Emini Trading Tips - Three That Are Important

Although many are drawn to the financial markets because they can be lucrative, most will leave in failure. Why?

Lack of discipline. In this blog post, we will cover three very important emini trading tips that can increase your chances of becoming a successful futures trader.

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Mini futures day trading offers something other forms of trading does not…short term profits, everyday!

The level of risk involved with index futures trading is substantially high but new traders can learn to become successful.

Most new participants (we will call them participants because they aren’t traders) will fail miserably because they are more focused on gambling rather than trading with purpose.

Getting It Right In The Beginning

Profits, to them, are more important than learning a skill and increasing knowledge. They, in effect, have the process backwards. Profits are only a result of gaining the skill to trade first.

Many increase the number of contracts they are trading from one to two or more before they are ready which results in larger losses and eventually blowing out their trading account.

Trading with one contract until such time the necessary skill level is gained and accounts levels justify increasing the number of contracts, should always be the rule.

This is one area where discipline is necessary.

It’s easy for a new trader to throw caution to the wind after a successful trade rationalizing, “I could have made more had I only traded with more contracts“.

Don’t do it!!!

Tip number one is; never ever increase the number of contracts until you are ready and your trading account capital can tolerate failed trade draw downs.

Always know the prevailing trend for the day.

Countertrend methodologies are the domain of experienced traders whom have the trading account balances to withstand the loss should the countertrend method go bad.

In trading, the trend is your friend!

Every level of trading throughout the daily session is effected by the underlying trend.

If you trade with the prevailing trend when trading, your odds of success are greater.

Always know what the current trend is by checking higher time frames before the opening bell.

Look at the hourly, daily, weekly and even the monthly time frames.

This information may seem unimportant to you as a  day trader since the goal is short term profits.

Nothing could be further from the truth. So index futures trading tip number two is to always trade with the prevailing trend.

Trading tip number three is another area where new participants fail miserably:

Obeying stop losses is also where a new trader often lets the gambling mentality takeover, leading to disaster.

Stops are there for a reason, to stop the trader from taking a larger than anticipated loss.

Where the new participant fails is he lets emotion take over when a trade goes against them, hoping the market will return to their entry point or higher.

In some cases this does happen but the novice failed to trade and only gambled.

Do this over and over and you will soon find yourself with a empty trading account.

Stops are there to be obeyed and not disregarded - EVER!

Trading is difficult enough without a proper trading system in place.

Why would anyone approach the index futures market without a proper trading plan in place?

Because they are more focused on profits rather than learning to trade well.

Follow these trading tips and you could be well on your way to being a successful  futures trader.

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Scalping Futures Using Emini Contracts

Although as traders we use various methods to make our money from the markets, scalping futures using emini contracts is one method experienced traders use frequently.

If you're new to the index futures market, in this article we will explain how using this method can reduce your exposure while allowing you to reach your trading goals and increase your confidence and grow as a futures trader.


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By nature, trades executed using the scalping method are designed to get the trader in and out of the market quickly.

Usually with no more than a few minutes elapsing between entry and exit with the trader pocketing a small profit. Since the time frame is small, exposure to the market is significantly reduced thereby protecting precious capital.

Shorter Time Frames - Less Exposure

With traditional emini day trading, the trader is focused on a larger time frame, ideally entering a trade and riding the current days trend, banking larger profits than the trader utilizing a scalping method.

However, the day trader risk more exposure to market forces by holding a position for longer periods.

Scalping mini-sized contracts is a much more rapid type of trading with traders focused more on smaller movements in market action.

Accumulating profits with each trade, the trader will execute several times more trades throughout the daily session than those using a futures day trading methodology.

Since this type of trading is faster than traditional day trading, the scalp trader must be more focused on his trading rules and sticking to his money management system.

Although experienced traders utilize scalping methods, this form of trading lends itself very well to the new index futures trader.

