Last updated on May 14th, 2020
Whether you’re trading Stock Index Futures on the Chicago Mercantile Exchange such as the Russell Emini, the S&P 500 (the mini version of course), the Nasdaq or the Dow, there are some basic things you can do to heighten your chance of successfully day trading Emini Futures.
Let me first say that the truth about day trading is that is tough. It will challenge you like no other career. However, you can make it just as others have before you.
What Is Emini Futures Trading?
Emini Futures trading is trading the mini version of the full contract of various instruments. The most popular is day trading the S&P 500 Emini contract. The symbol for the S&P Emini is ES and is traded on the CME (Chicago Mercantile Exchange). You can trade the ES for 1/5 of the value of the full contract size. This makes trading more accessible for the smaller capitalized trader.
How Much Do You Need To Trade Emini Futures?
How much you need to trade depends on the instrument you are trading, whether you hold overnight, and your broker. Here are margins for TradeStation:
- E-MINI S&P 500: Initial margin $6930 | Day trading margin (25%) $1732
- GOLD (COMEX): Initial margin $4950 | Day trading margin (50%) $2475
- NATURAL GAS (NYMEX): Initial margin $2200 | Day trading margin (50%) $1100
Those are higher-end margins as some brokers will let you trade the S&P 500 Emini with $500 margins.
Consider day trading the S&P as an example using tick size and stop-loss:
- Each tick is $12.50 and your stop-loss is 4 ticks = $12.5 X 4 ticks = $50 risk per trade
- Determine your risk per trade as a % of your trading account (1%, 2%)
- You would need a $5000 trading account to risk 1% with a 4 tick stop loss
Ensure you have enough capital to withstand a string of losing trades.
5 Tips For Trading Emini Futures
Here are five key pointers that you will want to pay attention to if you are serious about trading for a living or to supplement your current income.
1. Trade The E-Mini On A Schedule and During The Best Times
Most people get into day trading Emini futures, such as crude oil, with the dreams of making it their one and only job. They leave their 9-5 desk chain behind and take up behind their home computer. Interesting enough, they often spend more time watching every price movement on the chart and still be chained to a desk.
Regardless of the time spent in front of the computer, there are only so many hours during the day that the price action of the Emini is worth even looking at.
Limit your trading to a consistent time period.
What is the best time to trade Emini Futures?
The best time to trade the Emini futures is when the volume is the highest during the trading session. From 9:30 to 11 a.m. is the best time to trade as volume begins to drop off after that.
Trading the PM session can also be good. In fact, you can break the day up into 2 or more “mini sessions” each with its own stop time and dynamic goal strategy (see number 2).
The important rule here is to define your session and stick to it. Disciplined consistency is the key to success.
When I mentioned that there were only so many hours where the price action is worth day trading, remember that we need volatility to make money. We need the Emini markets to move and there are times, as shown in this graphic, that the volume is simply not worth your time.
You can read the full article “The Worst Time To Day Trade” here.
2. Don’t Be A Slave To The Emini Market
When you are day trading an E-Mini Futures markets, create a dynamic goal setting strategy that allows you to quit positive on your terms. I try to get 2 winners and have a
Because my trading strategy is so robust, I want one of those winners to be a full target winner to qualify for my “power of quitting” goals. Whether I am up by 1 tick or 4 points, I take what the market will give me while quitting positive on most sessions.
I will keep trading until I have achieved that goal or, I hit my stopping time. That moves my account forward on a consistent basis while not giving back my winnings to the market. I quit on my terms in a dynamic way.
Markets tend to trend and then the price action will show consolidation…..over and over again, so by using this type of dynamic goal setting on a day to day basis, you are able to take advantage of the best moves and stay clear of the choppy consolidations.
3. How To Trade ES Futures? Use A Trading Strategy With An Edge
There are plenty of ways to trade but there are only so many edges in the market that you can exploit.
Manually backtest it thoroughly and then create your trade plan from what you discover.
This will eliminate guesswork and will separate you from most other traders, who incidentally, fail to take this important step and also, fail as traders more often than they will succeed.
Learn by NOT doing what losing traders do, or in this case, do what they do not do. Since most traders don’t have any long term success in trading, does it makes sense to follow the crowd?
I use a trading system I developed which you can find out more about High-Velocity Wave Trader.
One of the best things about this trading strategy is that everything you need to know is plotted right on the chart. Believe me, this makes day trading the sometimes “fast-moving” emini futures markets much easier.
To learn more about our exclusive trading system, visit the High-Velocity Wave-Trader webinar here.
4. Trading Emini Futures Can Blow Your Trading Account
Risk management is vital in any market you trade. Without a solid understanding of risk management in trading, you can forget about finding success because you will end up with a blown trading account.
Everybody has a different tolerance for risk, that’s true, but you can’t argue math and probability.
I know you think you won’t have a 10 trade losing streak….or a 32 trade losing streak, but the truth is that the probability says that it can happen. Because there is the chance that it can, you must manage risk to sustain a string of losers.
- You can use a rule of thumb such as “Don’t take more than 2% of your balance”.
- Use yesterday’s closing balance.
- Know the average risk your futures trading system uses per trade, from entry to stop. This can also be derived from backtesting.
If you have a $10,000 account balance, and the average risk your trading strategy puts on a Russell Emini trade is 2 points ($100 per point), then based on your 2% rule, you would only be able to trade one futures contract. 2 x $100 = $200 = 2% of $10,000.
Another thing is that most traders have just enough in their accounts to cover the margin requirement of their instrument.
Under-capitalization is one main factor traders never succeed so you want to ensure you have an account balance that has a large buffer zone around the margin requirements you must follow.
5. A Trading Program With Instruction Can Help
When I was first learning to ride a bike, I have someone behind me who could grab the seat if I started to swerve off course. That protected me from some falls that could have caused some damage.
That is why I suggest that if you choose to look for a trading system like the ones here at Netpicks, make sure there is some type of trade room instruction.
All of the products we offer at Netpicks for traders who are serious about taking a run at trading, come complete with instruction…A-Z. We make it our mission to have traders of all markets, Forex, Options, E-Mini…..be able to hit the ground running.
From installing our software on your trading platform, to complete instruction on the trading strategy inside of our trading room, we “hold the seat” so you can get your balance as you learn. You can contact a member of our support staff any time to see how Netpicks can assist you in your trading.
You Can Trade Emini Futures Successfully
There is a lot of money to be made day trading but most traders:
- Don’t know when to quit and will often turn a positive session into a negative one
- Don’t have their entire trade plan figured out in advance
- Break their own rules, get distracted, make mistakes, etc.
Having a mentor (or trading partner) is a great way to be disciplined because you will be held accountable for your actions or lack of actions. It forces you to trade your plan.
Ultimately it takes a very professional mindset.
You want to treat your trading as your business and not as a hobby, source of entertainment or anything else. If you exercise ‘best practices’ as outlined in this article, you will be ahead of a majority of traders out there and will be in the best possible position to succeed.