Professional Documents
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ST C ENTURYPPUBLISHING
CENTURY UBLISHING
21ST CENTURY
EMINIS
How Smart Investors are Making
$1,000 to $5,000 USD per week Trading
Eminis, Starting with as Little as $5,000!
.
First published June 2009
ISBN 978-1-921458-28-6
Would you like to control your own financial future trading E-
minis?
Is the idea of making US$1,000 to US$5,000 per week trading the E-
mini market with an investment of as little as A$5,000 attractive to you?
If so, this book may be just what you are looking for!
It will help you discover why in the past nine years, thousands of
traders world-wide have become successful E-mini traders.
With this book you can find out for yourself how to become a
professional trader and to learn this simple yet powerful trading
technique in the live market.
As a reader of this book you are also entitled to a complimentary
DVD, How investors can make US$1,000 to US$5,000 per week trading
the E-mini market starting with as little as $5,000.
This book plus the DVD will help you find out how to achieve
long-term success with short-term trading.
In this book you will learn a simple, yet powerful trading method
to trade the high potential index market and gain a wealth of
knowledge that can be used for life.
The intended outcome of this book is to assist and help you gain
confidence and experience trading E-minis so that you can join the
traders earning US$1,000 to US$5,000 per week starting with as little as
$5,000. The consistent trading range of the E-minis markets along with
their high volume and leverage, offers a perfect trading environment
for short-term trading.
Each day, multiple high potential trading opportunities occur. You
can profit whether the market goes up or down. Taking advantage of
these opportunities is simple if you have a powerful and precise
trading system.
Whether you want to begin a career as a professional trader or
become a better trader by managing your financial assets more
efficiently, this book can help you become successful.
This book is a start to trading E-minis and if combined with the
dynamic, interactive trading seminars delivered online that are backed
by unmatched professional live market mentorship, this trading system
will build the confidence and skills you will need to effectively and
successfully trade E-minis.
In this book we also mention how to continue your E-mini
education should it be something you wish to pursue.
For those wishing to be successful E-mini traders, fortunately there
are state-of-the-art educational technologies that deliver realistic
market simulations that enable students to gain real experience before
risking real capital.
This is the first exciting step in your journey to earning US$1,000
to US$5,000 per week trading E-minis.
21st Century Eminis have published this book with the intention of
enabling as many people as possible to learn and develop the skills
required to become a successful E-mini trader.
21st Century Eminis regularly conduct popular E-mini trading
seminars at locations around Australia and New Zealand and soon
world-wide.
During the pilot stage of this program over the last 5 years many
traders have learnt this highly profitable E-minis trading system
designed by Australia's most successful E-minis traders by attending
our workshops.
This book highlights and details the issues involved in trading E-
minis as an introduction to this exciting concept.
However, due to the depth of knowledge required to successfully
trade E-minis it is unrealistic for one book to teach you all of the finer
points of successful trading in this topic.
Therefore 21st Century Eminis is making available to every reader
of this book a complimentary DVD on trading E-minis at no charge.
To access this DVD log on to:
www.21stcenturyeminis.com.au
Table of Contents
1 What are E-minis? ...................................................................1
A trading career in E-minis.......................................................... 2
Why trade E-minis? ...................................................................3
What is an E-Mini? ................................................................ 3-6
What types of people are trading E-minis?.................................. 6
Some benefits of E minis........................................................6, 7
The Dow Jones......................................................................... 7
Advantages of Trading Mini S&P 500 Futures and Options..........8
What exactly are Mini S&P 500 Futures?..................................... 9
What is the Special Opening Quotation, or SOQ? .......................9
Because E-minis are futures..................................................... 10
Equities investors like the great ‘tradability’ of E-minis................10
Trading the E-mini S&P 500 - an example ................................11
The electronically traded CBOT mini-sized Dow.........................12
Some Facts About the S&P 500 Index ................................13-15
E-mini Case Study - How Marcus made $9,000 in a night
with a $4,000 outlay .........................................................15, 16
Background on the E-mini Contract ................................... 16-17
Summary.................................................................................18
2 Trading E-minis...................................................................... 19
An introduction to trading E-minis............................................ 20
Trading E-minis has many advantages over other forms of
trading and share investment ...................................................20
Trading E-minis....................................................................... 21
To trade E-minis we use three basic indicators.......................... 21
E-mini charts........................................................................... 22
Candle sticks........................................................................... 22
MACD and Stochastic.............................................................. 23
Double tops.............................................................................24
Technical double bottoms........................................................24
Lower lows..............................................................................25
Because E-minis are futures, they offer some unique
additional features..............................................................25, 26
21st Century Eminis advice on how to profit from learning,
understanding and trading the E-mini index........................26, 27
Exit strategies...........................................................................28
How do E-minis compare to stocks, CFD’s and options?..........29
How do E-minis compare to Options?......................................29
How can you be right more times than wrong?.........................30
E-mini market profit potential....................................................30
How do our signals perform?...................................................31
How do I make money trading E-minis?...................................31
How do we identify signals?.....................................................31
Trading Signals - The Power of T3............................................32
What is the cost of trading E-minis?......................................... 32
When to enter the E-mini market...............................................33
When to exit the E-mini market.................................................33
When not to enter an E-mini trade............................................ 33
Trading E-minis - some frequently asked questions...................34
E-mini Money Management..................................................... 35
The Road to Riches. What it takes to be a consistent
winning E-mini trader .............................................................. 35
E-mini trading - risk and reward................................................ 35
Some simple advice for trading E-minis.....................................36
E-minis trading advice from a successful trader......................... 37
Your Trading Plan.............................................................. 38, 39
Mark Douglas.......................................................................... 39
Day Trading E-minis.................................................................40
Summary.................................................................................41
An E-mini Trading Time Table...................................................42
4 Bonus Section........................................................................ 57
Using Dynamic Pivot Points to Time E-mini Moves.............. 58-60
Day Trading e-minis.................................................................60
Would you like to control your own financial future?..................60
Why trade E-minis? .................................................................61
Trading the E-mini market in Australia....................................... 61
E-mini Indexes are the ideal market to trade...............................61
You can spend a day at our E-mini workshop and learn:........... 61
What you will learn at a 21st Century Eminis seminar ................62
The valuable topics covered in the Live Market Online
E-Mini Training Class include: ..................................................63
The 21st Century Eminis course is taught in four stages......63, 64
Are you ready to start trading E-minis?......................................65
Gain confidence and experience trading E-minis........................65
F.A.Q’s for E-minis............................................................. 66-66
What is the next step?..............................................................68
Index..........................................................................................89
1.
