Emini Futures Day Trading Blog

There are many differences between trading forex and eminis. The first thing is fees, you’re looking at at least 4$ for a “round-trip” trade with a basic emini contract. With FX you just pay the spread, in many cases only 1 or 2 pips on the Euro and more for exotics, maybe 4 pips on Euro/JPY.  It’s cheaper then all of the comissions, that’s for sure.

It really depends on your style. If you need volume data as part of your system then forget about Forex as they don’t give you the real volume as it’s not a central marketplace like with eminis that are traded via the Chicago Mercantile Exchange.  Also, forex can be crazy volatile and erratic, bigger - badder ranges.  AND forex also has really amazing trends that just keep going and going.

Another advantage of forex is that you get more leverage which means you can bet higher risk if you want to. As a very general rule if your trading system is awesome and has a 90% winning rate with equal risk:reward then you could bet 5% of your account per trade as  a maximum. However you would need a much higher amount in your trading account to be able to trade at this level with eminis.

Personally I have been working with mostly fx and getting it to work for me. You can learn more at my site about automated forex trading and psychology of trading.

Trading the emini’s has many advantages over trading stocks, commodities and foreign exchange (forex) markets.

To get started in trading stocks and commodities generally requires an account size of $10,000 where emini trading only requires a minimum of $2,000. Eminis are miniature-sized futures contracts you can make a considerable amount of money from very small moves in the market.

You can also start with a small account size in forex markets, one of the advantages of trading eminis is that you get to see accurate volume data. Besides the price movement itself, volume is the second most important information that you can get and is very helpful information.

For instance, if the market looks like it is at a top and there is very low volume, its unlikely to go up. There must be buyers and volume for the market to go up. Because forex markets have no central exchange you cannot get accurate volume data, they only provide data from each broker and likely the big players who move the markets will not be using the same broker as the smaller players.

Another advantage of emini trading is that you can just trade for 1-2 hours per day. Generally during the first hour of market open is when a large amount of trading transactions take place. If you don’t have a lot of time to trade during the day or just prefer not to have to stare at the screen, trading eminis during the opens may be a great idea for you.

Emini trading (like all trading) has a large risk, be sure to get a quality emini trading education and practice on a demo account before going live.  I recommend Traders International, they offer a professional emini trading education and have a live trading room which is open everyday. It’s such a benefit to have a support team available when you are new to trading, it really helps you to maintain focus and discipline.

Sometimes in trading we get ourselves into sticky situations by not being aware of the daily market conditions . The following are the 4 Market Conditions:

1. Stabile & Quiet
   
2. Stabile & Volatile
3. Trending & Quiet
4. Trending & Volatile

During the stabile periods, the market is in a trading range (70-80% of the time). In the trending & quiet, there are not many retracements, during the trending & volatile there are larger reversal retracements.

It’s important to understand what type of strategy/methodology you are using and for which market it is designed. In most cases trend-following strategies do poorly when the market is in a trading range and counter-trend strategies lose when the market is in a strong trend.

Trading your strategy during the wrong market condition leads to losses and many traders will lose confidence in their system. This is setting yourself up for failure as our minds have certain cognitive biases that lead to erratic emotional behaviour. For example there is what is termed “recency bias”, this means that the mind gives more weight (importance) to events that happened recently. If you’ve just taken 3 losses in a row you may start having doubts about your system and start changing the settings on your indicators. If this sounds familiar it’s time to get out of this vicious cycle.

You need to test your strategy over 200 trades as a minimum. It takes about 200 samples until statistical probability becomes accurate enough to guage a percentage. If you’ve only tested over 20 trades, you have no idea if the system is a winner. After 200 trades you can see,  ok I had 7 losses in a row once, 5 losses in a row three times, overall I won 45% of the time, broke even 20% and lost 35%, etc. By doing the math and seeing that your system is a real winner and that probabilities are on your side, this gives you the mental strength to not become a victim of recency bias when you are trading eminis

These words from Mark Douglas (an expert in trading psychology) caught me offguard. The way he said it “It’s ALL in your mind, trading is a mental game”.  Sometimes in life we think we understand something only to find out later that the truth was much bigger than we were able to absorb.

I highly recommend that you pick up Mark Douglas’ books and study it thoroughly, as he puts it - our minds are wired to make us lose. This all stems from emotions, for humans generally we don’t like to be wrong and we don’t like to lose, when these events happen we feel pain. Money is something very important to us and losing money hurts, especially because we were wrong and/or made a decision we really didnt’ want to be making. Nobody would ever put on a trade if they thought they would lose, right?

Emini Trading Secret: Professionals make trades knowing that they are going to lose and have no negative emotions after taking a loss. It’s a part of playing this game, you are going to win some and lose some, there is no way to avoid a loss. The trick of course is winning more than you lose or another way to say it is Profit vs. Expenses.

