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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Futures Trading Across Higher Time Frames

You've decided that futures trading is how you want to participate in the financial markets and the emini contract is your chosen trading instrument. Great! Index futures are a top notch way to make a good living in the markets but you must first decide on a strategy.


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Part of your strategy will be choosing a time frame in which to trade. Large profits are the goal of every trader and this can surely be accomplished if the trader exercises commitment and discipline.

When deciding upon a time frame, the common approach is to choose one that is best suited to the trader's risk tolerance and trading goals. However, regardless of what time frame you choose to focus on, by analyzing the futures market across numerous time frames you can enhance your winning percentages.

A frequent error common to new traders is executing a trade while watching market action in a single time frame. All traders in every financial market, no matter if they are trading futures, stocks, options or currencies have an ideal time frame they favor.

Assesing The Market With Differing Time Frames

Scalping enthusiast could benefit by assessing market conditions with the 5 minute chart in tandem with the one minute chart. Higher chart levels can enhance your view and provide information you may not be seeing at lower level time frames.

A day trader that favors the 15 minute chart should check out the 30 minute and hourly charts as well to improve his view of market internals.

By analyzing the market across at least two higher time frames we can better check for confirmation of the move we are anticipating. Essentially, the higher time frames acting as confirmation is a signal we can use before executing a trade which shows the strength of the set up in both your favored and higher time frames.

If you are a day trader that generally holds a position for extended periods throughout the daily session riding trend for the day using a hourly chart, it is wise to check the daily and weekly time periods as well.

The same goes for the scalper. If you are using a 3 minute chart, you should be using the five and ten minute charts also. With futures trading, some people have three different time frames open all at the same time as well as the NYSE TICK and TRIN charts.

However, trading systems which are based on simplicity typically are the best systems. Over analyzing can create information overload where too much information can cause hesitation and bad judgment resulting in bad execution.

Utilizing more than three higher time frames is more often than not, overkill. Over thinking the set-up presented by the market can make you second guess and miss an opportunity to enter and exit with a profitable trade.

If you are in the habit of trading with one time frame, odds are favorable you're struggling or you would not be reading an article about trading across multiple time frames. Once you start utilizing higher time frames, it will take some trial and error to become comfortable using a different method.

However, the results may well be surprising. You can only trade with the information you have and with a single time frame you do not have all the information you need to increase your winning percentages.

You are more then likely not seeing many opportunities when they present themselves through a one-dimensional view. A three dimensional view is far superior since it provides a wider scope of the market, helping you to react when opportunity is present. Emini future trading using higher time frames in conjunction with the time you favor can only enhance your trading.

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The Best Trading System - Selecting One

A trading system can be as simple or as complex as you wish, however, simple systems tend to do better since they eliminate information overload. If we take in too much information, the decision process becomes difficult which results in bad execution or hesitation, causing losses.

So it is best to exercise some degree of caution when choosing a trading methodology. Simplicity is ideal when we are searching for the best emini trading system to meet our needs.

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If simplicity is the goal, system design is the criteria we should look to first. Is the design of the system built with user-friendliness in mind? Nothing is more frustrating than watching the market and dealing with a difficult system.

It should flow easily between the different modules that make up a system. Your futures broker should provide fast execution when your system reveals a trade set-up and work well with your charting software or time and sales feeds.

Data feeds should be in real-time which require dependable Internet connections from a reputable Internet Service Provider. A back-up Internet connection is recommended should your ISP fail.

If you've ever been in a trade and lose your connection, frantic can best describe the feeling a trader experiences when his ISP goes down. A back up connection is a must since major losses can be the result.

The best emini trading system, as you can see, is not just a single module or one size fits all. Interaction between various tools is a requirement as outlined above.

Trading methodology is the heart of the system. Choosing a time frame to trade will be part of your system. Traditionally, day trading is the method most often associated with index futures trading, with many traders choosing scalping as their approach to the futures market.

Choosing to take small profits many times throughout the day while the daily cash market is open. Others will open positions and trade the overnight sessions when trading is much slower. Some use a combination of both scalp trading and classic day trading throughout the day.

The use of traditional Japanese candlestick charts are used by most index futures traders, while some experienced traders will use only a time and sales screen. Others use a combination of charts, indicators and oscillators to determine when to enter and exit the futures market.

Pivot points around areas of strong/minor support and resistance is another often used methodology and is very productive. As you can see, the choices are varied and trading is available to just about any methodology favored by the individual trader.

Having the best trading system that fits your personality and trading style is what we are after as futures traders. The market is complex no doubt. It is fickle and ruled entirely by the emotions of greed and fear which creates a paradox.

While we see the evidence of emotion every day in the market, we seek out a trading method which eliminates the emotional aspect of trading. Our ideal is to react only to the conditions presented by the market in technical terms, not through fear or greed.

Your system should be of such design that you automatically submit trades based only on technical analysis, without hesitation. Hesitation is the result of emotion which more often than not translates into bad execution and loss.

A good trading system will assist you in determining when to place trades based on market dynamics and technical conditions, not financial news reports, crowd mentality or geopolitical events.

Is there a perfect index futures trading system? No. Is there a trading system that will help you become a proficient? Absolutely! Odds are if you are reading this, you have some experience in the financial markets, most likely as a stock day trader, swing trader or just a long term investor.

Although if you're a long term investor, it is recommended you first read up on technical analysis since you are more likely coming from a fundamental background rather than a technical analysis background.

Short term traders live and die by technical analysis and some education in this area is important before venturing into index futures trading.

As a trader, you can build your own system or you can choose to adopt one of the better trading systems available. However you choose to proceed, finding the best emini trading system will boil down to personal choice and what best suits your trading needs and goals.

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How To Choose A Emini Trading Platform

Trading online is much easier now than when the mini sized contracts were first introduced a decade ago due to the advancement of trading technology available over the Internet.

With so much technology available to index future traders it is understandable people experience difficulty when choosing a emini trading platform.

With so many to choose from, as futures traders, we must first determine what are the characteristics that make up a good, usable trading platform.

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When we purchase a new automobile, most people usually take the car for a test drive. The same goes for a trading platform.