Day trading methods normally allow for more liberal stop losses before exiting a losing trade.

However, scalp trading by design, requires the position be exited quickly should the trade turn south minimizing trading losses.

Stealth and Favorable Odds

Scalping futures is not unlike a submarine using stealth to stalk and attack an opposing target.

The scalper will only execute trades when the odds are in his favor by employing tactics and strategies which exploit favorable market conditions.

In most cases, other traders will never know he's there, quickly entering and exiting the market, waiting on the next profitable set-up.

Although many believe scalp trading to be difficult, in most cases a simple strategy or one tactic can be used over and over.

The futures market offers many opportunities throughout the daily sessions for a skilled scalper to enter many trades everyday, making it possible for him to make as much profit as a traditional day trader.

Scalpers or day traders never hold positions over night, going home with a flat account with no exposure to the news and geopolitical events which can affect the overnight futures markets.

Hence the scalper sleeps worry free each night. In fact, the scalper seldom if ever concerns himself with daily financial reports or anything that can affect the markets, relying only on the technical attributes of the futures markets.

Ideal Conditions For the Scalp Trade

Certain conditions need to be present within the index futures market for successful scalp trading tactics.

Fortunately, these conditions are almost always present in the daily futures trading sessions.

Liquidity is one characteristic of the futures market which is always present. Thousands of contracts are bought and sold each day without wild price swings making them extremely attractive to short term traders.

Volatility is another condition which is needed for scalpers to trade successfully. The index futures market can be highly volatile in some instances like when an FOMC announcement is released other financial news hits the news wires.

At times such as these, the wise trader stands aside and lets the market sort out the news before considering a new trade.

However, the futures markets has enough volatility on normal trading days which allow the scalp trader to enter and exit the market multiple times everyday.

The scalp trader learns to exploit these characteristics of the futures market and profit.

By exercising discipline and obeying the rules of their trading system such as exiting the market when stop losses are hit and not swinging for the fences and focusing on small profits, scalping futures with emini contracts is an excellent way to profit from the financial markets.

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Emini Pivot Points - A Powerful Emini Simple Indicator

Simplicity should be the goal of all index futures traders when it comes to their trading methodology.

Uncomplicated methods allow the trader to watch market action without the level of stress associated with a complex system, freeing them to concentrate on potential trade set-ups.

Emini pivot points are one such  simple trading indicator many experienced traders employ exclusively in the index futures markets with excellent results.

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A powerful technical analysis tool, pivot points have proven to be effective across all financial markets no matter what instrument is traded, whether futures contracts, stocks and even currencies.

Many trading services provide futures traders daily pivot points along with import levels of support and resistance before the market opens.

These chart setting services are affordable and an excellent tool for people choosing to trade using pivot points in conjunction with support and resistance levels.

If you are unfamiliar with pivot points and using them as a simple indicator, follow along and learn how they are implemented by futures traders to effectively trade the ES , YM and NQ futures contracts.

A Change In Market Direction

If you've been around the financial market for any length of time, you've heard of leading and lagging indicators. Pivot points are commonly referred to as a leading inductor since the area of the pivot point is established before the market opens.

A pivot is defined as a point on which something turns. In the index futures trading world, this means a change of short term trend.

For example, if the market opened down and continued down throughout the morning session, the trend is down so far for the day. As the market continues down and bounces off an area of support and reverses, the trend is still considered down until is reaches the pivot point for the day.

Once price action pushes through the pivot point, the trend has changed to upwards. Many traders use these pre-defined areas, both pivot points and levels of support and resistance, to initiate trades.

Drawing The Lines

If you take pivots points and levels of support and resistance numbers and draw lines on your chart, odds are they will line up with the areas where changes of trend, bounces and pullbacks have occurred in the past or very near that area.

Some traders only use a time and sales screen with these levels written on a sheet of paper without using a chart. A testament to the power of pivot points and levels of support and resistance when used properly.

