Day Trading Tips & Training: Trading The Eminis
Unlike stocks which are traded based on cents, emini futures contracts are traded on ticks. A tick is a minimum incremental movement which varies from one emini contract to the next.
Eminis are relatively new to the trading scene with people only trading them over the last decade. They started as futures contracts for stock indices and are now also available for commodities and currencies. Stock index eminis are very popular for day trading and also for scalping which is when you make trades that generally last for less then 15 minutes.
When you trade eminis you earn a fixed amount per contract that you trade (ex: 50$ per pt) x the amount of points that you make. Then you pay exchange fees per contract traded. The average broker charges about 5$ per round turn. For the above example if you made 2 points then you would net 95$, if you lost 2 points you would be down 105$. Keep in mind that the exchange fees bring a negative expectation. Even though the market can only go 3 ways (up, down or sideways), you need a strategy that provides a consistent edge to succeed trading the eminis.
The amount of contracts that you can trade depends on your margin and your risk tolerance level. All emini trades can have a stop loss so that you know your maximum risk per trade. Managing your risk is a very important part of becoming a successful trader. Professional traders rarely risk more then 2% of their trading account per trade. This means that if you have 10,000$ in your trading account then you could only trade 1 contract with a 4 tick stop or 2 contracts with a 2 tick stop.
Trading the eminis is a very lucrative business for those that have found a consistent edge. Earning 2-6% a day on your acccount produces fantastic gains. Be sure to gain a high quality education and be absolutely confident in your strategy before trading with real money.