The vendor should provide a demo for you to use for a brief period of time to decide if the software is right for you, your trading plan and your personality.

Not all platforms are created equal and a demo can provide invaluable information to make your choice.
So first on our check list is does the developer of the platform provide a demo for you "test drive"?

Make sure the demo provides the data to track the S&P, Dow YM and Nasdaq NQ futures.

Several other factors should be considered when determining which trading platform is best suited for your trading purposes.

Choosing the wrong platform can increase the odds of hindering trading style and failing to profit which translate into bad money management, in this case, capital preservation.

By building your checklist of attributes needed to fit your trading goals and style, you can further enhance your chances of selecting a platform which helps you to be successful.

Although there are several platforms available to future traders, one underlying attribute required is ease of use.

Traders want to trade the markets and spend their time becoming a proficient student of the futures markets, not spending a their time learning how to manage a complicated trading platform.

User friendliness without confusing add on features which require a background in programming is desirable.

There are two types of trading platforms available. One is the stand alone module which resides on the trader's hard drive and the other is a web based online platform.

Accessibility is the strong suit of the web-based online platform. Wherever the trader can connect to the Internet, he can be up an running, trading the market.

A stand alone module based platform requires the trader to be in front of the computer in which the software based program resides on the hard drive.

In this situation, it depends mainly on the lifestyle of the individual emini trader. For those which will be trading from the same location everyday, a stand alone platform is more than adequate.

For those traders that are on the go and travel, an online platform is ideal. Also, online based programs eliminate the worry of computer crashes since the trader can easily access the market through another computer.

One very important aspect of a trading platform is data feeds.

It does not matter if you purchase the best platform on the market, it will be useless without reliable real-time market feeds.

Real-time data is a crucial component of any trading platform and reliable vendors providing data feeds are a must.

It cannot be stressed enough the importance of accurate real-time market information.

If a trader does not have confidence in the information he is receiving, it will result in poorly executed trades which translates into losses.

Very often when traders are going through the selection process of determining which trading platform to use, they fail to consider customer service, including technical support.

Unlike the cash markets which open with the morning bell and close with the sounding of the closing bell, the index futures markets continue to trade after a brief break.

With a market which trades almost entirely around the clock, it is essential that the trader have access to customer support should a problem occur with the trading platform.

If customer support is not available after normal business hours, although the futures market is open, the possibility of losing money is very real if the problem cannot be resolved quickly.

Failing to consider the importance of customer and technical support when choosing a trading platform is a recipe for disaster.

In conclusion, we have discussed some of the most important components which should be considered when choosing a emini trading platform.

Use the demo provided by vendors and spend enough time learning how they work and determine of they are a fit with your trading style.

Become familiar with the different modules and their ease of use and understanding, or lack there of. A trading system is so important to the success of a trader that sufficient time should be spent making sure the system chosen is right for you.

There are many  trading systems available and with enough research, you will find the one that best provides for your trading needs.

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Emini Trading Alerts Software

About Trading Alerts

As a new trader learns how to use trading signals, he will put himself in a place to execute more profitable trades without the need to sift through tons of financial information every market session. First, it is important to understand what is meant by a trading alert or trading signal. Rather than manually reading through trading charts, daily economic reports and a myriad of other financial data, trading systems are available which analyze data for the trader. The system analyze the data turning it into relevant information the trader can use to execute high percentage trades by issuing signals which alert the trader when possible trade set-ups are on the horizon.

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What makes a mechanical trading system great is they provide information both for possible trade entry and elimination of irrelevant information thrown at a trader each day. To be sure, one of the first mistakes a new emini trader makes is failing to spend some time learning the dynamics of the index futures market. Many traders new to the market begin trading impulsively, focused on making a ton of money rather than learning to trade proficiently. Profits are a by-product of learning to trade well and proficiently. This also applies to the use of signals and alerts. New traders fail to take the necessary time to learn a mechanical trading system and don't realize until it is too late that all signals are not created equal. With the usually happening after the rookie has executed a few bad trades and lost money. However, by understanding and employing index futures trading alerts, you can greatly enhance chances of executing winning trades far more than broken, losing trades. This is the power of this kind of system.

Why Emini Trading Using Eimni Trading Alerts

Trading is, without doubt, one of the top money making ventures available to just about anyone with a drive to succeed. Every year, more and more people come to the futures markets hoping to make it big and profit trading the S&P 500 emini, Dow YM emini and Nasdaq NQ futures. Unfortunately, too many think  trading is simplistic and easy when in fact, it is complicated and difficult, especially for those without any market experience. Because of this reason, the Internet has seen an explosion of trading alert services, charting programs and without a doubt, the proliferation of questionable and expensive trading rooms, all preying on those new to the index futures trading market. That being said, there are exceptional services available to inexperienced traders which can quickly get them up to speed, teaching them the skills necessary to become profitable using alerts and signals.

Traditionally, traders have utilized a wide variety of charts and indicators to participate in the index future markets. These traditional tools and their use are still relevant and applied daily by experienced traders. But they require an extended learning curve coupled with many trading losses before becoming useful profitably. The implementation of trading alerts can greatly reduce the amount of losses associated with a learning curve, common to new traders. By relying on these systems designed by experienced index futures traders, accurate buy and sell signals will be issued by the system depending on the condition of the market. By using algorithms, trading software designed students of the markets can produce better results rather than dependence on archaic traditional methods.

 Moreover, new futures traders can, depending on the provider, utilize a demo or pay for a trial period to determine if the alert system fits in within their trading style and personality. Furthermore, by choosing a reputable trading system with built in alerts is a exceptional way to protect trading capital, the life blood of futures trading, until such time the new trader gains a better understanding of the futures markets. Using a reputable system allows the new trader to gain confidence while also allowing him to trade in a real-time market situation.

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S&P, Dow, NASDAQ Or Russell Futures: Which One To Trade?

Those new to emini trading often have difficulty determining which index futures contract is the best fit for them. For this reason we are going to outline and profile each contract for those who haven’t quite yet grasped the differences between these four very unique trading instruments.