WHAT ARE EMINIS?
“Do not be afraid to stretch beyond your
comfort zone. When you move outside
your comfort zone you will experience fear,
but from that fear you will grow and
achieve success.”
How to Trade E-minis
2
1 - What Are E-minis?
struggle to get your money back, so there is a lot at stake. Owning your
own business can involve a lot stress and a fair amount of risk.
Many people thrive on that and a proportion become wealthy that
way. With your job, you don't have all this money at stake, but you do
have your time at stake which is a challenge as well. With a job, you
still have to have a fixed location which means you have to be at work.
If you would like to own and run a business of your own with none
of the hassles we discussed above you may like to consider trading
E-minis as a full time business.
You could establish your own E-mini trading business for a fraction
of the cost of buying a ‘standard franchised business’, with a genuine
chance at obtaining a good return on your investment.
Trading E-minis is effectively a business opportunity with no staff,
no rent (you work from home using your computer) or a place of
business to maintain. You can work just 2 hours per day and have
professionals advise you on when to buy and sell and you can trade
from anywhere in the world.
Trading E-minis is a business with an overhead of approximately
$10 per trading day with no debtors and creditors.
Trading E-minis is a business with no more 70-hour working weeks
or working on weekends.
What is an E-mini?
If you are a novice investor do not be put off by many of the words
used to explain E-minis in this book. All that is important is that you
grasp the concept of trading E-minis.
E-mini is a short abbreviation for Electronic Mini S&P 500.
An E-mini is a futures contract that can be traded electronically on
the Chicago Mercantile Exchange (CME) and is based on the S&P 500
index, as opposed to normal S&P futures contracts, which have a
point value of $250; the E-mini contract has a point value of $50.
A brief explanation of the S&P 500 index for readers who are
unused to the term.
The S&P 500 is a stock market index containing the stocks of 500
Large-Cap corporations, most of which are American. The index is the
most notable of the many indices owned and maintained by Standard
& Poor's. S&P 500 is used in reference not only to the index but also
to the 500 actual companies, the stocks of which are included in the
index.
The S&P 500 index forms part of the broader S&P 1500 and S&P
Global 1200 stock market indices.
All of the stocks in the index are those of large publicly held
companies and trade on the two largest US stock markets, the New
York Stock Exchange and NASDAQ. After the Dow Jones Industrial
Average, the S&P 500 is the most widely watched index of large-cap US
stocks. It is considered to be a bellwether for the US economy and is a
component of the Index of Leading Indicators.
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1 - What Are E-minis?
E-minis are bought and sold 500,000 What types of people are
times on a typical trading day. Many trading E-minis?
analysts believe E-minis future trading In Australia at the time of
is the fastest growing product going to press there were
available. more than 500 people
E-minis are growing and actively trading E-minis
becoming more important to both with interest in the market
growing exponentially. The
investors and the marketplace because number of active traders is
they allow small investors to access expected to expand to
what can be a lucrative income if thousands in the next year
they become successful at trading. or two as many investors
and share traders discover
An income of US$1,000 to US$5,000
that it is simple to profit
per week is a pittance compared to from trading E-minis.
what some E-mini traders can earn.
The E-minis market is
traded by many people,
including amateur and
Some benefits of E-minis professional traders as well
• E-minis are a fast, efficient way to as Pivot Traders, Gap
trade the benchmark S&P 500 Traders and Pitt Traders.
Trading E-minis offers
Index (and the underlying 500 people the chance to get
large-cap U.S. issues) with a single out of their comfort zone
contract. This means you do not and to do something new.
need a large amount of capital to It is interesting to look at
commence trading E-minis. the demographics of a
• E-minis provide a smaller contract well-attended recent E-mini
well suited for a broad range of seminar on the Gold Coast.
The vast majority attending
individual and institutional were casually attired in
customer needs. shorts and thongs. Around
• E-minis offer substantial liquidity 25 percent of those attend-
and tight bid/ask spreads. ing were female, a
significant number were
• E-minis are electronically traded already full-time share
on the CME Globex® platform, market traders and a large
offering speed, reliability, number were successful
anonymity and trading around the property investors. All of
these people were seriously
clock, around the world. assessing E-minis as a
• E-minis accommodate a variety of further alternate trading or
strategies such as hedging to investment opportunity.
6
1 - What Are E-minis?
Exposure
Investors can have exposure to the U.S. stock market via the world's
leading stock index. Although there are many indexes, some very
popular, the S&P 500 has the most closely watched, actively traded and
liquid of all futures products based on a stock index.
Affordability
The enormous appeal of the standard S&P 500 futures has caused the
contract to grow beyond the reach of many investors. New Mini S&P
500 contracts allow investors to trade this benchmark index at a
fraction of the cost. Mini S&P 500 futures will require much less
margin than the standard S&P 500 futures.
Opportunity
These new contracts provide a variety of investment opportunities,
such as:
• increasing or hedging portfolio exposure
• spreading against other CME index products such as the S&P 500,
NASDAQ 100, Russell 2000 and/or S&P MidCap 400
• a cost-efficient way to benefit from rising or falling equity markets.
