Update – this post was written before the launch of CME’s newest product – the Micro E-Mini. Here’s a link to a Micro E-mini resources page.
In any discipline, transitioning from novice to expert takes time, discipline, and dedication. Active futures trading is certainly no different. Featuring a steep learning curve and the risk of financial loss, a majority of market newbies find that achieving consistent performance is an epic challenge.
For those who do make a living in the markets, education is a driver of their success. Understanding how the industry functions and how it evolves are two elements vital to conducting business efficiently over the long-haul. Taking the time necessary to learn futures trading can help make your journey into the marketplace a positive one.
Three Ways to Learn Futures Trading
Whether you read the business section of the local newspaper or tune into CNBC, satisfying a basic intellectual curiosity about markets is the first step in most traders’ careers. Of course, after the initial thirst for knowledge has been quenched, it’s time to get serious. The E-mini line of products and the soon to be released Micro E-minis offered by the Chicago Mercantile Exchange (CME) is a great place to learn futures trading and gain perspective on what the financial markets are all about.
Education comes in many forms, from sensory perception to academics. In futures trading, participants obtain knowledge via three primary avenues:
- Research: Reading books, examining blogs, and watching webinars are study tools frequented by traders of all types.
- Observation: Shadowing professional traders or attending seminars are two ways that many market participants broaden their horizons. Watching successful traders engage the markets can be instructive while also stimulating the imagination.
- Simulation: Paper trading or working on a simulator are two common ways of practicing trade-related mechanics. Analyzing market data, placing orders, and managing open positions in real-time are useful for becoming fluent in trading functionality.
Each of these exercises can be a valued contributor to any trader’s knowledge base. However, understanding theory, watching others and making millions on paper only goes so far. The only way to truly learn futures trading is to trade real money in the live market, and the E-mini products are an ideal way to begin doing just that.
Advantages to Trading the E-mini Products
The E-mini futures products give participants a variety of unique advantages. Here are a few of their primary benefits:
- Diversity of options: The E-minis provide a wide array of options. Ag commodities, currencies, metals, energies, and equities are asset classes readily available.
- Reduced margin requirements: “Regular” or “full-sized” contracts feature greater margin requirements. In practice, this means that you need more money to conduct active trade. In comparison, the E-mini and Micro E-mini products offer reduced margins, requiring much smaller capital allocations.
- Affordability: When it comes to opening a position in the live market, per-tick cost is a critical part of realized profit or loss. E-mini products feature lower per-tick values, ensuring that a single bad trade doesn’t destroy your entire account.
As an example, this chart shows the key difference between the full-sized S&P 500 and E-mini S&P 500 futures contracts:
|Product||Intraday Margin||Maintenance Margin||Tick Value|
|S&P 500 Futures (SP)||$33,000||$30,000||$25.00|
|E-mini S&P 500 (ES)||$500||$6,000||$12.50|
Anyone who’s interested in the markets should check out the E-minis and the even smaller Micro E-minis. From equities to energies, these products offer a more affordable alternative to the full-sized contracts. Engaging the E-minis is a great way to learn futures trading.
Getting Started in Futures
Education plays a critical role to the gaining of competency in any profession. After high school, it can take up to 15 years to become a licensed medical doctor and 7 years to become a practicing lawyer. For active traders, there’s no industry standard ― your educational requirements are what you make them.
A great place to learn futures trading is at the online educational suite available at Daniels Trading. Expert analysis, blogs, and webinars are at your fingertips 24/7/365, online and on-demand.