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The S&P futures contract is the most popular and rightly so since not only is it traded exclusively by many, it is also used by stock traders as a strong indicator for daily market direction. Most stock traders will always have a live chart or ticker open on their trading platform displaying real-time feeds of these futures since they are literally the ring in the bull’s nose. Wherever they go, the cash market will follow making the S&P 500 index futures a very important tool for those utilizing short term trading methods in the stock markets.

S&P 500 Futures Contract

The Chicago Mercantile Exchange or CME, introduced the S&P mini sized contract in the 90’s as an alternative to the larger sized S&P futures contract since the original contract became too large for many smaller traders to utilize. The smaller S&P mini contract is one-fifth the size of the larger, original contract and is traded electronically through the Globex system.

The contract up ticks and down ticks in quarter points and is the minimum price movement with each quarter point tick equal to $12.50 with a whole point value of $50. The S&P futures market is highly liquid and is employed by institutional traders for speculation and hedging. It is not uncommon for the mini SP contract to trade as many as ten-thousand shares in the course of one minute to give an example of market depth and the amount of daily volume as well as to underscore their importance as a vital trading indicator and about market sentiment. Trading without one eye on the S&P futures is akin to trading blindfolded.

ES S&P

The symbol for the S&P futures contract is ES. Of course this only refers to the basic contract in general terms. Futures contracts are derivatives which means their value is derived from an underlying issue, in this case the S&P 500 cash market. As a derivative, they have expiration dates and cease to hold any value after a set expiry date. Expiry is determined by four different months starting with March, followed by June, September, and December, meaning there are four different contracts within a calendar year. Each month has a different letter within the ES symbol to identify which month the contract will expire. The identifying letters are as follows:

March = H
June = M
September = U
December = Z

Not only does the ES contract symbol contain the month in which it expires, it will also contain in which year it expires. For example, if someone were trading an ES contract which will expire in December 2012, the symbol would be ESZ12, which identifies what type of contract (ES) along with what year (09) and month (Z) the contract will expire.

The ES is an excellent futures instrument in which to trade, however it is not the only one by any means. Some traders prefer trading on different exchanges than the S&P 500 as we will discover.

NASDAQ NQ Mini Futures Contract

After the introduction of the ES S&P 500 futures contract the NASDAQ NQwas introduced. Tracking the top 100 stocks on the tech heavy NASDAQ stock exchange, the NASDAQ NQ soon became very popular among index futures traders, although never surpassing the popularity of the ES. Designated with the symbol NQ, the NASDAQ contract also trades in quarter points but is valued differently. Each quarter up tick or down tick is equal to five dollars ($5), with a total up tick or down tick point worth twenty dollars ($20).

The same symbol system applies as the ES as does expiry months. With the NQ, if a trader were to take a position in the December 2012 contract, the symbol would be NQ12Z. The mini NQ also has excellent liquidity and volume each day allowing futures traders several opportunities each day to initiate trades.

DOW YM Mini Futures Contract

Although the DOW YM contract has not been around quite as long as the ES or the NQ, it has however, seen an explosion in popularity among index futures traders. Tracking the Dow Jones Industrials Stock Exchange, the DOW mini futures or YM as it is designated, has seen increased volume and liquidity since it’s introduction and has converted many long term ES traders which now trade the YM exclusively

YM futures contracts follow the same symbol designations as the ES and NQ as outlined above. A December 2012 contract would be YM12Z identifying the contract type (YM-DOW); expiry year (12); and expiry month (Z-Dec.). Another factor unique to the DOW YM contract unlike the ES or NQ is it does not trade in quarter points, rather it trades in whole points with each up tick or down tick equal to five dollars ($5). Growing in volume and popularity, the YM is an excellent choice for all index futures traders including those new to the market seeking an education and to test strategies.

Russell 2000 Mini Contracts

Although less utilized than the other three contracts for trading, the mini Russell contract is still an excellent choice as a trading instrument. The Russell 2000 mini is one-fifth the size of the larger contract with the Russell 2000 tracking 2000 securities on the Russell 3000 stock exchange.

This contract is also uniquely different from the other three in it trades in .10 increments equal to $10 for every .10 up tick or down tick with each whole point equal to one hundred dollars ($100). The symbol for the Russell is ER and fit’s the same criteria as the other 3 for identification purposes and expiry. A December 2012 contract would designated as ERZ12. Some traders favor the Russell  contract over all others, claiming this contract trends better than the others and eliminates noise since it tracks many more stocks than the other three index futures contracts.

Strategy

Index Futures trading is most often utilized as a day trading method or scalping method and all positions are exited when the bells sounds closing the cash market, although the futures market is open 23 hours daily. Traders employ many different approaches when trading futures contracts. Some rely only on support and resistance numbers in conjunction with pivot points. Others will use simple moving averages and crossover methodologies, while some will utilize classic Japanese candlestick formations in combination with indicators and oscillators such as the Stochastic, MACD or RSI. Whatever method chosen, emini trading lends itself very well to different approaches to the index futures market no matter which contract is traded.

As mentioned above, the S&P mini futures should be used as a indicator of market direction even if the trader is utilizing a different index futures contract, since the ES is the ring in the bull’s nose and the market WILL follow their direction. Also, the NYSE TICK is an excellent indicator for determining market internals and sentiment. Newer traders may wish to join a trading room to follow along as experience traders call out trades and explain why they enter and exit the market at certain points. A trading room is an excellent way to build confidence and skill levels for rookie traders.

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Learning Index Futures Trading With A Focus On Trading Well

Make no mistake, the odds of long term success at short term trading stands firmly against most all who enter the financial markets. Each year, beginning traders set out with a plan to educate themselves about emini futures trading with most soon realizing index futures trading is one of the most difficult challenges they’ve ever experienced.

Once they reach this realization most will throw in the towel, ending their short trading careers in frustration, while a serious few will stay in the futures game long enough to learn how to trade and become successful.

Will you become one of the few serious winners or will you go home with the losers?

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Profiting consistently in the index futures markets demands standing against the crowd mentality which requires a level of commitment and dedication most cannot successfully achieve.

Learn To Trade Well

By beginning to build on these skills early in your trading career, you will be one step ahead and on your way to trading well. Trading well is what successful traders strive for everyday in the markets with profits being the result of trading well.