Integrity
Chicago Mercantile Exchange (CME) customers and members are
protected from default on futures and options contracts by the
Exchange's sophisticated risk management and surveillance
techniques. The CME Clearing House acts as the guarantor to each of
its clearing members, thus ensuring the integrity of all trades. The
CME system has proven to be outstandingly effective, even under the
most stressful market conditions.
The CME is The Index Exchange, with more than 95 percent market
share of all domestically traded stock index futures and options on
futures. Open interest in the CME's index complex totals in excess of
$93 billion, making it the world's most liquid trading environment for
stock index products.
8
1 - What Are E-minis?
You can trade E-mini stock contracts as a day trader, simply with an
eye to making a profit, but you can also use E-minis as hedging tools
or to get a particular kind of market exposure.
For example, you may decide to sell these E-mini contracts if you
think the market will be bearish, but you don't want to disrupt your
portfolio by selling off a large number of stocks.
Or, you may buy them if you think the market will be bullish in the
near future, but you don't want to purchase additional shares of a
particular stock at that time.
10
1 - What Are E-minis?
FEATURES BENEFITS
BENCHMARK Capture the performance of the Dow - the
APPEAL most widely recognised stock index in the
world.
TRADING Fully electronic with a level playing field.
PLATFORM Trade the Dow, anywhere, almost anytime
CONTRACT Comparable to other mini-sized stock index
VALUE futures. $5 x current price of CBOT mini-
sized Dow futures. For example, if CBOT
mini-sized Dow futures are currently 8000,
the value of one contract is $40,000 - ($5 x
8000).
CBOT MARGINS Initial margin is currently $2700, or
approximately 6.75% of contract value.
The CBOT mini-sized Dow offers more leverage
by requiring less margin per contract than other
stock index futures.
LIQUIDITY Professional traders are making continuous
two-sided markets in CBOT mini-sized Dow
futures. As a result, liquidity is deep and
constant.
DOLLAR Recent average daily range over 4 months:
VOLATILITY $1080 or 216 points. Relative to comparable
stock index futures, CBOT mini-sized Dow
futures have lower exchange margin.
requirements for similar intraday dollar volatility.
Consequently, CBOT mini-sized Dow futures
offer the most value per dollar of any mini-sized
stock index future.
EASE OF The DJIA is a price-weighted average of 30
TRACKING of the largest, most liquid US stocks. Dow
moves can be easily anticipated by
following price moves in these widely-
quoted stocks.
DOW QUOTES Free real-time depth of market quotes
available at www.cbot.com/dow
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1 - What Are E-minis?
Logarithmic graph of the S&P 500 Index from 1950 to January 2008
The S&P 500 index was created in 1957, but it has been extrapolated
back in time. The first S&P index was introduced in 1923. Prior to
1957, the primary S&P stock market index consisted of 90 companies,
known as the ‘S&P 90’, and was published on a daily basis. A broader
index of 423 companies was also published weekly. On March 4, 1957,
a broad, real-time stock market index, the S&P 500 was introduced.
This introduction was made possible by advancements in the computer
industry which allowed the index to be calculated and disseminated in
real time.
The S&P 500 is used widely as an indicator of the broader market,
as it includes both "growth" stocks (which inflated and then deflated
in the dot-com bubble and bust) and generally less volatile "value"
stocks; it also includes stocks from both the NASDAQ stock market and
the NYSE. The index, near the height of the bubble, reached an all-
For a free DVD and access to a free webinar go to
13 www.21stcenturyeminis.com.au
How to Trade E-minis
time intraday high of 1,552.87 in trading on March 24, 2000, and then
lost approximately 50% of its value in a two-year bear market, spiking
below 800 points in July 2002 and reaching a low of 768.63 intraday on
October 10, 2002.
Since then, the US stock markets gradually recovered, but the S&P
500 lagged the popular Dow Jones Industrial Average and total-market
Wilshire 5000 indices by remaining below its highs of 2000 for a longer
period. On May 30, 2007, the S&P 500
closed at 1,530.23 to set its first all-
time closing high in more than seven On May 30, 2007, the S&P
years. On July 13, 2007, the index 500 closed at 1,530.23 to
followed a nearly thirty-point gain set its first all-time
the previous day by setting a new closing high in more than
seven years.
intra-day record of 1,555.10 points,
its first of the 21st century. On July 13, 2007, the
index followed a nearly
The components of the S&P 500 are thirty-point gain the
selected by committee. This is previous day by setting a
similar to the Dow 30, but different new intra-day record of
1,555.10 points, its first of
from others such as the Russell 1000,
the 21st century.
which are strictly rules-based.
The index does include a handful
(13 as of July 6, 2007) of non-U.S. companies. This group includes
both formerly American companies that are now incorporated outside
of the United States, but which were grandfathered and allowed to
remain in the S&P 500 after their expatriation, and companies that
have never been incorporated in the United States. Notably, after the
merger of Daimler-Benz and Chrysler, the S&P did not include the
newly created German aktiengesellschaft (company) in the index.
The committee selects the companies in the S&P 500 so they are
representative of various industries in the United States economy. In
addition, companies that do not trade publicly (such as those that are
privately or mutually held) and stocks that do not have sufficient
liquidity are not in the index.
A notable example of an illiquid stock not in the index is Warren
Buffett’s Berkshire Hathaway, which as of April 2006 had a market
capitalisation larger than all but 12 of the members of the S&P 500, but
which also had a stock price (in the case of its class A shares) greater
than $100,000, making it very difficult to trade.
14
1 - What Are E-minis?
By contrast, the Fortune 500 attempts to list the 500 largest public
companies in the United States by gross revenue, regardless of
whether their stocks trade or their liquidity, without adjustment for
industry representation and excluding companies incorporated
outside the United States.
