Emini trade is the most popular way to day trade futures online. The reasons for this include the relatively low cost to start and the legendary success that some traders have achieved trading E-mini futures.
What makes e-mini futures the ideal medium for making a success of day trading?
- Firstly, the same principles of technical analysis that are applied to stock and forex trading are applied in emini trading.
- The next advantage of e-mini futures trading is the low cost to get stated. It is true that to make a living from day trading, you need to have more than the minimum capital, but having said that, even trading one /ES (e-mini for S&P500) contract each time can make you a margin of a few hundred dollars. The minimum capital is $3,500 to $5,000 depending on your broker.
- Another advantage emini trades that appeals to traders is the short time horizon of minutes to a couple of hours in which the trade is entered and exited (win or lose). Thus the uncertainty of holding a position the success of which depends on the trader’s correct reading of the technicals and fundamentals, is obviated.
- The financial leverage resulting from trading e-mini contracts is a huge advantage for those who do not have large resources to commit to trading a stock or ETF in the market. With just a few dollars, the trader gets to control a large tranche of futures contracts.
- Lastly emini trade is not confined to only the S&P500, but includes a diverse set of mini contracts covering other markets such as commodities and foreign exchange that can be traded in similar fashion.
What then are the steps one needs to take to get started on a successful day-trading path?
- The absolutely non-negotiable first step is to get the knowledge you need. This is not a market one can glibly experiment in with real money without getting burned. The basics are straightforward, but successful application needs experience. Experience translates to a great deal of paper trading (simulated) using a predetermined trading strategy which is practiced until the trader proves that the system works to provide more profit trades than loss trades. The rules of the chosen strategy should be possible to follow without concern of major loss. This removes the main failure-generating factor – emotions of greed and fear. Obtain day trader skills by taking a quality class to obtain the necessary skills.
- Open an account at the best futures trading broker/platform you can afford. The most popular with both professionals and others is TradeStation. Others worth looking at are Thinkorswim and eSignal.
- Practice, practice, practice – this is the only way that your trading can become mechanical, without emotion.
- Choose which emini trade type (forex, S&P500, commodity etc) you want to be an expert in and then get to know it as well as you know how to clean your teeth.
- Start trading.
Some pitfalls to look out for:
- Protection of your capital is your highest priority. This is because you WILL experience losses, and you must therefore minimize these, otherwise you may find your capital dwindling below what you need to continue trading. The other danger is to make some good profits only to have them completely wiped out by one big loss. This is the most common reason for failure by beginner traders in the emini trade arena.
- Do not underestimate the leverage aspect on the money you trade. Because you can make a good return on a relatively small amount of money, you can also lose a significant portion of the money you commit, in a very short time.
- Do not over-trade. There are two aspects to this. If you make your target gain for the day, you should stop trading because to continue puts you are risk of losing that gain. Secondly, if you keep making false starts, entering and exiting too much in a short time, your profits can be consumed in broker commissions.