Most index futures traders use various techniques that comprise a trading system to execute potential trades. By learning to read and understand the dynamics of the market as well as developing an understanding of the internal and external forces which impact the markets, will they set themselves apart from the those that have less commitment to trading well.

The index futures market is one of extremes with traders experiencing winning and losing on a daily basis since all experienced traders know losing trades are a part of trading well. Losses are a part of futures trading and to be expected.

How the trader handles losses is the difference between a successful trader and someone who will not last long in the game. The emotional up and downs, so much a part of the markets, drives many rookies to a quick exit.

Once you learn how to handle your losing trades and accept losses equally with controlling your emotions, you’ve matured as a trader.

Learning to trade well is the key to the game. Beginners come into the futures markets raw and reckless with no clear understanding of market dynamics and most importantly, with no trading system or an expectancy.

Learn from mental mistakes. Make notes on bad executions, cut losses short and use trailing stops. Learn to exercise discipline since lack of this important skill can end a trading career far more rapidly than a lack of trading knowledge.

Many new and inexperienced traders often find themselves in a cycle of winning and losing bigger, over-trading to “get back” what they lost on the previous trade, eventually blowing out their trading account. At this point the trader will either give up or commit to gaining the skills through trading education to become successful.

Use a Trading Mentor

Locate an experienced trader that’s willing to share his knowledge about the markets. Ask about winning  trading systems, bad habits and losing strategies. Find a mentoring program that utilizes a trading system that can be expanded on once you gain confidence and experience at index mini-sized futures trading.

By joining a mentoring program, beginning traders can learn the system used by the mentor with some offering a live  trading room so the beginner can follow along during live trading sessions. Turn their knowledge into your success and follow their advice. The assistance you receive eliminates throwing money away and many months of frustration.

Trading requires that you learn to crawl before you walk. Unfortunately, many who enter the futures markets each year believe they can walk when they haven’t yet learned to crawl.

The futures trading roadside is littered with the blown out trading accounts of novices who didn’t have what it takes, focused only on the potential profits to be made rather than learning to trade well.

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Moving Averages, Pivot Points, Oscillators And Emini Trading

Trade execution is a much talked about subject within index future trading circles and  proper execution is covered extensively in our trading room.

In this article we will profile some of the most utilized and popular signals traders add to their trading system and charting software to interpret market direction with the understanding traders are unique individuals and each one will have different preferences.

You may find by adding just one of these trading tools to your arsenal could have have a impact on your trading profitability. However, when you choose to implement a new indicator it is best to test it out in simulation before trading live.

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Pivot Points

As a trader you have undoubtedly heard of support and resistance. Pivot points are used to determine areas of support and resistance and are very popular with futures traders. Pivot points can be calculated different ways, however the most utilized method is by averaging the day’s open, high, low, and close divided by 4. Pivot point support and resistance levels are an excellent choice for trading mini-sized index futures contracts and employed by many veteran traders.

Moving Averages

Moving averages are another tool used by futures traders to profit, mostly with the day trading method rather than a scalp trading methodology. Many market players only use the 9 and 18 day moving averages however time frames are entirely up to the individual trader.

Although moving averages are lagging indicators they are excellent for determining the market environment and making sure you are on the right side of the trade. Some traders will use the 9 and 18 day moving average to enter the market in the morning when market direction is determined in some cases, and ride the trade all day until close, profiting handsomely.

Overbought/Oversold Indicators

Price extremes very often send short term traders into a frenzy when indicators reveal futures contracts are reaching overbought/oversold territory. The New York Tick is one such indicator. When showing plus or minus 1000, the market is said to be in severely overbought or oversold territory and a reversal is likely.

The TRIN is also another indicator used by traders to determine the mood of the market. When the TRIN has a reading of 1.0 or above, the market is generally moving down. With a reading below 1.0, the bulls are usually in control of the market.

RSI (Relative Strength Indicator)

The Relative Strength Indicator is another indicator very popular method for determining emini signals. With a range of 0 to 100, oversold conditions are present when the indicator is nearing zero on the RSI and overbought conditions exist when the indicator is nearing the 100 mark. Many traders use the RSI in conjunction with Japanese candlestick charts and moving averages.

Stochastic

The Stochastic is also used by traders to determine oversold and overbought conditions and like the RSI, is has a range of zero to one hundred. Oversold conditions are implied to exist when the Stochastic is nearing or goes below 30. Overbought conditions exist when the Stochastic is nearing or reaches 70. Just like the RSI, the Stochastic is used by index futures traders along with charting software, usually found at the bottom of the chart screen.

Overbought and oversold indicators can help determine market direction and possible reversals, but are better when used with other indicators rather than being used alone to determine signals on entry and exit.

Japanese Candlestick Charts

Candlestick charts have long been the choice of many traders as well as traders across all financial markets. Developed by a rice trader in the 17th century to predict rice prices, modern traders have incorporated them into many popular trading systems.

Easy to read with clearly define opening, high, low and closing levels, candlestick charts can be used across all time frames. Very popular with scalping traders, candlestick charts can be set to a one minute setting to follow even the smallest time frame. Although all traders do not employ candlestick charts, most traders would equate not using candlestick charts to driving a car blindfolded.

These are just a few of the tools utilized by successful index future traders to interpret market conditions and alert them to possible trade setups or when to exit the market. However, an trading system is a must to be successful, not only in the futures market but in any financial market.

Index futures traders live in a fluid and volatile environment where market noise is a constant. Learning to read signals for order entry and exit is part art and part science and is something that is learned only by experience and by implementing a proven trading system.

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Dow Futures Live Trading Room - Profit With Experienced Traders

YM futures trading has seen exponential growth since their introduction with traders attracted to the exceptional liquidity and potential profits offered with these emini contracts. With a $5 multiplier for each contract, it doesn’t take much volatility within the futures market for traders to profit with several trading opportunities available each day.

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However, some market participants don’t have the experience necessary to trade Dow futures and can benefit from trading along side veteran traders. Fortunately, technology has advance to the point trading along side experienced traders is as simple as turning on your computer and joining a Dow futures live trading room.