Calculating Pivot Points

Because they are a leading indicator, the trader knows in advance what might occur should price action reach one of these levels.

As we mentioned above, simplicity is what we should look for in a indicator and the mathematical calculation to determine pivots points and other levels is a simple formula. By using numbers from the previous days session, we can determine the possible trading range  for the following day.

By using the previous days low of the day, the high of the day and the closing price and divide by three, we can easily enough generate the range for the next trading session.

If you are not sure what is meant by a range, it is simply the low and high of a period of time. In this case the high would be how far the market went as bulls pushed the market up and the low would be how low sellers sold the market for the session. A Pivot Point Calculator can be used to calculate daily, weekly and monthly pivot points.

The range is a complete picture of what took place during the session. Within this range, there will be evidence of struggle where bulls and bears fought over lines of support and resistance with the pivot point being where the trend changed from up to down or down to up.

The pivot point is an indicator of market sentiment and the mood of emini traders. Most experienced traders advocate going long if the market is above the pivot point and short selling the market if it is below the pivot point line.

At first, pivot points may seem complicated. However once you begin using them, you will soon realize how easy they are to apply as a simple indicator of current market direction.

Many experienced traders have used them to such levels of success, they would not even consider using any other indicator to trade the index futures market. Pivot points can be used with all of the index futures including the ES emini, YM, NQ and the Russell with equal results.

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Trading Eminis - How To Win When You Are A New Index Futures Trader

Trading eminis is a vocation which has been proven time and again that just about anyone can learn to be profitable. However, there is one underlying fact that new traders fail to acknowledge when they first begin.

Almost all will lose money initially. Why? Because most will jump into the index futures markets without the necessary knowledge to trade successfully.

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Most will have some background and possibly some varying degree of success in trading stocks. Index futures have the liquidity and movement each day which entice these new traders since stocks may be stagnant and range bound for days on end.

Futures have the ability to generate profits everyday making them the ideal day trading instrument and the number one reason novice traders jump in unprepared.

Which Contract To Trade?

Most realize in order to be successful, they will need to quickly get up to speed and seek out basic information about the futures markets. For example they may acquire information to determine which  contract they prefer to trade such as the DOW YM or the S&P 500 ES contract.

Or they may search the Internet for a live trading room and trade alongside as the moderator calls out trades. Of course most of these live trading rooms charge hundreds of dollars in monthly subscription fees, placing a strain on the new trader's funding sources with most blowing out their brokerage account within the first month or two, quickly leaving the futures markets in frustration.

Trading profitably takes work on the part of the new trader. Being impatient is probably the largest factor attributed to why most new traders fail, never to return to the index futures markets. Sure, they know huge gains can be made on a daily basis, but won't take the necessary time to understand and learn the dynamics of this fascinating market.

Knowledge is key to becoming successful at mini index futures trading!

Keep It Simple

Even more importantly, simple strategies are usually the ones that work the best far more than a tedious and complex system. The good news is, a simple trading system can be learned and traded successfully in a matter of a few weeks, providing the new traders approaches with the right frame of mind.

Most new traders are not unlike small children when Christmas is approaching. Visions of presents under the tree on Christmas morning is what dominates the minds of small children at Christmas time each year. New emini traders have visions of huge gains and piles of money which distract them from what they should be focusing on...learning to trade well.

Trading well has been covered many times here on this website for one very important reason - profits are a by-product of trading well!

Trading Well Begins With The Trader

However, trading well does not begin with adopting a system or strategy, it begins within the mind of the futures trader. The novice trader must first adopt a plan for approaching the market and it begins first with trading discipline.

What do we mean when we talk about discipline where trading is concerned? It's very easy when we first start out as index future traders to easily be swayed by a moving market.

For example, say you are using pivot points or levels of major and minor support or resistance. During the afternoon session when the New York lunch comes to an end as all of the major players return the market starts to show some life after the lunchtime blues.

