batty when trading stocks. In online e-mini futures trading, you never even have to think about up-ticks. Just go short whenever you want - hit the bid and you're short.

Trading an Index - Sometimes it's simpler for traders to focus on a broader index than trying to game an individual stock. With these index-based e-mini futures, you are trading a broad index of stocks, but with the type of leverage that can make it feel just like you're day trading a highly volatile individual stock.

Those are the advantages and some of the reasons why the e-mini has become so popular. And there seems no end to the appetite for these types of products. Single stock futures are now trading. And there are e-mini-type contracts on other markets, including key European indexes and interest rate markets.

One good resource to learn more about online futures trading is the Chicago Mercantile Exchange website (http://www.cme.com) or the Chicago Board of Trade (http://www.cbot.com). The CME trades the S&P and Nasdaq e-mini futures contracts, and the CBOT trades the Dow products.

After that, you'll need a solid stock trading strategy to take advantage of these markets. NetPicks offers the NetPicks DayTrader, where we focus exclusively on day trading the E-Mini futures markets mentioned here. Get additional information on our online e-mini futures trading strategies by following this link:
http://www.netpicks.com/DayTrader.html