Main Menu
Members Page
Click below to enter the Traders International Trading Room & Class Room.
Awards & Recognitions
WHAT ARE E-MINIS
What are E-mini Futures & Why Do They Present the Best Opportunity for You to Profit in the Market?
The E-minis are a smaller version of the electronically traded index futures contracts that large financial institutions have used for years. These smaller contracts allow the little guy to take part in trading a basket of stocks in one easy to execute leveraged contract.
E-mini index contracts are related to an underlying shared index like the DOW or the S&P, and these indices entail a group of stocks. For example, the DOW is made up of the top 30 stocks in the US and the S&P is made up of the top 500 stocks in the US.
But, we don't trade the stocks; we trade the futures contracts which are related to these underlying shared indexes, this is essentially what E-minis are. With stocks, you are trading "shares." However, with E-mini futures you are trading "contracts."
Many individuals get caught up on this concept, but the important thing to remember is it's very simple to learn and you are still trading on the basis of price action. It is also important to know that even if you have no training at all, your odds of success are 50/50. So, the big question is... can you increase your odds? The answer is, yes. We KNOW you can because we've done so time after time for over 10 years.
So, why should you trade E-Mini Futures? Here's why:
Let's start with the biggest one: Leverage.
Advantage 1 - The first advantage is their excellent leverage capabilities
For instance, let's say the S&P 500 index is at 1400, when we are trading the S&P E-mini each point is worth $50, if we are trading one contract: 1400 x $50 = 70 000. But we don't have to put down 70 000. It's highly leveraged, we only have to put down $1000.In many ways, it's like a mortgage for a house because you are able to control a large asset with a small deposit.
Think about what leverage has done for you with your home. If you buy a home for $250,000 and you put 10% down ($25,000), you will double your money if your home simply goes up 10%. You'll triple your money if it goes up by $50,000. This is the magic of leverage.
But as you know, this same leverage can bite you. If your home depreciates by 10%, you have lost all the capital you have placed in it. But when correctly used, the leverage in the E-mini markets allows your capital to rapidly accumulate at a far greater pace than the leverage offered to you in stocks.
Each point in the S&P E-mini is worth $50, so if it goes up only 2 points, you make 10% or $100 on your money. This is a very volatile market that moves up and down many times throughout the day and presents numerous opportunities. It also gives you the ability to meet your profit objectives in only a few minutes. For instance, with our 10 or $100 dollar example of 2 points, it isn't uncommon for this to happen in a matter of minutes.
This way you are in and out of the market FAST, which is good because the longer you are in ANY market, the more you expose yourself to risk.
Advantage 2 - Individual stocks are harder to trade then the E-Minis
It's important to realize the benefit of trading an index or basket of stocks rather than an individual stock. It is much easier to know which way an index or the overall market will go rather than an individual stock. Most stocks are not tightly correlated to the movement of the overall market. If you thought the overall market would rise, your E-mini position would rise with the overall market. But there is no guarantee that an individual stock will rise. In fact, on good market days up to 50% of the stocks will not rise.
Advantage Number 3 - 24 Hour trading access
Stock market hours in the US trade from 9:30 a.m. ET to 4:00 p.m. ET, plus a few more hours in pre-market and after-hours trading.
Let's imagine you are long stocks and some world event like a terrorist attack occurs at 8:30 p.m. ET. What can you do about getting out of your stocks? Not much unfortunately. You have to wait until morning to be able to get yourself out. Not so with the E-Minis. The E-minis trade throughout the day, for a total of approximately 23 hours. So for our scenario, which we hope never happens, if you were long E-minis, you could get out right away.
So, unlike stocks which have unlimited overnight exposure, with E-minis your exposure is limited to the time you receive the information to the time you exit your trade. All you need is an internet connection and you can trade them from anywhere in the world at almost any time.
Advantage 4 - No massive gaps
If you have ever traded stocks, you know what happens after they have announced negative news. Sometimes they open at half their previous day's closing price or even worse. This is a horrible experience when it occurs. This sort of occurrence doesn't happen with the E-minis. Yes,they gap higher or lower, sometimes 2% - 3%. But they have never gapped down to the extent that individual stocks sometimes do.
AND most importantly, if you are trading the Traders International way, this will never happen to you because you will never be holding any positions overnight!
Advantage 5 - The trades are easy to execute and there isn't any market manipulation from market makers
Have you ever had a stock go down in price shortly after a brokerage firm increased their recommendations or when extremely good news came out? If you are familiar with stocks you know how often this happens. One major reason why this happens is because there are specialists or market makers involved in every stock, and with this comes the possibility of manipulation.
Not only that, individual stocks trade differently from each other. One reason for this is, once again, because their price is somewhat controlled by individual specialist firms or market makers. You may see exactly the same trading setup in several stocks, but they can all react differently because of the way the specialist or market maker manipulates the stock.
This is not a problem with the E-minis. They trade much more smoothly than stocks, making their behavior predictable and easier to trade. It really is a level playing field, every trader is equal. The system is first in/first out and if you have a better bid/offer, you are executed. In effect, you are in a queue and are price matched. So, unlike the forex or stock market, it's completely transparent.
Advantage 6 - They have large amounts of volume, making them very easy to get in and out of in a hurry with no problems. This isn't always the case with stocks
For instance; the S&P E-mini routinely trades millions of contracts per day during regular trading hours, and over a couple hundred thousand contracts during the overnight session. To put this into perspective, you can very easily buy or sell 500 S&P E-mini contracts during the day, which amounts to about $30,000,000 worth of futures. Trades of 500, even 1000 contracts clear all day long without any problems, or without adversely impacting the bid/ask spread.
Advantage 7 - They have lower capital requirement and costs
To open up a day trading account with stocks you need at least $25 000, not so with E-minis. You can get started for as little as your broker will allow you to open an account. This is typically $2000. This allows you to get started in trading without many of the limitations present when trading stocks.
Advantage 8 - Tax advantages!
This is like icing on the cake. Trading E-minis gives you substantial tax advantages over trading stocks. This is something most people haven't even heard of, but it’s true!
And last but definitely not least,
Advantage 9 - It doesn't matter if it's a BULL or BEAR market
When you’re using the Traders International TIMES methodology with the E-minis, it doesn't matter if the market is going up or down because we can make money either way.