The market at times can take off quickly and blow through a pivot point or level and the new trader hesitates, not entering the market as planned.

An undisciplined trader will many times force a trade out of frustration and enter the market right when the NYSE TICK is at an extreme and the move is reaching exhaustion, finding himself holding a position at the high of the day as the market recedes as sellers begin shorting the pullback.

The novice trader will then either exit quickly as excitement turns to fear or further increase his loss by holding the position hoping the market will return to the high of the day before the market closes.

The point here is, the undisciplined trader forced a trade because he failed to enter the market based on his trading plan, let emotion take over when he saw the market going up and couldn't restrain himself thinking of the cash he could be making.

The disciplined trader would have stuck to his trading plan and stayed on the sidelines if he missed his planned entry point. He understands the market will always be there and another opportunity is always right around the corner, especially with the amount of liquidity provided in the futures market.

The point is,,,,trade as a disciplined trader and trading eminis can be as profitable as you need it to be.

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Dump The Stock Market And Focus On Emini Futures

If you’re reading this page it is probably for one reason - you are bored to tears with trading stocks! Understandable, but we shouldn’t be too hard on stocks since stock trading is where almost every veteran trader began his career before moving on to other trading instruments such as emini futures contracts.

Usually starting as a fundamental investor, searching for specific stocks in favorable sectors or buying on a “hot tip” given to us by a friend, we all begin somewhere and that starting point is almost always the stock market.

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Once we enter the market we undoubtedly become hooked although not in a reckless and gambling sort of way (there are exceptions and they don‘t last long), but in more of a analytical and rational sense, which turns us into students of the financial markets.

Falling In Love With The Markets

We grow to love the ebb and flow as bulls and bears fight it out each day. The successful veteran trader has learned profits are the result of trading well. He understands that profits are a byproduct of his skill and concentrates on developing a system that fits his personality and tolerance levels. And for most, it began with a simple stock purchase.

Once that first stock is purchased, one of three things is going to happen. 1)The investor is going to sell the stock at a profit or loss then walk away. 2) Continue to invest as a long term fundamental investor -concerned only with companies and the bottom line or they will become number three.

A life long adherent of technical analysis who could give two cents if a company goes bust or what geopolitical event is currently upsetting the world markets. Long or short ,the technical trader doesn’t care about anything except being on the correct side of the market and he does this with technical analysis.

After cutting their teeth on stock trading, many find it boring and labor intensive since stock trading requires hours of chart scanning to find potential stocks to trade. Liquidity and volatility can be an ever present problem for stock traders since stocks may trade sideways, with very little movement for days or weeks, even months. Eventually, some stock traders seek out a different approach to the market by utilizing a different financial instrument.

Lessons

Lesson one - the futures market is liquid enough for a trader to make profitable trades several times daily. Long or short, profitable trades can be executed in every daily session which is why index futures trading has exploded since their introduction in 1997.

Day trading is a popular method used by index future traders, with some executing a trade at the open and riding the day’s trend all the way to the close while others will employ a scalping strategy, entering and exiting the market rapidly, often making several trades daily.

Whether you are a full time stock day trader, swing trader or a hard core fundamental long term investor, mini futures trading offers and excellent opportunity for short term profits. Emini contracts are available to trade for all of the Indexes: S&P 500, NASDAQ, DOW and The Russell, all of which offer enough liquidity to enter and exit the market several times daily.

With lower margin requirements than the full-sized index futures contract, the mini index contract is available to those that don’t have the $25,000 minimum required to open a stock day trading account, which eliminates many people that would otherwise participate in the stock market on a daily basis.

If you’re bored with trading stocks and looking for a new financial instrument to trade, you should consider mini futures trading. With enough liquidity on a daily basis to trade several times each session, more than enough opportunity exist to profit.

Since the trader often focuses on one index contract such as the Dow YM, he eliminates hours of research which otherwise would be required to locate stocks to trade.

