Emini Trading Techniques Explained for Beginners

It is a requisite that you understand the basics of day trading before you purchase my course. If you are unfamiliar with the S&P 500 Eminis or terms and phrases like Ticks, Margins, Contracts, etc. then read on. I am going to give you the basics. You can find definitions to common terms on my Glossary Page.

Realize, however it’s not entirely necessary to know the complete ins and outs. Most of us really don’t know how our cars start in the morning. Some of us (like me) don’t even care; I just care that it starts!

That said, here are a few things you need to know.

First off, I am a Stock Index Trader. A Stock Index is an average price of the stocks that are included in that index. For example: You have probably heard of the “DOW”—it’s talked about on the news any time it has a large move up or down. Well the Dow, or its complete name, The Dow Jones Industrial Average, is really the average price of the 30 stocks in its index. It’s price-weighted, meaning some stocks in the index have more “pull” than the others.

I trade the S&P 500 E-minis. This is a Stock Index of Standard & Poor’s 500 stocks. It, like the Dow, is price weighted—some of the stocks have more “weight” or "pull" than others meaning some stocks move the index more than others.

Because the S&P 500 is a “broad” market, it is watched quite closely by a diverse group of interested investors. Many other investment vehicles (mutual funds, IRAs, etc.) gauge their performance to the S&P 500.

I prefer to trade the S&P 500 Eminis as opposed to the “big” S&P 500. The “big” S&P 500 is still traded in an actual “open outcry” Pit in Chicago, at the Chicago Mercantile Exchange, www.cme.com. To trade one contract of the big S&P requires roughly 25 thousand dollars margin per contract.

The S&P 500 E mini is a totally electronically traded market, Hence the “E” in E minis. It is also traded in fractions of the Big S&P, hence MINIS. The margin requirements on the Emini contracts are usually $500 to $1000. The E-minis are a separate market from the big S&P, but the Eminis usually mirror the performance of the Big S&P.

The S&P 500 Eminis Futures Market

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Although the S&P 500 Eminis are a stock index, they are not traded at the stock market. The S&P 500 is a Futures Market, and therefore you buy and sell future contracts. A futures contract is an agreement between a buyer and seller to deliver commodities by a certain day. For example, if you bought a futures contract of corn, and you held your contract to expiration (delivery) you would be physically delivered your corn. Of course, you probably didn’t buy the corn to take delivery of 5000 bushels yourself. More than likely you speculated future prices of corn to go up in value so you bought it only to sell at a later date, before expiration. You can buy and sell any futures contract any time you want, you are not obligated to hold onto it. The good news is, the S&P 500 is a CASH MARKET. Nothing really gets delivered. At expiration you are simply profitable or not. It’s traded as a futures contract to give futures traders the opportunity to trade a stock index. I mean, who really wants to day trade corn anyway.

You are not limited to trade just the S&P 500 Eminis. There are several other Emini markets available. You can trade Dow Minis, E Russell Minis, NASDAQ Minis. The Tick Trader Techniques work for all the Emini markets.

The reason I trade the S&P 500 E-minis, is because it is very liquid—meaning it has a lot of volume and a lot of action. A lot of volume means we can get in and out very quickly.

"Tick Trading"

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The minimum price movement the S&P 500 Eminis can make is called a TICK. A Tick is worth $12.50 (per contract). 4 ticks make a complete point in the S&P Eminis, meaning one point is worth $50.00 (per contract). You can trade as many contracts as you like, providing you have the trading capital to do so. To trade the S&P Eminis you are going to have to open up a Futures Trading Account with a Futures Broker. It’s a very easy process, just fill out a bunch of forms and mail a check into your account.

Your broker will tell you how much MARGIN is required to trade the S&P 500 Eminis. For day trading, the margins are usually $500.00 to $1000.00 per contract. So a $20,000.00 account can trade 20 to 40 contracts. Margin is really a “good faith deposit” that protects your broker in case your trade moves against you. That “deposit” gets returned to you once you close out the trade.

As Tick Trader’s we are targeting one S&P Emini point a day. Remember, a point is $50 per contract. You need to decide how many contracts you are comfortable with. Please see my Business Plan chart which shows how starting off with 3 contracts can escalate to a 6 figure income in a couple short months!

The methods you will learn in my Emini Trading course will allow you make money when the market goes up and make money when the market goes down

When you speculate the market will go up, and you initiate a trade, it is called “going long” (good old fashioned buy low, sell high). First you BUY a contract to OPEN a new position. When the price reaches your target you SELL the contract to CLOSE the position.