Emini trading gives unlimited opportunities for you to create wealth but can be very hard and elusive. Take for example the fact that many very successful people in other areas of life fail at trading (doctors, lawyers, ceo’s, engineers).

It is easy to discount this information about the 95% failure rate of new traders. The way I see it trading is like playing a very intense sport and starting out playing against people who are much better than you. You lose and lose and lose and then if and when you get your game together, you start to win sometimes and then win more and more.

I agree with Mark Douglas that emini trading (and trading in general) is 100% mental. You need a system or methodology yes, but if your mind is not “in the game”, you don’t have a chance. One of the most invaluable tools is to spend some time with a successful trader and understand their psychology and approach to emini trading. If their style matches your personality and you can learn from them personally, your road to success will be MUCH quicker and easier.

Why do I think of trading as being similar to a poker game?

If you’ve ever played in a no-limit poker tournament you know that it’s smart to wait for the very best cards before you jump in. When you play no-limit there is a chance that you might get called and have to either put up all your money on one hand or walk away. This experience teaches you to wait for a damn good hand! AND you learn that even if you have pocket aces you can still lose.

Well, in trading we don’t go all in with every trade (or we have very brief trading careers lol),  using smart money management is key. However I know that my weakness has been going in too much. It’s easy to convince yourself to take a trade when only risking 1 or 2%.  However as the losses accrue it becomes so much harder to come back.

Let’s say that you risk 5% of your account and during a few weeks you get down 10 trades, now you only have 50% of your capital left. Even if you make a 50% gain you are only at 75% of where your account was before.

Casinos know this and make millions of dollars everyday by just having a small edge. Do you honestly know what your edge is? Do you know the probabilities for each trade that you take? Are you consistently enacting your strategy or do you sometimes take trades on a whim?  Do you think that you can predict where the market will go with high accuracy?

These are important questions to ask yourself. Personally, I only go in when I know the odds are stacked in my favor. Because I am consistent my account grows nicely and I don’t suffer from emotional trading which can be devestating.

There are lots of strategies for trading eminis available on the market today although many of them unfortunately promise the world and don’t come close to delivering.

Before you invest your resources and time into a strategy be sure to investigate fully who you are learning from. If the teacher is not a professional trader, don’t waste your time. It is important to learn the right way from the beginning to truly program yourself for success.

Emini trading is fast-paced and you need to stay alert and keep your eyes on the screen when you have money in the market. Your finger needs to be on the trigger ready to close your trade at a moments notice.

Trading eminis can be extremely lucrative as you can get multiple trade setups each day. If you are using proper moneymanagement and only risking 1 - 2% of your account you can get to a level where you consistently earn 2-5% a day and enjoy seeing your account grow quickly.

We highly recommend Traders International. They are the biggest and most respected emini trading school in the world. Their support is top-notch and unparalleled in the industry.

Traders International has a Live Online Trading Room exclusively for members only. In the live room professional traders give emini futures trading signals in real-time. You can trade along with them until you learn to trade yourself. The average learning curve with their impressive training is only 6 weeks. You have to successfully trade 15 out of 20 days profitably before you are allowed to use a real money account. Check them out! Their emini trading strategy is top notch (it involves trading reversals but uses proprietary indicators with a high success rate).

Simply put, emini futures are small (mini) futures contracts which have always been traded electronically (e). The most popular eminis are the S&P 500 Fututes, Dow futures and the Russel 2000 futures.

Unlike stock accounts with higher account minimums, emini brokers can open your account with only $2000. But before you rush off to get an account be sure to get a high quality education and successfully paper-trade for at least a month. Otherwise there is a 95% probability that you will lose your money. (95% of new traders will fail because they don’t get a proper education and treat trading like gambling)

Japanese candlestick chart of the S&P 500 futures

Here you can see what a candlestick chart looks like. If you are new to charts, they are price measured over time. Each period of time creates a new “candle” and the size of the candle represents the change in price from opening until close. The “wicks” represent extremes in price and show that the price was unable to close at the level of the high.

The market only goes up, down or sideways. For each trade  you are betting whether the market will go up or down.

You click to open a trade up (long) or down (short) and then you set your stop loss, which represents the amount you are willing to lose. Some traders do not use a stop loss but this is extremely risky and can cost you dearly. Many traders will simply set a 2 or 3 tick risk and a 2 or 3 tick profit and look for as many opportunities as they can get per day.

It can take a long time to learn how to successfully trade eminis with a consistent profit. This market is very fast-paced and there is a lot more too it then first meets the eye.  In every financial market there are the professionals (smart-money) and the speculators (dumb-money). We all start out as the dumb money and then graduate to the smart money over time. For some traders this can take years. If you are brand new to this, be sure to enlist the aid of professional training and save yourself a lot of time, frustration and money!

Trading is a psychological game and favors one who can be very disciplined and patient. The “traders” who try to get rich quick will lose their money even quicker. As in every business one must have a professional attitude, pay attention to details and manage their money wisely.