The S&P 500 Index was market-value weighted; that is, movements
in price of companies whose total market valuation (share price times
the number of outstanding shares) is larger will have a greater effect
on the index than companies whose market valuation is smaller.
The index has since been converted to float weighted; that is, only
shares which Standard & Poors determines are available for public
trading (‘float’) are counted. The transition was made in two tranches,
the first in March 2005 and the second in September 2005.
limit his loss in case his analysis and entry proved ill-timed or faulty.
By evening, with the December E-mini SP up to over 1059.75 (.25
points higher than the cash index's close), Marcus was able to sell the
contracts at more than 18 points. That's 18 times $50 per point times
10 contracts, or $9,000.
16
1 - What Are E-minis?
tick, is .25 index points, or $12.50 per contract. If the futures contract
moves the minimum price increment (one tick), say, from 1040 to
1040.25, a long position would be credited $12.50 and a short
position would be debited $12.50. Brokerage accounts are adjusted
nightly to reflect unrealised gains and losses and if accounts drop
below the minimum margin requirement, brokers can issue a ‘margin
call’, closing out positions and requiring the deposit of additional
money to continue trading.
Hence the difference in margin requirements between a day-trading
position and a position held overnight, as we saw in the example of
Marcus on pages 15 and 16.
Overnight trades carry far more risk. Margin levels in futures
trading are set by the exchanges (the CME in the case of the E-mini),
which adjust the levels to encourage or discourage trading depending
on level of activity and volatility.
However, the clearing firms have the option to increase marginal
requirements beyond the level set by the exchanges, depending on
how much, or how little, risk they want to assume for themselves and
their customers. To help traders minimise the risks - and improve on
the rewards - many 'technicians' spend a lot of time studying the
technical charts of the E-minis.
These people look at the price patterns from different timeframes
(for example, 15-minute charts for intraday analysis, hourly charts for
near-term 1-2 day analysis, and daily charts for 1-2 weeks); they
identify price support and resistance levels and where the prices are at
relative to these levels as well as to moving averages; and they assess
all that in relation to the indicators such as volume intensity, relative
strength and stochastics.
These same 'technicians' look for what they consider to be a high-
probability directional outcome to a particular stock index trade as
well as multiple target windows that enable traders to profit from
entering the market.
They are more interested in these target windows, or zones, than
specific prices as they allow them to be active - if not interactive -
participants in the process of experiencing a move from point ‘a’ to
point ‘b’. This gives them the opportunity to exit or enter a position
in a range rather than at a specified price.
Summary
The markets give a final verdict every trading day at the close. This
verdict will not go in your favour if you enter the trading battle
unprepared. Skill and success in the markets are acquired through
hard work, education, patience and emotional discipline.
Day trading E-minis takes a combination of discipline, caution,
aggressiveness, fortitude and willingness to take small losses quickly.
We doubt that anyone is born with all these traits. Instead, the
majority of traders day trading E-minis start this business with the
wrong instincts.
They are naturally willing to give up control of a losing position.
When the market heads towards a rookie's stops, they wait, hoping
things will turn around. When they don't, there is often a temptation
to loosen the stop and increase the potential for loss. This makes no
logical sense, but it is human nature. When day trading E-minis you
have to learn to take small losses quickly to succeed.
18
2.
TRADING E-MINIS
“The creation of a thousand forests
is one single acorn.”
Emerson
How to Trade E-minis
www.21stcenturyeminis.com.au
20
2 - Trading E-minis
Trading E-minis
In the past nine years thousands of traders world-wide have enjoyed
the popular, award-winning E-mini training course conducted by 21st
Century Eminis. 21st Century Eminis offer their clients the truly unique
opportunity of a web based education program for trading the Index
Futures market and then supporting this education with a live trading
room operating from bell to bell.
Members can log into the Live Trading Room website and watch as
the professional trader marks buy and sell signals as they develop on
the live chart. Members are able to observe the ongoing success of
these signals with 100 percent transparency.
Candle sticks
22
2 - Trading E-minis
These charts shows buy and sell signals - matching W's and M's
Double tops
24
2 - Trading E-minis
Lower lows
26
2 - Trading E-minis
Exit strategies
Traders should set a stop/loss. Remember that as a trader if you go
long with 10 contracts, there has to someone there to buy the contracts
that you want to sell.
E-minis v. Stocks
Items for consideration and comparison
• For E-minis - no market • For stocks - how will I
manipulation manage my portfolio?
• For E-minis - no portfolio • For stocks - what
to manage research reports will I
need I need to study?
• For E-minis - one simple
choice • For stocks - how reliable
are the accounting
• For E-minis - no skill - reports?
your probability of
success is 50/50, but by • When trading stocks
using 'signals' the chance investors have to rely on
of success in some cases financial information which
is increased to 70 percent may be misleading
and more.
• People may be able to
• For E-minis - no reports manipulate the market
to read because we are • Research may be very
trading the top 500 stocks difficult
• Many stocks collapse -
e.g. HIH Insurance,
Pasminco and One.Tel
• The stock market is
subject to major
corrections over a
extended periods of time.
28
2 - Trading E-minis
Trading hours
The US market trades from 1.00am - 8.00am Australian Eastern winter
time, with a one hour break in the middle.
For a free DVD and access to a free webinar go to
29 www.21stcenturyeminis.com.au
How to Trade E-minis
30
2 - Trading E-minis
Month T1 T2
May 19 / 95% 26.5 / 133%
June 17 / 85% 18 / 90%
July 13 / 65% 16 / 80%
Aug 14.5 / 72.5% 16 / 80%
These results are based on assuming that a trade is filled at the closing
price of the confirmation candle and profit is only assumed if the
price passes through the profit target. Stop loss is set at 1.5 points
with MIT. (MIT stands for ‘Market If Touched’ meaning that upon
reaching this value a ‘Market Order’ will be automatically placed).