Going it alone as a “noob” trader in the index futures market can be frustrating since a understanding of market dynamics and a proven trading system is necessary to be successful. All too often, noobs will find themselves reaching the point of desperation, executing trades based only on emotion.

For example, a trader may start the morning session in a winning position only to see the market turn against him, blow through his stop loss, hoping the market reverses, finally exiting the position only when enough pain has been inflicted.

Emotional Trading Results

Brooding over the huge loss, mad at himself for not obeying his stop loss, the noob trader frantically looks for another set up to “get back” what he lost on the previous trade. Instead of waiting on the market, he forces a trade only to once again see the market turn against him, sustaining another staggering loss.

Frustration and desperation are constant companions for the unprepared - inexperienced “noob” trader. The above illustration is why it is so important for those new to the Dow index futures markets to first have a trading system in place. Rules and discipline are both part of successful trading just as losses are part of successful trading.

However, the experienced trader knows how to practice sound money management rules and does not sustain heavy losses since he follows the rules of his trading system.

Much has been written about trade entry and how to spot the perfect set up with very little about how to exit the market. Money management through stop loss and capital preservation(trade exit should the market turn against you) are just as much a part of the trade as market entry.

Losing trades WILL happen, this is true, but having a trading system designed to handle these losses is an important part of successful trading. Following along with experienced traders in the Trading Room can greatly improve trading success as rookie traders learn trading techniques used within a proven trading system.

Veteran traders explain why they entered the market and why they exited the market at certain levels. Whether day trading or scalping, the new index future trader will learn the dynamics of Dow mini-sized index futures trading.

A Word About Trading Rooms

Some of the most knowledgeable people in the world trade the futures markets so why would you want to compete against these experienced professionals without the necessary skills to participate in the financial markets? Utilizing the services of a reputable trading room can help you stay one step ahead and increase your chances of profitable trading.

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Emini Scalping - Why New Index Future Traders Should Consider Scalping Emini Contracts

Scalping is an effective trading method to capture quick profits from the index futures markets and reduce exposure by using tight stops. Although we use scalp trades frequently in our trading room, we do not limit ourselves exclusively to scalping futures contracts since the market is dynamic and changes from time frame to time frame.

Longer open trade periods may be utilized to capitalize on larger market moves to increase profits but scalp trading is a large part of our trading system. 

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Scalping Index Futures

As index traders, we should always be testing different trading methodologies that can improve the amount of winning trades we execute. Scalping is one method that allows for increased potential for profitable trades since exposure in the market is greatly reduced when scalp trading index futures contracts.

When utilizing this method of trading, traders are capitalizing on extremely short term opportunities. If you already understand the concept of scalp trading and are looking for a scalping system, follow the link below:

Although scalp trading is widely employed by veteran traders, those new to the futures markets can also benefit by using short term trading methods. Building confidence as a new trader is vitally important and by setting our goals at obtainable levels, we can raise our levels of confidence. The emini futures markets are highly liquid and volatile, offering many opportunities for the trader to profit many times throughout the trading session.

By setting goals for only two or three points on each trade, the novice trader can build confidence by reducing exposure and lower risk of broken trades.

The key to scalping, is to approach the market with a trading plan to get in and out of the market quickly, not swinging for the fences hoping for a homerun. Small profits are the goal.

Given the nature of the futures market, there will be many opportunities each day for the trader to execute trades with the potential of profit. Veteran traders that use scalping as their chosen method of trading will, in most cases, execute a large amount of trades each day.

As a trading method, trades are entered and exited rapidly. Once the trader begins to implement the scalp trading method, he will learn to exit the market swiftly on both winning and losing trades. Since the trader knows he will exit quickly no matter if the trade is successful or unsuccessful, large losses are prevented.

New traders so often approach the markets with ideas of huge profits and making a mint rather than focusing on learning to be a successful trader. It is so important for new traders to build confidence and understand profits are the result of disciplined trading.

Although scalp trading is an excellent method for new traders to utilize, it is also a method that is expertly used by market professionals. What makes scalping so profitable is position sizing. Professional market players wouldn’t use this method of trading if it didn’t offer a substantial profit.

Trading one contract will yield small profits on a winning trade. However, by increasing the amount of contracts on each trade, the futures trade can increase the amount of profit through position sizing. On the flip side, risk levels increase substantially with each contract added to each trade.

New traders should start with only one contract and increase the amount of contracts traded on individual trades once confidence and skill levels increase. The futures market is no place for thrill seekers or those who find themselves trading out of desperation. This recklessness will always lead to total failure and empty trading accounts.

Another important factor to consider is your broker. Scalping is a trading method that yield smaller profits and decreases risk exposure. However, because the amount of profit is small, traders will need to execute many trades to show a decent profit. Broker commissions will have and affect on profits which makes having the right broker very important.

Competition is stiff in the futures brokerage industry and locating a broker with inexpensive trading fees is not difficult. Some brokerage firms cater specifically to high volume traders and offer competitive commissions. It should be understood, you will pay a commission on both sides of the trade, both on entry and exit, so this should be considered when choosing a broker.

Scalping requires quick execution of trades since traders seek to be in and out of the market very quickly. Make sure a broker is chosen that offers a reliable trading platform. Nothing frustrates a trader more than to attempt trade execution only to see the market move without their trade being executed because of their broker. It cannot be stressed enough the importance of a reliable broker.

Although scalping is most often employed by veteran traders, a new trader should consider scalp trading mini contracts as a way to obtain the confidence so necessary to trading success. Because this method reduces exposure time within the market, losses can be limited and account draw downs are kept at a minimum allowing the novice opportunities to execute many trades.

Scalp Trading Offers Advantages Over Other Forms Of Trading

If you are experiencing difficulty in your trading, maybe you should consider changing your method to a shorter time frame. Scalping involves a shorter time frame but does require the ability to be laser focused and quick on the draw. Since the holding period for a scalp trade is generally no more than a few minutes if not only for a few seconds.

New traders run into difficulty when they do not approach the markets with a defined plan and look for opportunity with a shotgun method. Day trading, scalp trading, no clearly defined plan for trading and basically entering a trade and hoping for the best outcome.

Their daily plan for trading is as fluid as the market itself, ever changing as the session flows toward the close. Veteran markets players know trading without a clearly defined system, or plan is a recipe for disaster.

