Day Trading eMini & S&P 500 Futures

Last updated on June 9th, 2015


You might have heard of a popular market called the E-mini S&P 500, aka the ES. But this market remains a mystery to many people – and not just beginners.


The ES is a futures contract on the S&P 500 cash market. The S&P 500 is an index of 500 large cap stocks in the US. It is made up of individual stocks from all the main industry sectors – from energy, financial, health care to industrial stocks and many more, the S&P 500 covers the lot! The ES is a futures market that has four quarterly expiry contracts per year, trades in quarter points and each quarter point, or tick is worth $12.50.


Many beginners are drawn to the ES because of its great liquidity, low intraday margins and daily ranges that are about right – not too crazy to start out trading, but also it still has a pulse. But then they start to trade it and begin to hate it. “It never just goes!!” or “It always stops me out to the tick before heading to my target!!” you’ll hear them cry. And these views aren’t without merit at all. Because the S&P 500 is an aggregated product – i.e. it’s made up of lots of other products (the stocks) – its movements are muddied and an average of all the stocks that make it up. This feeds straight into the ES. The ES is a mean-reverting product. It likes to trade back on itself. It likes to check and recheck levels. And it can be hellishly stubborn at times when it does trend. So the kinds of psychological torments that traders and especially new traders go through are often amplified by the ES. If you’re stubborn in nature, you’ll likely get torn to shreds.


The product is just like any other you might choose to trade – find your niche and you’ll make a lot of money. One thing that this market loves is context. It loves to see levels or a trendlines tested and fail for example. It loves to see yesterday’s high broken briefly then fall back below. It loves to know that more buyers didn’t enter when that high broke, so that sellers can confidently step it up. No new buyers above high = trapped longs = opportunity to profit from trapped longs liquidating. True it’s an art as much as a science to knowing when to pull the trigger in scenarios like this and when to lay off as things aren’t quite right. You’ve also got to have a good handle on what the ES is viewing as technical levels as you’ll be able to better control your risk by knowing where to enter as much as knowing when you have your cue. Once you know which direction you have your cue in, you could trade it with a something like the PTU Trend Jumper for example.


According to my googling, there is apparently no genuinely designated patron saint of patience. Shame. But if there was, the ES would surely try the patience of said saint and certainly of all the rest. The fact is that because most of the time, given its aggregated mean-reverting nature, the ES undulates back and forth looking for buyers and sellers. When you’re wrong it makes you think you’re right and when you’re right you know to your core that you’re wrong. And then you see what actually happens after you exit the trade. It’s a tricky little fellow the ES and so having a well thought out trading plan that you religiously stick to through thick and thin will likely serve you better than any gut instinct you have whilst you’re in a trade. You must yield to the trading (and trade plan) gods and have the patience to see the trade through whatever the outcome may be.

The ES is just another market. So don’t love it or hate it – use it if it fits the type of strategy you like to trade. At the end of the day, while those reasons why beginners first start trading it still hold true, the ES is a fantastic product to trade and it is very possible to make considerable amounts of money with it.


The following two tabs change content below.