| In honor of St.Valentines Day, I'd like to offer an | | | | somewhere in between. |
| unabashed view of the electronic e-mini index futures | | | | Things About E-Minis that We Just Have to Put-Up |
| markets. Like many people's relationships, there are | | | | With |
| certain things about e-minis that I love – and | | | | The quirks and idiosyncrasies of the e-minis are there |
| other things that I just have to put up with. So let's | | | | also. Yes they do have their downsides. And just |
| look at both sides of the coin, and see what | | | | like our significant others, these are things about |
| conclusions we can draw about these ultra-popular | | | | e-minis that we'd love to change but can't – so |
| trading tools. | | | | we just learn to live with them. |
| Things to Love About Index E-Minis: | | | | Leverage – the Other Side of the Sword. Great |
| Liquidity. This is what allows us to enter and exit | | | | leverage can bring great reward. But it also brings |
| trades with a minimum of slippage. S&P 500 are | | | | great risk. If you have a $10,000 account that allow |
| among the most liquid exchange traded instruments | | | | you to trade on $1000 margin, you can trade 10 |
| in the world. Other index e-minis are also very liquidity | | | | Russell contracts. A 10 point move in your favor will |
| and enjoy significant day trader participation. These | | | | double your account; a 10 point move against you will |
| include the Dow, the Nasdaq and the Russell 2000. | | | | wipe you out. With leverage this high, proper risk |
| More on each of these below. | | | | management is absolutely critical. |
| Level Playing Field. With e-minis, all trades are | | | | The Cumbersome S&P. There are periods of time |
| computer matched. This means that a the trader at | | | | when the S&P seems to act like a huge oil tanker. |
| a terminal in Topeka, Kansas is not at a disadvantage | | | | Never moving outside of a narrowly defined range. |
| to anyone trading e-minis around the world. The | | | | Trend Days vs. Range Days. Traders in all |
| high level of liquidity also helps make a level playing | | | | instruments have the problem of deciding if you're in |
| field, because its almost impossible for the spreads to | | | | a trend or a range. But for many, this is a |
| get bigger than one tick in the four e-minis mentioned | | | | particularly beguiling problem in the indexes. |
| above. (The spread is the difference between the | | | | Fortunately, there are some tools that can help us |
| bid and offer prices). | | | | here. And we teach the best one I've ever seen in |
| Leverage. Overnight leverage on e-minis is high, at | | | | our E-Mini course. But without those tools, many a |
| roughly 20:1 for the S&P 500 e-mini. Day-trading | | | | trader has been caught on the wrong side of the |
| leverage is screaming at most brokerages, with some | | | | market all day, only to look back in calmer times and |
| brokerages allowing greater that 100:1 leverage. It's | | | | see the error of their way! |
| tougher to get a bigger bang for your trading buck | | | | Differences in the indexes. While the different |
| than in e-minis. | | | | personalities of the indexes give us different reasons |
| Predictable Movement. One of the reasons that so | | | | to trade them based on conditions, set-ups, etc., |
| many professional traders trade the index e-minis is | | | | they also mean that we have to learn about each |
| because they have predictable price movement | | | | instrument in order to trade them. As with most |
| intraday. This means that when prices approach | | | | worthwhile endeavors, there is no one size fits all. |
| certain points, there is a pattern of reaction that can | | | | The bottom line – Trading e-mini futures indexes |
| be exploited. This tradeable edge is a critical – | | | | is a bit like driving a fine sports car – they're fast, |
| and much loved – aspect of e-mini trading. | | | | they corner great, and they have a few |
| An Index Personality for Everyone. The four major | | | | idiosyncrasies. But at the end of the day, they are |
| indexes that are traded (S&P, Dow, Nasdaq and | | | | still the best way to get the most bang for your |
| Russell) each have different personalities, while | | | | buck. |
| sharing the overall characteristics and trading styles | | | | Join me and Wall Street maven Christopher |
| of indexes. The S&P is a bit slow and ponderous, | | | | Castroviejo on March 27 - 29 for a jam-packed three |
| with great fills and minimum slippage. The Russell is | | | | day workshop where you will learn to exploit the |
| the other end of the spectrum – moving quickly | | | | benefits of e-mini trading while avoiding the potholes. |
| at the drop of a hat. Both the Dow and Nasdaq fall | | | | |