By utilizing a scalping method, the trader limits his exposure and has a exit strategy designed to only cost him no more than a couple of points should the trade go against him. By design, scalping is for quick entry and exit.

The very nature of this method of trading reduces exposure and be default, minimizes potential losses. Although the index futures scalp trader generally executes many more trades a day than the atypical day trader, the scalp trader is in a better position to control the amount of losses incurred.

Professional traders have known for years scalping can generate excellent profits each day if the trader practices sound money management skills and follows a trading system with rules designed to protect against devastating losses that so often are a part of the rookie trader’s daily routine. The importance of a trading system can not be emphasized enough.

Unfortunately, new traders blinded by the profit potential offered by index futures trading, seldom have a system in place before jumping into shark infested waters. Once they blow out their trading accounts they finally realize that only when a trading system is in place will they be on the road to profitability.

Index future trading requires discipline and intestinal fortitude not required in many other money making fields. The financial markets are the arenas of the most informed and financially savvy participants, bar none.

In order to compete, the rookie trader must have a system in place that will improve their chances of success against stiff competition. By utilizing a scalping trading system and by exercising sound money management rules, the new trader can quickly be on his way to emini scalping success.

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Using Trade Exits To Gain Maximum Profit

Exit strategies are an integral part of any trading system. Without an exit strategy, your trading is doomed to failure. All experienced and veteran emini future traders know what their exit will be before they enter any trade.

Exits are designed to attain the maximum amount of profit and giving little profit back once the profit is made on the trade.

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All trading systems should have different exit strategies designed into them depending on the current market situation. For example, the trader may have one exit designed explicitly for getting out of the market that do produce a small loss but there is a decrease in initial risk.

Other exits are designed to produce maximum profits. While some are utilized to keep the index futures trader from giving back too much profit. In this article we will cover a few of the exit strategies that can be designed into a trading system and how they can be utilized.

Market Timing

Market timing is most often implemented when the trader expects the market to move in the direction they think very quickly after execution upon entering the market. In this case, the trader may execute the exit before his stop-loss is hit reducing losses even further if the market does not go in the directions thought.

This type of exit is very often employed by people utilizing a scalp trading methodology. Scalp traders, as a rule, are usually only looking for a couple of points before they quickly exit the trade. Scalp traders may very often execute large numbers of trades throughout the daily session.

The Trailing Stop

One other very popular exit strategy used among traders is the trailing stop. The trailing stop is dynamic and fluid, moving along with the market after a trader enters a position. This type of exit is very often employed by day trading futures traders.

Day trading is generally defined as entering a position at some point during the market session and exit is executed at some point before the daily session ends or not long after the session closes in after market hours. However, some day traders may enter and exit positions several times during the day.

Trailing stops are an excellent strategy to use mostly if the market initially begins to move in the trader’s favor. Depending on the trading system used, as the market continues to move in the predicted direction, the trader will automatically move his stop above his original stop loss reducing the potential loss should the market reduce.

Trailing stops are not a guarantee of profit but do reduce the potential of larger losses that would be suffered if the original stop loss was hit. Remember, a trading system should first be designed with emphasis on money management, or protection of capital rather than profitability. Traders that learn this concept are very often the ones that live to become successful veteran traders.

The trailing stop has the ability to help the trader gain maximum profits but the trader should also understand, the trailing stop will also give back some profits since it is trailing, which of course means once you gain profit’s the stop will move up behind the trader’s position.

However once the market reaches exhaustion, the market will pull back and the stop will be hit thus giving back some profit. This is the nature of the trailing stop. It will not get the trade out at the top but will however produce profitable results in most cases if market direction is predicted accurately.

The Mental Exit

One of the most utilized exit strategies by trading market participants is the psychological or “mental” exit. The mental stop depends entirely on the trader and the trader’s interpretation of the market. This exit strategy should only be used by traders that have the discipline and experience to determine when the best time to exit as market conditions dictate.

Maximum profits are the goal. Calling a top is one of the most difficult parts of futures trading or any other form of trading and seldom will a trader execute an exit at the top. However, mental stops are an excellent choice to maximize profits.

The best trading system are designed with simplicity in mind. Rather than focusing on optimizing a index futures trading system, understanding and simplicity should be the main focus. Simplification of a system does not mean only one exit strategy can be used.

You as the trader can have multiple exit strategies and keep them simple to understand and follow. System that are intricate and difficult seldom work since the trader often becomes overwhelmed with the massive amount of information and signals produced by a over-optimized system. Simplistic systems work by allowing the trader to employ multiple exits and still meet their trading objective.

Scaling Out Exits

One exit that should not be avoided although very often employed by inexperienced traders is the scaling out exit. This form of exit requires the trader buy multiple contracts and scale out of them as the market move.

If the trader will take the time to analyze this exit, he would realize how much more profitable he would be if held the entire position and exited fully. The purpose of designing a trading system is to maximize profits and reduce the amount of major account draw downs and losses.

If the system is designed properly, scaling out of positions should not be necessary since the system will produce the best result with a full position. Inexperienced index futures traders very often employ this strategy falsely believing they are successful when they are really robbing themselves of maximizing profits.

Trading takes a considerable amount of dedication and discipline as well innate competitive spirit, no matter what financial market is chosen. Index futures is probably the most fluid and volatile of all the financial markets which requires a well designed system for the market participant to be profitable index futures trading.

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Set Ups And How To Incorporate Them Into A Index Futures Trading System

Trading requires the participant to be prepared for the coming market session and one of the criteria that must be met is trade set up considerations. Liquidity is very important, although the emini index futures market seldom has issues with liquidity during regular market session. However, the index futures are accessible twenty-four a day and liquidity is a concern in the after hours market. If a trader holds a position into the after hours market, unloading these contracts once the daily market has closed can become difficult. Liquidity should be considered if after market hours are chosen by the market participant to hold positions.

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Another important consideration is volatility. Depending on the chosen time frame, volatility or price movement is important before acting on a set up. Futures traders live for volatile markets. Enough market volatility is needed to make a profit, usually two to three times the trader’s initial risk.

