21 ST ST C CENTURY ENTURYPPUBLISHING 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!
“A STEP BY STEP, SIMPLE, POWERFUL & PRECISE STRATEGY”
Presented by 21st Century Eminis
EMINIS
How smart investors are making $1,000 to $5,000 USD per week trading Eminis, starting with as little as $5,000!
Disclaimer - Important Information The financial information in this book is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. Any 21st Century Eminis seminars held within Australia are conducted by fully licensed presenters in accordance with ASIC regulations. .
First published June 2009 Published by 21st Century Publishing Building 20, 75 Lorimer Street Docklands, Melbourne VIC 3006 Australia Tel: 1800 999 270 Fax: (03) 8456 5973 Email: customerservice@21stca.com.au Web: www.21stcenturyacademy.com www.21stcenturypublishing.com.au www.21stcenturyeducation.com.au www.21stcenturyeminis.com.au Copyright 2007-9 21st Century Publishing All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher National Library of Australia Cataloguing-in-Publication entry: How to make $1000 to $5000 per week trading E-minis starting with as little as $5000 ISBN 978-1-921458-28-6
Would you like to control your own financial future trading Eminis? Is the idea of making US$1,000 to US$5,000 per week trading the Emini 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. Some of the topics covered in this book include: • What are E-minis and why trading them has become so popular? • A step-by-step, simple, powerful and precise winning strategy. • How to achieve success in live simulated trading before trading with money. • How to trade professionally full or part time, anytime, anywhere and how to succeed with 100 percent online interactive training. 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 Eminis 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 3 E-mini Case Studies............................................................... 43 Trading E-minis - How Dennis does it.................................44, 45 How Bill Trades E-minis........................................................... 45 E-mini trader Glen’s three-step method for long-term E-mini trading success ......................................................46, 47 Only perfect practice makes perfect ..........................................47 Extracts from an E-mini traders diary................................... 48, 49 Robert Kiyosaki, financial information and financial leverage....... 50 Robert Kiyosaki's Cashflow Quadrant.......................................51 Five key trading tips that every e-Mini Futures trader should know .................................................................... 52, 53 E-minis - Making Leverage and Volatility Your Allies ............54, 55 Success or failure.....................................................................55 Most people are afraid to fail.....................................................56 Thomas Edison....................................................................... 56 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 5 E-mini Glossary and Terminology..................................... 69-83 5 E-mini Testimonials.......................................................... 84-87 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
A trading career in E-minis Are you sick of your day job, or are you are looking to change your career? Perhaps you should consider trading E-minis as a job or business. Trading E-minis offers many advantages over other forms of self-employed businesses. If you start up your own business, or buy a traditional business, you will have a significant outlay of maybe $100,000 and in many cases much more than that. A traditional business is very labour intensive, in other words you put a lot of time into it. You might work ten and twelve-hour days, six or even seven days a week in the beginning - what is the lifestyle like? Unless you absolutely love the business there is really very little lifestyle; it does not exist. You will need to employ staff in your business and having staff in a business is probably the biggest headache in business. Having staff is often like running an adult day care centre. The real challenge with that is with an adult day care centre, you would actually get paid to look after people whereas having staff in a business, you have to pay them. If your staff make mistakes, you have to look after them as well as bear the cost of their mistakes. You also have to pay them. What else is a traditional business? Do you have to work where you live? Your location could affect your lifestyle and it could be expensive if you have to live in a city. Another drawback with owning a business is that you have got to have stock which can often become damaged and outdated. That stock usually ties up significant amounts of money. People can have $50,000$70,000 in stock just sitting on the shelf not earning income. Theft can be a big problem as well as fraud, insurance, maintenance and countless other things. What about resale value? Is the business very liquid? In other words, if you paid $100,000 for a traditional business and you needed the $100,000 back quickly, could you cash it in by Tuesday? Could you cash it in within five-minutes? Could you cash it in within five years? Your likelihood of getting the same as what you paid for the business is often very small. Sometimes if you know how to grow businesses you can make money out of them, but often you may 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.
Why trade E-minis? E-minis are cutting-edge products designed for the active trader who wants to trade electronically and who likes to have maximum control and highest profit potential. You can use E-mini stock index futures to: • Actively trade stock indexes • Hedge your portfolio or other investments • Gain broad market exposure at relatively low cost
3
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
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.
Linear graph of the S&P 500 Index from 1950 4
1 - What Are E-minis?