Signals are measured between 9.30am till noon and 1.00-3.30pm.
www.21stcenturyeminis.com.au
32
2 - Trading E-minis
How long does the training take and how long till I trade real
money?
That will depend on how long you take to go through each step of
our training. However it is our goal to have all our students up and
trading real money after approximately 3 months. During this time you
will complete a minimum of 15 profitable days out of 20 using a real
simulation account trading the live market.
Can I trade my super fund and pay for the course using it?
Yes you can and we can put you in touch with accounting services that
can assist you in setting this up.
34
2 - Trading E-minis
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2 - Trading E-minis
Refine your processes for analysing signals and do not let your
emotions dictate your trading habits. You need to define your signal
in words so that another trader unfamiliar with your technique can
duplicate your strategy. If it is not duplicatable, it is not a system.
Exit Plan
Before you place your order, you must decide on where you will exit.
Many traders advocate the use a stop loss to capture your profits and
avoid large losses.
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2 - Trading E-minis
Mark Douglas
Mark Douglas is a trader, personal trading coach and industry
consultant and has written a book, Trading in the Zone: Master the
Market with Confidence, Discipline and a Winning Attitude.
Douglas focuses on the psychology of successful traders and
instead of offering specific strategies, he offers the following general
advice to traders and potential traders:
“The first step on the road is to understand and completely
accept the psychological realities of trading.”
According to Douglas the psychological realities of trading may be
too abstract for some, but given the risks of trading experienced
investors should be willing to engage in self-reflection.
Maximising the trader's state of mind is the key to successful results
says Douglas. “Conflicts, contradictions and paradoxes in thinking can
spell disaster for even a highly motivated, astute and well-grounded
trader. ‘Thinking strategy’ will profoundly influence a trader's success
rate.”
For a free DVD and access to a free webinar go to
39 www.21stcenturyeminis.com.au
How to Trade E-minis
40
2 - Trading E-minis
enter the next set-up. The market may pop up to a key moving average
during a strong down trend, and the Tick may record an emotional
extreme, but this trader hesitates to enter. The market will often move
quickly and the edge that this classic RBI set-up had a few seconds ago
is now gone. This is where aggressiveness is key.
Everyone who has ever considered day trading E-minis for a living
has been told something like this, “Are you kidding, the game’s
rigged. It is impossible to time the markets. My cousin tried that and
lost $15,000. I read that 95 percent of traders blow up their accounts.
Better keep your day job.”
No matter what you try to do, it’s going to be tough to get beyond
your own doubts and especially the doubts of your family members
and close friends. This is where true grit, perseverance and an
intelligent, well-informed approach are essential if you want to make a
living day trading E-minis.’
Summary
E-minis are a fast, efficient way to trade the benchmark S&P 500 Index
(and the underlying 500 large-cap U.S. issues) with a single contract.
E-minis provide a smaller contract well-suited for a broad range of
individual and institutional customer needs and E-minis offer
substantial liquidity and tight bid/ask spreads.
E-minis are electronically traded on the CME Globex® platform,
offering speed, reliability, anonymity and trading around the clock,
around the world and accommodate a variety of strategies such as
hedging to protect against adverse price moves, spreading with other
stock-index futures and gaining broad market exposure.
The E-minis market is a level playing field offering open, fair and
transparent markets and offer potentially lower trading costs than
trading a basket of equities or ETFs.
42
3.
E-MINI CASE STUDIES
“The secret of success is learning
how to use pain and pleasure instead
of having pain and pleasure use you.
If you do that you’re in control of your life.
If you don’t, life controls you.”
Anthony Robbins
How to Trade E-minis
44
3 - E-minis Case Studies
Remember, when you trade, you are your own best friend or worst
enemy.
It is you against you everyday. Not you against the market. Not you
against another trader.
The market is going to do what it is going to do everyday. Whether
you are in or out. The only thing that determines if you make money
or not, is how you react to market action. Only you can give yourself
money or lose money trading. Not the market, not the system, not the
data, not the software package you use, not the book or seminar you
purchased. Just you!
Sure you'll get it right sometimes, and that's the most dangerous
thing about forecasting. By tossing a coin you'll be right half the time,
so you tend to get random rewards when you trade. You win some,
and think your forecasting ability is great. Then you lose some after
doing the exact same analysis, and you start to question yourself and
your abilities.
Eventually this lack of consistency forces you to either change your
strategy or give trading away to protect your sanity...
48
3 - E-minis Case Studies
that region as buying/selling dry up. I find that you have to exit such
positions quickly when profitable; it's very easy for your several ticks of
profit to reverse - which is what happened on both my scratched
trades. Still no real signs of selling conviction in the TICK, but buying
is not sustained either, keeping us in the range.
9:06 AM CT - Lots of cross currents with the sentiment numbers;
dollar strength interest rates up. Pullback after the rise, but I'm
looking to see if we get lower TICK lows. If not, I'm leaning toward
buying. Sellers have not shown conviction thus far.
8:50 AM CT - So far, lack of downside and upside conviction and
volume tailing off, leading me to suspect range bound day. Still
anticipating test of lows unless I see evidence of meaningful buying.
8:41 AM CT - DAX strong, but I want to see ER2 buying before I'll
commit long. If ER2 stays below its preopen range, I'm selling for test
of lows.
8:24 AM CT - Forgot to mention; DAX has been strengthening through
much of pre-opening trade and that's led to a bit of a bid now in the
US indices. Something I'm watching.
8:19 AM CT - Not a big news day; Michigan sentiment numbers at 9 AM
CT and that's it. We have options expiration today, so some chop and
range bound trade would not be unusual. We're trading at the lower
end of yesterday's distribution, so I would not be surprised to take out
yesterday's lows, especially if we continue to see under performance
from ER2 and NQ. My full market wrap-up, strategy, and pivots for
today are on the Weblog; I'd expect a test of the 1429 S1 level on ES if
we start out with below average NYSE TICK readings. Overnight
resistance is 1434; Thursday VWAP is 1435; inability to sustain selling
in the AM should bring us to those levels, which would be consistent
with range bound trade. I'll be keeping an eye on early volume to
handicap the odds of such range bound action. The 1431 region is
also overnight support. If you get some free time, check out the post
on trader personality; some interesting findings from a recent pilot
research study.