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Reading The Index Future Market

When new participants are just beginning to learn how to trade eminis, they often struggle with a basic understanding of the index future market. Success can only come when the novice trader understands the market, it’s current strength and weakness and how their position exploits this fluid, ever changing environment. Many newly minted traders focus only on the possible profits that can be attained trading futures contracts but to fail recognize market characteristics that can lead to disaster. Following market moves such as momentum plays can yield exceptional results but can also have disastrous results on trading accounts.

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When the market makes a move generated by a significant event such as an area of strong resistance broken through, this will attract crowds of greedy participants that focus on this brief period that generates upside pressure, all hoping to catch large gains from the move. When these market moves happen, most trading rules will go to the wayside with undisciplined and inexperienced traders letting greed overrule trading judgment. Unfortunately, when traders abandoned their trading system, losses and blown out trading accounts soon follow. Momentum events can disappear as quickly as they appeared leaving unsuspecting traders holding the bag.

Strategies that can be successful during momentum moves often lead the new trade into a false sense of trading prowess that can have detrimental effects in less climactic markets. Neophyte index futures traders will many time carry long positions into a momentum move when the market is topping hoping to ride the wave to more profits only to be whipsawed and hung out to dry. Adhering to a trading system and pre-defined trading rules is more important in these trading situations more than ever. When learning how to trade eminis, new traders should focus on reading the broader market and increase their index futures trading knowledge on how to adapt to rapidly to changing market conditions. By opening their eyes and using common knowledge to learn and utilize new profitable trade set-ups through testing, the new trader can acquire skills that other market participants seldom posses.

By joining together the general mood of the market and the current trend, the index futures market player can increase chances of finding profitable trade setups. By determining the current market trend, trade selection is much easier since the trader has tested set-ups in similar markets previously. However, make sure market conditions and dynamics fit the same time frame as the analytical test.

Players should short sell equally as easily as they open long positions. However, short selling is often a physiological barrier for many individuals since the concept is difficult to understand. Buying into a long position does not present difficulty as the concept is easily enough understood since people buy goods and service everyday, not unlike buying into a long position. However, short selling offers opportunity for participants to profit whichever direction the market is headed. Avoidance of short selling the futures market is omitting a profitable opportunity.

Successful futures traders begin each market session with a clear understanding of current market conditions. They acquire the necessary information that will influence the day’s session including market trend and direction, financial reports and geopolitical news that could have an effect on the market. After gauging the larger market and all internal and external influences, they will then scan for the most promising trade set ups that will likely drive the market for this current time frame. By evaluating the market as a whole, the index future trader can asses how to change their strategy to best reveal executable trades. The pre-market will very often determine market direction at the opening bell through the first half hour to hour of the session. The amount of contracts traded are determined by these factors or the trader could determine the opening hour is not conducive to taking a position at all. Many financial reports and news items are often released within the first hour of futures trading and will often set the tone for the day and dictate market direction.

By taking these factors into consideration before executing a trade, the market participant helps eliminate unexpected risks that can pop up and create broken trades and lost opportunity. By executing trades based on pre-defined parameters the trade increase his chance of success. Sometimes the trading participant can benefit by sitting out the first hour, especially when bulls and bears are in a tug-o-war for the day’s market direction. By sitting out the first hour of trading, the futures trader can often capitalize on moves once direction has been identified and ride the trend throughout the day and profit handsomely. By preparing himself to adapt quickly to changes in market sentiment when trading mini-sized contracts contracts, the trader can enhance his potential of success by recognizing moves before the momentum crowd jumps on board in a frenzy. By honing our trading skills, the futures market participant learns to recognize set-ups that offer increased opportunity. Learning to execute trades going long as well as short selling allows us to profit no matter what direction the market decides to move.

The financial markets are not for the undisciplined or the inexperienced. Only by careful study and learning to recognize opportunity when the market presents it can we be successful index futures trading.

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