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Twelve Essential Steps To a Winning E-mini Strategy

June 18, 2012 by Leslie Burton| Tips & Strategies

In the 80’s, the US T-Bond contract was the most liquid market. The bond pit at the CBOT was so crowded that you could not turn around. There was a bit of intrigue with commodities. It was deemed “not a prudent man’s investment vehicle” — it was for the aggressive investor. It was not a climate for “everyman” as the margins were often high and the moves could be severe. “Everyman” needed a liquid market with reduced margins that would allow participation in the stock market in a diverse manner. The E-mini indices allow a trader to participate in a stock weighted average of a portfolio.

The first futures trading platforms were very crude and unstable, but with the unification of the CUBS units on the floors of the exchange, the link became crucial to index traders. The CME exchange went through an elaborate changeover in the creation of Globex. The idea of a host computer to match the trades made the marketplace a fair and equitable trading floor for the average speculator. With the onset of the E-mini S&P 500 on September 9th 1997, the heads of many FCM’s traded hundred lots that first evening to kick off the contract and create the liquidity to make it stick. The exchanges have books of contracts that no longer exist as the volume would not sustain the contract.

Upon the success of the E-mini S&P 500, other E-mini contracts were introduced to provide diversity for the speculator. The Minis are offered at a fraction of the size of the larger counterparts. The margins are indicative of that fraction and further, day-trade margins may be $500.00 in some cases to make it even more appealing. The exchanges themselves do not require any margin unless a contract is held overnight, so each FCM may decide what they may be comfortable with for that “good faith deposit” as long as the client is out at the close (3:15 PM CST).

In constructing a plan to trade the E-mini contracts, there are many preparations to factor out potential errors and filter out the highest probability of successful trades.

  1. In today’s market, the platform means everything in terms of comfort, knowledge and ease of use. It is imperative to have a direct connection with the FCM to the Exchange. The stability of the platform and the internet connection must be reliable. The freedom to navigate from the depth of market to the order function to the charts is vital to trading. It is suggested to demo a variety of platforms to find the right match.
  2. The style of trading is important in developing a trading plan! There are scalpers, channel breakout traders, trend-traders and contrarians. The style of trading should be derived from the current market conditions and risk parameters.
  3. Risk is essential in that, psychologically, one must be comfortable losing money before they can make money. Fear of losing money can actually impede the ability to make money. If a plan is drawn up with a risk per day as part of the plan, it will contain any potential problems in overtrading or chasing a market. The E-mini S&P 500, for example, is $50.00 per full point, where some traders will earmark 6 points, or $300.00, as the risk tolerance for a day. Excess venture capital must be used!
  4. Mindset is a large part of trading. One must pursue a climate of clarity and focus when trading. Trading should occur when a place is set-up with a cell phone and a trade log. Should there be an interruption in online trading, a trade-log would enable a trader to record each trade so that even with an interruption in online trading, they may call the desk to exit a trade or adjust stops. A trade log would also allow the trader to review the trades of the day off the platform! Trading space should be conducive to trading without distractions.
  5. Basic charting is crucial to traders. One cannot trade off of the fundamentals alone successfully. The trading world is made up of many sophisticated technicians that will have an edge. For a trader to create that same savvy approach to the markets, charting and select indicators are necessary.
  6. Indicators range from momentum to moving averages. Most indicators are lagging, descriptive indicators and can occasionally be out of sync with the current market conditions. The correct predictive indicators can filter your trades so that you take only the higher probability trades. The ideal scenario would be to have a developer handy to decipher the trading environment and create the indicators necessary to keep up with the markets. Most traders do not have access to the latest indicators, so one must figure where the indicators may be obtained.
  7. The learning curve for trading is quite individual. It is important for the trader to know himself/herself to decide the best method to learn about trading. Some traders may be able to tinker with many indicators and charts to figure out what is in sync with the current markets. Some traders may do well with a mentor, course or trade room to learn. Many traders are social and desire the shared ideas of other traders. Why re-invent the wheel when other traders have been through the learning curve and are willing to share their findings? Shared experiences may in some cases prevent costly errors or inferior tools to decipher trade set-ups.
  8. Discipline is probably the most important part of trading. To be able to plan the trade and trade the plan without any emotional whims will keep the trader on target with their risk parameter for the day and perhaps occasional opportunities to profit.
  9. Taking a profit is part of the equation. Some traders will desire to trail stops to keep the profit side open while the risk limited. Other traders may wish to use preset brackets for their trading, allowing a part of their trading to be automatic. Bracket trades must have additional margin in many cases as the platform will not realize that 2 working orders may offset only 1 trade. In bracket trading, it is important to leave the bracket intact or, if offsetting manually, to be sure that all working orders on the bracket are canceled. A trade from the chart may not be acknowledged by the platform as an offset by the bracket. It is important to close out all open positions and cancel all working orders prior to leaving the platform.
  10. Trading platforms can be sensitive. Traders with pets or children may do well to close the platform before leaving it. The IP address of your computer can be traced so that all trades generated from it are yours.
  11. Winning can be just as damaging as losing! Traders can gain too much confidence and change the plan. The changed plan can lead to overtrading or even an error may occur as the emotional state may take over.
  12. Trading can be intense where concentration is vital. A trader cannot stay in the correct state of mind trading for an extended period. It is important to allocate a couple of hours a day when there are no distractions. The same time of day each day will allow the trader to note patterns and time changes in the market. It is also important to pick 1 to 3 markets initially to know closely. The price action of those markets can be viewed as imprints for your future trades.