I know of no more encouraging fact than the ability
of man to elevate his by a conscious endeavour.
Henry David Thoreau
50
3 - E-minis Case Studies
E B
You have a job You own a system and
people work for you
S I
You own a job Money works
for you
For those on the left side of the divide (E and S), Kiyosaki says that
they may never obtain true wealth. Conversely, those on the right side
of the divide (B and I) are supposedly following the only road to true
wealth.
2. Trend and Chop - Markets will oscillate up and down much more
often than trend. If you trade a method that succeeds only during
trending markets you’ll have the occasional big day, but any review of
the markets will show that the markets chop and churn more than they
trend. Be sure your trading method does not thrive only in a trending
market, and watch for signal services or strategies that make it a habit
of showing you how great it does on those big moves up or down.
Those are the easiest markets to trade – you hardly need a system for
that.
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3 - E-minis Case Studies
Leverage. One of the biggest advantages for E-mini trading is the high
amount of leverage they offer. And for day traders, this leverage is
increased still further. Let’s look at the actual leverage available: the
S&P E-mini trade unit is $50 times the S&P 500 Stock Index. Currently,
that calculation looks like this: $50 x 1430 = $71,500.
The margin to control $71.5 worth of stock is around $3,500 giving
you leverage of about 20:1 on your money. However, the day trading
margins are dropped significantly with $1,000 margins being common
and some reputable firms offering $500 margins. At these rates, you
can increase your intraday margin to greater than 100:1!
Scalability. There are certain types of trading that can only be used
on a small scale and cannot be translated to larger volumes as success
occurs and larger position sizes are required. But E-mini index
trading in general and S&P E-mini trading in particular are highly
scaleable. Getting virtually no-slippage fills on 200 S&P E-mini
contracts is an extreme advantage.
Success or failure
In the world of academics, mistakes are perceived as bad and to be
avoided. For the first twenty-two years of your life you are taught that
mistakes are bad and embarrassing, when in fact mistakes are simply
opportunities to learn something new.
The more mistakes a person makes, the more they will have
learned and the greater chance they will have of succeeding on their
next try. The key, however, is to learn from your mistakes and never
make the same mistake twice.
Most people are afraid to fail. They worry constantly about not
meeting expectations, making a mistake, or trying something new.
Because of this, many never get started on the path toward reaching
their goals and thus assure themselves of the very thing they are afraid
of - failure.
In order to become a successful trader you will likely have to 'pay
your dues.' You will likely have to fail a few times and learn from your
lessons; only then will you be able to come through a winner. While
you don't have to take wild chances, you do have to take calculated
and educated risks.
Thomas Edison would have never invented the light bulb if he did
not take this principle to heart. Edison failed more than 10,000 times
before he found the filament that would create light for a sustained
period of time.
He did not view these as failures, however. On the 6,635th try to
find a proper filament for the light bulb, Edison did not see himself
has having failed 6,634 times. He reframed the situation so that to him
he had successfully eliminated 6,643 possibilities, refining and
narrowing his search as he proceeded, drawing him closer and closer
to his goal.
56
4.
BONUS SECTION
MORE INFORMATION
ABOUT TRADING E-MINIS
Daisetz Suzuki
How to Trade E-minis
58
4 - Bonus Section
For example, this 500 tick chart of the S&P 500 E-mini futures (ES)
shows price action moving through the pivotal grid of 25% - 50% - 75%
of measure-period range levels. In this case it's the all-session view.
Price action below the 25% level is usually sustained during bearish
trend moves. Price action above the 75% level is usually sustained
during bullish trend moves. Price action tends to pause or turn at the
various grid levels in between.
Summary
Whatever actual reason(s) dynamic pivot levels affect current and
future price action in a given market is irrelevant. The visible fact exists
that price action across all financial markets do adhere to specific,
repeated patterns when it comes to measured retracements of all
For a free DVD and access to a free webinar go to
59 www.21stcenturyeminis.com.au
How to Trade E-minis
60
4 - Bonus Section
If you don't like what you see, 21st Century Eminis will
refund your money with no questions asked.
62
4 - Bonus Section
64
4 - Bonus Section
66
4 - Bonus Section
68
5.
E-MINI GLOSSARY
HANDY INFORMATION
AND TERMINOLOGY IN REGARD
TO TRADING E-MINIS
David Bach
How to Trade E-minis
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5 - E-mini Glossary
The notional value of one contract is US$50 times the value of the
S&P 500 stock index. It was introduced by the CME in 1998 after the
value of the existing S&P contract (then valued at $500 times the index,
or over $500,000 at the time) became too large for many small traders.
The E-mini has quickly become the most popular equity index
futures contract in the world. The original (‘big’) S&P contract was
subsequently split 2:1, bringing it to $250 times the index. Hedge funds
often prefer trading the E-mini over the big S&P since the latter still
uses the open-outcry pit trading method, with its inherent delays,
versus the all-electronic Globex system.
ETFs. Exchange-Traded Funds
Exit Strategies. Money management is one of the most important (and
least understood) aspects of trading. Many traders, for instance, enter
a trade without any kind of exit strategy and are therefore more likely
to take premature profits, or worse, run losses. Traders need to
understand what exits are available to them and know how to create
an exit strategy that will help minimise losses and lock in profits.
Making an Exit There are obviously only two ways you can get out
of a trade: by taking a loss or by making a gain. When talking about
exit strategies, we use the terms take-profit and stop-loss orders to
refer to the kind of exit being made. Sometimes these terms are
abbreviated as ‘T/P’ and ‘S/L’ by traders.