Whether trading a pullback or entering a fast moving upward breakout, the trader needs to be aware of the dominant direction the market is moving. All financial markets move in three direction: up, down or sideways with the index futures markets being no different. Overall, markets usually trend down or up twenty percent of the time give or take a few percentage points and move sideways the remaining time. However, the day trading participant pays attention to the overall trend make makes his living trading entering both long and short positions within the prevailing trend.

Most players have trading systems that keep them in the market continually. But if you consider the sideways market as a condition of the overall market, then you probably need a trading system that keeps you out of the market at least seventy percent of the time. The person that is always holding a position in the market is going to spend a great deal of time in a sideways market which translates into many losing trades and many transactions cost, which makes your broker very happy. If this is the case, you should look at tweaking your trading system to avoid sideways markets. Sideways markets are very common during the New York lunch hours when floor traders break for lunch.

Set ups are criteria that must be met, according to your trading methodology, before ever executing and entering a position, either long or short. When this set up criteria is met, overall improvement of the trade becoming profitable are enhanced. Most index futures trading participants make a profit because the market moves a sufficient amount from where they entered the market. Although set ups are considered a criteria for a potential trade entry, the are better used as an event that must occur before the trader even considers opening a position.

Timing the market is also a very important consideration when utilizing trade set ups. Once the trader chosen the time frame in which to trade and understands the general market direction, he must wait until the actual move begins. If your trading systems alerts you to a possible trade set up, odds are the system will alert you before the move actually happens. Seasoned traders will use experience and market knowledge to keep from entering a position on the alert while inexperienced traders will enter once the alert is recognized. Experience brings patience and the experienced trader will only enter once the market move has begun. Improve your odds of success by confirming the market direction you are expecting before executing a trade.

Trading software is very important and almost all trading software will come packed with many different indicators and oscillators built into the package. Unfortunately, these oscillators and indicators give the inexperienced participant a false since of security. They will spend a few hours learning about individual indicators and oscillators and usually find these over-optimized system only lead to disaster. Too many indicators cause information over-load while trading systems that utilize one or two indicators such as moving averages or areas of support and resistance are much better. Simple systems using few indicators are the systems most often used by veteran traders.

Building a system that is tested and proven is how veteran traders become successful trading index futures. Focusing on how to locate trade setups and timing market entry are just one the keys to market success. I later articles, we will discuss different trade set ups and how they can be used to improve trade execution in both trade entry and trade exit. However, it should be noted, most newly minted traders focus too much on trade entry and less on exiting trades. Knowing when to sell, it has been argued with great success, is one of the most important factors in protecting trading capital and living to trade again. Trading systems that alert the trader to both entry and exit strategies that are simplistic in mechanics are by far the best emini trading systems

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Capital Preservation And The Importance Of Stops

People very often enter the index futures market using a new a set up technique or jump on board following the momentum crowd based on a event that has spurred the market, with very little consideration given to their exit strategy. Seasoned veterans who understand the market and emini trading, know well planned exit strategies are the key to making money. It’s been said many times by many experienced traders and is worth mentioning once more: Cut your losses short and let your profits run!

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Although this sage advice has been preached for untold years, people fail to follow this cornerstone rule of trading the financial markets. The point of the rule, you will never be profitable as an emini futures trader until losses are cut short and bad trades exited quickly. Much effort is put into learning and recognizing trade set-ups and how to enter the market with very little placed on how to exit both profitable and losing trades. The trader will only taste success once he learns to master exiting trades and money management, or in this case, capital preservation.

Almost all experienced futures players have a trading strategy they use to enter and exit the markets with this strategy being their trading system. A trading system is not complete or does not exist until the trader knows what his exit strategy is before he enters the trade. Once the market presents a possible trade set up, a index futures trader should know what his exit will be before he ever enters the position, long or short. Knowing how you are going to take profits and letting them run should also be known before entering the position as well.

Setting Your Stop Loss

When a trader determines where he will place his stop loss, he is determining one very important factor: The trader is drawing a line and setting the maximum amount he is willing to lose on the trade should it go against him. However, determining where to place stops increases with experience and a clear understanding of market dynamics. Many market participants routinely place there stop loss in areas of recent support or resistance. The problem with this stop loss trading strategy is, everyone else knows where these support and resistance levels are located since they can read a chart also. The index futures market will very often reverse and execute protective stop orders in these areas then slowly return to the former market trend, leaving frustrated traders in it’s wake. This is where market experience and knowing market dynamics comes into play. Using a trading strategy that is not so obvious as placing your stop loss in the easily recognizable support and resistance areas is one tactic the trader may use.

Tight stops are one tactic that is beneficial to the inexperienced  market participants since they lend themselves to micro-controlling losses by losing less money . By utilizing tight stops, the trader can make more than one attempt to capture a big market if previous attempts failed. By losing less money on prior broken trades, the trader has enough powder to attempt subsequent trades to capture the move. However, tight stops require many more trades that involve small losses. For the trader that cannot tolerate many losses, tight stops should not be used. Transaction cost or brokerage trade execution fees should also be considered since this methodology will increase these cost. Finding a inexpensive broker is a must for traders that utilize tight stops.

Using stops based the amount of money they are willing to lose on each trade is another popular stop loss methodology utilized by trading participants. The trade simply determines the amount he is willing lose should the trade turn sour. The largest benefit of this type of stop is it is only known by the trader himself. Since the stop is more then likely not placed in an area of recent support and resistance, the odds of the market reversing to take out stop orders is almost nonexistent. Other traders use moving average stops when trading mini-sized contracts. Moving average crossovers happen when a shorter line moving average crosses over the larger moving average line, Many traders will execute their stops when these lines intersect.
Not only does the trader exit at these intersections, he also may execute another position going in the opposite direction since the index futures market will very often reverse when these moving averages intersect and cross one another.

Stops are not unlike road sign and signals we see while driving our automobile. These signs alert us of impending change or that danger may be lurking. Stops do the same. Just as when driving, we sometimes disregard the road signs and continue on our present path. We may not experience any danger but we are not driving safely. If we allow our protection stops to pass without initiating a exit trade, we are being unsafe.