Trading’s not easy, but with hard work, determination, and patience, it can get easier. In opening a business, a person may do elaborate feasibility studies and cost analysis before beginning. Why would trading be any different? Trading is a business like any other, but perhaps more fun. There is a learning curve that may be expensive so many traders will test their strategies through paper trading on their chosen platform. Paper trading may not be exactly the same as live trading, but it is the closest way to examine the trading plan and feasibility of it!

The CFRN.net Team

BEING A SUCCESSFUL PAPER TRADER DURING ONE TIME PERIOD DOES NOT MEAN THAT YOU WILL MAKE MONEY WHEN YOU ACTUALLY INVEST DURING A LATER TIME PERIOD. MARKET CONDITIONS CONSTANTLY CHANGE.


STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.

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Learn to Trade the E-Mini S&P 500

Learn to Trade the E-Mini S&P 500 as well as other futures markets in a live trading environment with professional traders. Test drive the online platform for a full week with the Christian Financial Radio Network (CFRN).

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Filed Under: Tips & Strategies

About Leslie Burton

“The best client is an informed client!” Leslie’s 32 years in the futures markets has been well spent monitoring the various indicator packages and systems that professional and retail clients use. There certainly is no “Holy Grail,” but there are basic parameters that potentially may warrant a higher probability of success on trades. She places a strong emphasis on a client’s financial goals and applies money management to keep those goals in perspective. Leslie’s personal desire to trade successfully was found in a trading room set up for the floor brokers coming off the CME floors after each trading day. Hand graphed charts were hanging out of their stuffed pockets. These charts were the only the technical guide that these “pit warriors” had in formulating their trades.

BACKGROUND: In 1984 Leslie began to get involved in the commodity markets by attending numerous classes in technical analysis. Then as a registered broker, Leslie attended Market Technicians Association functions. Leslie has been quoted in Concensus Newsletter, written for Inside Futures, Bar Chart, INO, Futures Knowledge, and has given market updates on Tiger Financial News Network and CFRN. She has also conducted webinars for FX Street on Fibonacci and Advanced Technical, and plans to continue sharing trading ideas and strategies through future webinars.

MARKET FOCUS: She primarily focuses on the more liquid markets. Execution is vital to implement strategies according to one’s trading model.

TRADING STRATEGIES: Leslie derives a trading model upon the initial client consultation. The most important part of the brokerage relationship is to be disciplined within the trade model. She uses seasonal guidelines and spread trades to garnish a differential between various commodities or months. She also believes in waiting for the ‘perfect’ scenario before entering the marketplace. In addition, each position has a stop loss strategy with a risk in mind, and trailing stops or timely exits in place upon the culmination of each trade.

RISK/MONEY MANAGEMENT VIEW: Leslie employs stops for outright futures positions. Options spread strategies may also be used, depending on the forecast for the market. Even in quiet, flat markets butterfly spreads may be used to take advantage of a small range of trading.

TECHNICAL AND/OR FUNDAMENTAL FOCUS: Leslie concentrates on technical analysis, primarily breaking down charts by using various moving averages, parabolic SAR, momentum, stochastics and RSI indicators. She reads and listens to any fundamental factors that may impact the markets. Market psychology is another factor that Leslie includes in her analysis.

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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