Stop-Loss (S/L) Stop-losses, or stops, are orders you can place with
your broker to sell equities automatically at a certain point, or price.
When this point is reached, the stop-loss will immediately be
converted into a market order to sell. These can be helpful in
minimising losses if the market moves quickly against you.
Developing an Exit Strategy. There are three things that must be
considered when developing an exit strategy. The first question you
should ask yourself is, "How long am I planning on being in this
trade?" Secondly, "How much risk am I willing to take?" And finally,
"Where do I want to get out?"
Conclusion Exit strategies and other money management
techniques can greatly enhance your trading by eliminating emotion
and reducing risk. Before you enter a trade, consider the three
questions listed above and set a point at which you will sell for a loss,
and a point at which you will sell for a gain.
Fibonacci signals. After making sustained moves in one direction,
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5 - E-mini Glossary
markets tend to retrace a part of that move before resuming the move.
Fibonacci levels provide insights used to forecast support levels and
price targets, based on the strength of the move. Levels are generated
using mathematical ratios discovered by Leonardo Fibonacci in the
12th century.
The Fibonacci series is 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144... and
so on. The sum of any 2 consecutive numbers is the same as the next
bigger number. The ratio between any number and the next higher
number approximates 0.618. The ratio between any number and the
next lower number is roughly 1.618. The number 1.618 is known as
the 'Golden Mean'. Elliot Waves are based on Fibonacci numbers.
The most commonly used Fibonnaci levels are 61.8%, 38% and 50%.
In a strong market, the typical retracement will usually be at least 38%
and may go as high as 62%.
If the market has shown respect in the past to a Fibonacci grid
drawn on the chart, the chances are much higher that it will also
respect those levels in the future market action.
FTSE 100. The FTSE 100 Index is a capitalisation-weighted index of
the 100 most highly capitalised companies traded on the London Stock
Exchange. The equities use an investibility weighting in the index
calculation.
Futures contracts. A futures contract is a standardised, transferable,
exchange-traded contract that requires delivery of a commodity, bond,
currency, or stock index, at a specified price, on a specified future
date.
Unlike options, futures convey an obligation to buy. The risk to the
holder is unlimited, and because the payoff pattern is symmetrical, the
risk to the seller is unlimited as well. Dollars lost and gained by each
party on a futures contract are equal and opposite. In other words,
futures-trading is a zero-sum game.
Futures contracts are forward contracts, meaning they represent a
pledge to make a certain transaction at a future date. The exchange of
assets occurs on the date specified in the contract.
Futures are distinguished from generic forward contracts in that
they contain standardised terms, trade on a formal exchange, are
regulated by overseeing agencies, and are guaranteed by clearing-
houses.
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5 - E-mini Glossary
The chart will show the S&P 500 index, with the performance of
the target stock or fund overlaid. The components of the S&P 500 are
selected by committee. This is similar to the Dow 30, but different from
others such as the Russell 1000, which are strictly rules-based.
SEM. ‘Sudden exhaustive move’, based on fear and greed.
Short selling. Short selling involves the selling of a security that the
seller does not own, or any sale that is completed by the delivery of a
security borrowed by the seller. Short sellers assume that they will be
able to buy the stock at a lower amount than the price at which they
sold short. Selling short is the opposite of going long. That is, short
sellers make money if the stock goes down in price. It is an advanced
trading strategy with many unique risks and pitfalls which novice
investors are advised to avoid.
Short selling is neither terribly complex nor entirely simple, though
it is a concept that many investors have trouble understanding. In
general, people think of investing as buying an asset, holding it while
it appreciates in value, and then eventually selling to make a profit.
Shorting is the opposite: an investor makes money only when a
shorted security falls in value.
Short selling involves many unique risks and pitfalls to be wary of.
The mechanics of a short sale are relatively complicated compared to a
normal transaction. And, as always, the investor faces high risks for
potentially high returns. It's essential that you understand how the
whole process works before you get involved.
In finance, short selling or ‘shorting’ is a way to profit from the
decline in price of a security, such as stock or a bond.
Most investors ‘go long’ on an investment, hoping that price will
rise. To profit from the stock price going down, a short seller can
borrow a security and sell it, expecting that it will decrease in value so
that they can buy it back at a lower price and keep the difference.
For example, assume that shares in XYZ Company currently sell for
$10 per share. A short seller would borrow 100 shares of XYZ
Company, and then immediately sell those shares for a total of $1000.
If the price of XYZ shares later falls to $8 per share, the short seller
would then buy 100 shares back for $800, return the shares to their
original owner and make a $200 profit.
This practice has the potential for an unlimited loss, for example,
if the shares of XYZ that one borrowed and sold in fact went up to
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5 - E-mini Glossary
$25, the short seller would have to buy back all the shares at $2500,
losing $1500.
However, the term ‘short selling’ or ‘being short’ is often used as a
blanket term for all those strategies which allow an investor to gain
from the decline in price of a security.
Those strategies include buying options known as puts. In fact,
what is many times labelled short selling is options or futures activity,
since this activity greatly magnifies the gain that results from a
securities price loss.
For example, if the next earnings release of XYZ company is going
to show that its profits declined somewhat in some of its divisions, its
stock might decline only 5 percent when that information is released.
Someone within the company who wants to trade in inside
information however would probably not be satisfied with only a 5
percent gain on his short sell and instead would buy put options or
other derivatives or futures to gain possibly 20 or more percent on the
decline in the stock price of XYZ.
Short selling concept. Short selling is the opposite of ‘going long’.
The short seller takes a fundamentally negative, or ‘bearish’ stance,
anticipating that the price of the shorted stock will fall (not rise as in
long buying), and it will be possible to buy at a lower price whatever
was sold, thereby making a profit (‘selling high and buying low’ to
reverse the adage).