It’s a little different when we speculate the market is going to go down. This is called "shorting the market". In this circumstance we will SELL to OPEN and BUY to CLOSE.

When going long we: BUY to OPEN And SELL to CLOSE

When shorting the market we: SELL to OPEN And BUY to CLOSE

Don’t allow yourself to get confused about shorting the market. It’s really quite simple as I will explain below.

Trading the S&P 500 E-minis

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Let me go into some detail. Trading the S&P 500 E-minis is a ZERO SUM GAME—meaning it is impossible for both players to win. When you buy a contract somebody had to sell it to you. If you win $1000.00 somebody lost $1000.00.

Here is an example of shorting to help you better understand. I am going to use a stock market trade for simplicity. Suppose Dell Computer is trading at $50 a share. You know that Dell's earnings report is coming out tomorrow and you speculate that Dell stocks will go down in value and you would like to profit from that downward movement. So you want to "Short 1000 shares”. In other words, sell the shares to someone else. But you don’t have any Dell shares to sell, so how can you do it??

You BORROW THEM from your broker. You call your broker and tell him (or her) that you wish to Short-sell 1000 shares of DELL at $50 a share. You then sell them to somebody (we’ll never know who it is) and $50,000 comes into YOUR ACCOUNT, (1000 shares x $50) but you can't spend that money! Remember you borrowed 1000 shares of Dell from your broker and he wants his shares back.

He doesn’t care at what price you get the shares; he just cares about getting them back.

The next day, Dell goes down to $45 a share. Great! You take $45,000 of the $50,000 you received from the short-sale and go buy 1000 shares on the open market at $45 a share. You give the broker back his shares, and you keep what’s left of the original $50,000, or $5,000.

That is just an illustrative story to help you better understand shorting. Of course, all this is done very quickly and electronically. You don’t actually call and ask to borrow shares. It’s all done for you—all you do is click the short button!

Remember: there is always two sides to your position. You either Buy to Open/ Sell to Close (meaning your going LONG) or Sell to Open / Buy to Close (going short)

That’s basically it. All you really need to know about it is that you can speculate the price will go down and make money if it does, just as easily as you can make money going up.

So far we've covered what we trade, why we trade it, and that we can make money going UP and we can make money going DOWN.

Charting Your Moves

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Let's look at a chart to see what it all looks like. This is a chart I created using a program called TradeStation. In my opinion it is the best charting program available. www.esignal.com is also quite good.

OHLC Chart – Open High Low Close

This is a 1 minute bar chart. Meaning, every bar is one minute worth of time. You will notice that every bar has a little “leg” to the left and to the right. The Leg to the Left is the Opening price of that bar and the leg to the right is the closing price. The top of the bar is the High of the bar and the bottom is the Low. That’s it! This, by the way is called an OHLC Chart – Open High Low Close.

Some people use “Candlestick” charts as opposed to OHLC. A Candlestick charts still show price action like the OHLC charts do, but they do it in a very unique way. You can read volumes of books on just Candlestick charting and what they mean. Personally, I stick with OHLC. They are very simple to read and easy to use.

I use a chart similar to this one to trade every day. I add a couple of “technical indicators” to my charts to help me determine which way the market will go. There are literally thousands of indicators you can use. Each indicator is unique in its own way and tries to help you determine what price action is going to do next.

In my Emini Daytrading Course, The Tick Trader, I use two basic, easy to learn indicators. I place these indicators right on the chart shown above and I know EXACTLY when to Go Long and when to Go Short.

What You Get With My Course

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My Tick Trader Course comes with a Comprehensive Manual and 2 DVDs with lots of videos. In my videos I show you exactly what to do and how to identify trade setups. I show “real” trades that I actually made. I do not cherry pick and only show the good trades! I show the winners and the losers. I teach you precise entry and exit techniques. In order for a trading course to work, it has to work TODAY. That’s why I always use current trades when teaching you. Watch my videos a few times and this will become crystal clear to you. Of course you will always have access to my Member’s Area where I will post daily videos to show the trades. You will learn from these trading videos even if you are a veteran trader.

Most of all you get ME with your purchase! I stand behind my methods. I want you to use this to make your living every day. If you ever have questions, just call me or email me. You will have my private email and my cell number.

I am here to help! But understand, after a week or two of videos and a little paper trading you won't need me anymore. You will have a life changing skill that you can use forever to earn an incredible living, trading just a few hours a week. I guarantee it!

Order Tick Trader Emini Trading Course Now