Stops only work as an emini strategy if we react when these physical or mental areas are reached. How much faith you have in your trading system will be determined if you yield to it’s parameters and are not ruled by human emotion - fear and greed. Index futures trading is a profitable vocation and professional seasoned traders make an excellent living by plying their vocation. However, they did not reach this level of professionalism by following their emotions. The got where they are by implementing a system, testing it and following it’s rules based on market dynamics.

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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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Breakouts And Index Futures Trading Strategy

Emini futures trading requires market participants to utilize strategies which increase their chances of avoiding broken trades and have proven to produce success and profitability. One of the most common trading strategies implemented by veteran traders is the breakout. In this article, we will outline the dynamics of a breakout and how to trade the breakout and increase the odds of trading success.

Major market declines can evolve into long basing periods which often produce failed rallies and multiple testing of previous lows. As continual re-testing takes place, buyer accumulation slowly shakes out the last of the sellers, the market begins to change character. Index future contract prices begin to rally toward levels of significant resistance as short term strength increases and the chart starts to reveal a series of green candlesticks with the closing tops near the candlestick highs. As this happens, the market begins to climb toward and through the area of resistance that produced prior failures.

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Mini-Sized Futures contracts must overcome downward pressure to begin a new uptrend. Bounce traders try to build a base but cannot gain enough traction and momentum to fuel a strong enough rally. However, many times this is the momentum players join in and help bounce players push the futures through resistance. As the contract begins to slowly break through resistance, the dinner bell rings and breakout players all jump on the bandwagon at the same time.

When the breakout gap appears on the charting landscape, a great deal of buying power is behind the move. However, the futures trader must exercise caution at this juncture in case the move does not produce heavy volume. Tremendous buying pressure must entice other traders to join in on the frenzy to increase price expansion. The breakout gap may rapidly fill and trap inexperienced traders when heavy volume fails to show up. Moves that do not gap and only produce strong volume surges print breakouts similar to gaps but support is not as dependable and force the contract to a new range rather than the tell-tale rapid rise of the gap.

Breakouts that only produce moderate volume often are excellent set ups for trading pullbacks. The uptrend path is marked by many obstacles of clear pockets and congestion that is left in the wake of the previous downtrends. The obstacles very often force the chart into dips that make excellent buying opportunities. The experienced trader recognizes the profitable zones quickly and is equally ready to react and execute the trade. As is often the case, price moves quickly past the top Bollinger Band right when price hits the strong ceiling, revealing the most likely turning point on the chart. When this happens when trading index futures, the trader should follow price back to normal support which should offer opportunity for low risk trade execution.

Trend following indicators will register price surges as market players jump on board building momentum. As volatility absorbs each wave and new rallies erupt, the trader should ignore dip set-ups and focus on catching powerful moves by shifting to the next lower time frame and finding small packets of support in the charting landscape. At this point, volume should peak as the trending waves reach the peak as price expansion often moves into a final spike as exhaustion set in.

The index futures market will then need to take in any instability generated by the quick movement in price, pausing to breathe as both price and volume drop sharply. At this time, consolidation take place and new ranges are tested to find new areas of support and resistance. Futures trading does require a working knowledge of candlestick patterns and to the experienced technician, this area will reveal common formations of pennants, flags and triangles. The appearance of these formations signify the return of the markets previous state and a excellent possibility of a new thrust in the same direction is expected.

Congestion tends to fluctuate between simple and complex candlestick patterns in a series of sharp waves. For example, after the first pullback, traders will notice the chart very often will reveal eight to ten candlesticks in a close pattern while the following congestion period shows a wide price range through twenty to twenty-five candlesticks. The trader should always look back at the last range to properly estimate the expected price action for the new congestion area. The trader should be cautious and trade defensively if the former pattern was simple and short.

When using this method, the trader should pay close attention to continuation patterns. Constricted chart ranges should be in proportion and should time the relative trends that preceded them. The trader should evaluate all chart patterns within the context of trend relativity. A constricted range exists only in the current time frame used by the trader. Arrange drawn through one individual time frame does not automatically mean trade conditions exist in other time periods.

Index futures trading offers excellent chances of profitability in uncharted territory. Futures markets at new highs produce unique momentum properties that can incite quick price movement as well as unexpected behavior. As old support and resistance areas disappear at new highs, there are few areas appearing on the chart to give the trader a road map to vector. Although possible trade set-ups abound, risk also increases in this highly volatile trading environment. Once the market completes the breakout to new highs, it completes overhead inventory and supply but the the struggle for newer highs continue. These strong markets often produce new tests and base building before returning to the strong uptrend. The experienced trader that has learned how to trade, will watch as this base building process develops through candlestick pattern formation.

As the futures market reaches new highs, it may return several times to test the boundaries of prior resistance levels. As the market completes these test, it creates a range or series of stepping stones before the trend resumes and surges forward or higher. The market can sometimes go immediately vertical when they enter new high breakout phases. The futures contract trade faces the challenge of doing his best to predict what the new high market will produce. At his point, it is wise for traders to let indicators reveal accumulation and distribution as well as candlestick formation guide their decision on trade execution. Price action either lags or leads accumulation. When accumulation leads price in the first move to new highs, odds are the new high breakout will imitate a new round of buying as new traders pile on an push prices higher with no basing period.

As trading pushes further into the days uncharted territory, the index futures trader should study existing chart patterns. The last area of congestion before the breakout occurred very often prints sharp patterns for the new move. The trader can locate these patterns in double bottom lows lying in the trading range underneath the breakout price area. The price range between the low and the previous resistance areas may reveal price targets for a rally soon to follow.

In the futures market, a strong move upward can occur for a extended time frame after it finally escapes the breakout area. Price may on occasion, print a strong third wave of buyers at the level of the final congestion low point. This buying thrust can easily blow past initial price predictions when the chart converges with large scale momentum buyers.

Index future trading is at it's best when trading the breakout. This type of trading offers a wonderful opportunity for traders to exploit the breakout and enjoy profits that would otherwise take day or even weeks to gain. Learning how to trade eminis effectively can be vastly improved on by the novice trader by joining our trading room. Veteran traders are available to explain the system that is designed to teach and most importantly, to be profitable.

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