The act of buying back the shares that were sold short is called
'covering the short'. Day traders and hedge funds will often use short
selling to allow them to profit on trading in stocks that they believe
are overvalued, just as traditional long investors attempt to profit on
stocks that are undervalued by buying those stocks.
The short seller owes his broker and must repay the shortage when
he covers his position. Technically, the broker usually in turn has
borrowed the shares from some other investor who is holding his
shares long; the broker itself seldom actually purchases the shares to
loan to the short seller.
Example: Borrowing 100 shares from someone, selling them
immediately at $1.00 - when the stock drops, you buy them back for
$0.50 and give the 100 shares back to the original owner keeping the
profit.
In the U.S., in order to sell stocks short, the seller must arrange for
For a free DVD and access to a free webinar go to
79 www.21stcenturyeminis.com.au
How to Trade E-minis
processes are the time series, which has a time interval domain, and
the random field, which has a domain over a region of space.
Familiar examples of processes modelled as stochastic time series
include stock market and exchange rate fluctuations, signals such as
speech, audio and video - medical data such as a patient's EKG, EEG,
blood pressure or temperature; and random movement such as
Brownian motion or random walks. Examples of random fields
include static images, random terrain (landscapes), or composition
variations of an inhomogeneous material.
Spread trading. Futures spread (or spread) is a long-short futures
position that provides exposure to a spread or difference in two
prices. If both futures are traded on the same exchange, two types of
spreads are possible:
An intracommodity spread (or calendar spread) is long one future
and short another. Both have the same underlier, but they have
different maturities.
An intercommodity spread is a long-short position in futures on
different underliers. Both typically have the same maturity.
Spreads can also be constructed with futures traded on different
exchanges. Typically this is done using futures on the same underlier,
either to earn arbitrage profits or, in the case of commodity or energy
underliers, to create an exposure to price spreads between two
geographically separate delivery points.
Spread trading is the trading of futures spreads. For speculators,
spread-trading offers reduced risk compared to trading outright
futures. This is because the long and short futures that comprise a
spread are usually correlated, so they tend to hedge one another. For
this reason, exchanges generally have less strict margin requirements
for futures spreads.
Stop-Loss Order. An order placed with a broker to sell a security when
it reaches a certain price. It is designed to limit an investor's loss on a
security position. Also known as a "stop order" or "stop-market
order". In other words, setting a stop-loss order for 10% below the
price you paid for the stock would limit your loss to 10%.
It is also a great idea to use a stop order before you leave for
holidays or enter a situation in which you will be unable to watch your
stocks for an extended period of time.
E-mini testimonials
”Thanks for the amazing opportunity you have offered me. I
have always been interested in the trading game but after
reading a lot of information over the years and doing a fair bit of
research, I didn’t even know where to begin when it came to
getting started trading the share market.
All things pointed to a fantastic opportunity to make vast
amounts of money through investing in the market but that only
came with time and extremely high risk, always leading me to
inaction.
You have really made the learning curve a simple one with
your simulation trading dome so that I can learn to become a
confident professional trader with time but little risk. I really enjoy
ultimately having my “hand held” through each and every trade
you take, along with being able to chat live during trading and
having all my questions answered there and then.
Of course the highlight is watching my account grow with your
money management system and knowing that each day is
bringing me closer to my financial and lifestyle goals. Ultimately, I
am truly enjoying being part of a dynamic industry which keeps
me intensely interested day after day……what more could you
ask of a career!! Keep up the good work because you are
changing peoples futures…..”
Amy Mochi
85
5 - E-mini Testimonials
“Just over a year ago I decided that enough was enough, there
had to be a better way to earn a great income and support my
family than the 70 hr /week executive job I had become used to. I
began searching for a way to spend so much more quality time
with my wife and kids and live my life finally the way I wanted to.
At 32 years of age I could see what working life lay ahead of
me and I was determined to find a better solution. Interested in
the stock market for years I finally gained the courage to
research in depth the various financial instruments and markets,
searching for the vehicle best to begin my trading
apprenticeship.
As a complete beginner, it was overwhelming to digest the
amount of information out there and to know where in the world
to start. I read so many books and looked at so many courses,
products and online trading rooms it was ridiculous! And who
knows, many of these products / services may have been good,
but the problem was that I had zero hours of experience in the
market and therefore had absolutely no reference mark or point
of comparison to effectively measure them from, essentially
leaving me a sitting duck to being scammed! I worked out real
fast that what I really needed was a mentor.
An actual professional trader that has made a lot of money
(and is still making a lot of money!) able to show a complete
beginner the ropes, dramatically shorten the learning curve and
explain in simple language the nature of the market. Fortunately I
didn't waste too much time or money before I found David
Loughnan, a professional trader right here in Australia who was
prepared to take me on as a student. With the statistics of
trading survival against me, I began to gain the necessary
experience trading with Dave while staying determined to
become one of the few traders that make it beyond their first
year.
I can't even begin to describe how much I have learned from
David about trading. Well, 2008 will go down as one of the most
historic years ever in the stock market ( I certainly picked an
interesting year to start trading – who would of knew! ) and I am
still trading now in my second year learning the craft under
Dave's guidance. I am looking forward to a very successful year
trading the E-mini markets with Dave and I feel confident that my
dream lifestyle is now closer than ever.
Michael B
87
5 - E-mini Testimonials
89
Index
90
How to Trade E-minis
Valuable topics
covered in the Live
Market Online E-Mini
Training Class include
63
What
exactly are Mini S&P
500 Futures? 9
is an E-Mini? 3-6
is the cost of trading
E-minis? 32
is the most I can
lose on any given
trade? 34
is the next step? 68
is the Special
Opening Quotation,
or SOQ? 9
it takes to be a
consistent winning
E-mini trader 35
start up capital will I
need? 34
to include in your
Trading Plan 38
type of people are
91