Many index funds and exchange-traded funds track the performance of the S&P 500 by holding the same stocks as the index, in the same proportions, and thus attempting to match its performance (before fees and expenses). Partly because of this, a company which has its stock added to the list may see a boost in its stock price as the managers of the mutual funds must purchase that company's stock in order to match the funds' composition to that of the S&P 500 index. In stock and mutual fund performance charts, the S&P 500 index is often used as a baseline for comparison. 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. E-mini® S&P 500® futures provide investors with an innovative tool for accessing and managing risks on stock market investments. Fully electronic and one-fifth the size of a standard CME S&P 500® futures contract, it closely tracks the price movements of the S&P 500® Index, the premier benchmark of stock market performance. More than 1 million contracts trade on an average day, making E-minis one of the most highly-traded futures contracts in the world and reinforcing CME's (Chicago Mercantile Exchange) position as the world's leading provider of stock-index futures. E-Mini S&P, often abbreviated to ‘E-mini’ and designated by the commodity ticker symbol ES, is a stock market index futures contract traded on the Chicago Mercantile Exchange's Globex electronic trading platform. The notional value of one contract is US$50 times the value of the S&P 500 stock index. It was introduced by the Chicago Mercantile Exchange in 1998 after the value of the existing S&P contract (at the time valued at $500 times the index, or over $500,000) 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. 5
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
E-minis are bought and sold 500,000 times on a typical trading day. Many analysts believe E-minis future trading is the fastest growing product available. E-minis are growing and becoming more important to both investors and the marketplace because they allow small investors to access
what can be a lucrative income if they become successful at trading.
An income of US$1,000 to US$5,000 per week is a pittance compared to what some E-mini traders can earn.
Some benefits of E-minis • 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. This means you do not need a large amount of capital to commence trading E-minis. • E-minis provide a smaller contract well suited for a broad range of individual and institutional customer needs. • 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. • E-minis accommodate a variety of strategies such as hedging to 6
What types of people are trading E-minis? In Australia at the time of going to press there were more than 500 people actively trading E-minis with interest in the market growing exponentially. The number of active traders is expected to expand to thousands in the next year or two as many investors and share traders discover that it is simple to profit from trading E-minis. The E-minis market is traded by many people, including amateur and professional traders as well as Pivot Traders, Gap Traders and Pitt Traders. Trading E-minis offers people the chance to get out of their comfort zone and to do something new. It is interesting to look at the demographics of a well-attended recent E-mini seminar on the Gold Coast. The vast majority attending were casually attired in shorts and thongs. Around 25 percent of those attending were female, a significant number were already full-time share market traders and a large number were successful property investors. All of these people were seriously assessing E-minis as a further alternate trading or investment opportunity.
1 - What Are E-minis?
protect against adverse price moves, spreading with other stockindex futures and gaining broad market exposure. This can help to minimise losses for small investors. • The E-minis market is a level playing field offering open, fair and transparent markets. • E-minis offer potentially lower trading costs than trading a basket of equities or Exchange-Traded Funds (ETFs).
The Dow Jones In this book we will often refer to the Dow or Dow Jones. For readers who are not familiar with these terms some definitions of the Dow Jones are: • A price-weighted average of 30 actively traded blue-chip stocks. It is the oldest and most widely used of all stock market indicators. • An indicator of stock market prices; based on the share values of 30 blue-chip stocks listed on the New York Stock Exchange; "the Dow Jones Industrial Average is the most widely cited indicator of how the stock market is doing"
Dow Jones Industrial Average monthly price from 1900 7
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Advantages of Trading Mini S&P 500 Futures and Options
Trading Mini S&P 500 futures and options offers investors a number of distinct advantages:
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?
What, exactly are Mini S&P 500 Futures? • Mini S&P 500 futures are legally binding agreements to buy or sell the cash value of the S&P 500 Index at a specific future date. • The contracts are valued at 50 x the futures price. • For example, if the Mini S&P 500 futures price is at 900.00, the value of the contract is $45,000 ($50 x 900.00). • The minimum price movement of the futures or options contracts is called a ‘tick’. • The tick value is .25 index points, or $12.50 per contract. • This means that if the futures contract moves the minimum price increment (one tick), say, from 1300.00 to 1300.25, a long (buying) position would be credited $12.50; a short (selling) position would be debited $12.50. • All futures positions (and all short option positions) require posting of a performance bond (or margin). • Positions are marked-to-the-market daily. • Additional deposits into the margin account may be required beyond the initial amount if your position moves against you. • Mini S&P 500 contracts are cash settled, just like the Standard S&P 500; there is no delivery of the individual stocks. • Even better, Mini S&P 500 daily settlements and quarterly expirations will use the exact same price as the S&P 500. • The same daily settlement prices allow Mini contracts to benefit from the liquidity of the S&P 500 futures. • Like the S&P 500, which is settled using a Special Opening Quotation (SOQ), all Mini S&P 500 positions are settled in cash to the same Special Opening Quotation on the third Friday of the quarterly contract month.
What is the Special Opening Quotation, or SOQ?
The final settlement price is an SOQ of the S&P 500 Index based on the opening prices of the component stocks in the Index, or on the last sale price of a stock that does not open for trading on the regularly scheduled day of final settlement. Additional deposits into the margin account may be required beyond the initial amount if your position moves against you. 9
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Because E-minis are futures, they offer some unique and very important additional features: 1. The capital requirement to trade is low relative to stock margin requirements (minimum $1,000) 2. Returns can be quite substantial 3. You have the opportunity for profitable trading strategies regardless of market direction or volatility 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.
Equities investors like the great ‘tradability’ of Eminis. Besides having very tight bid/offer spreads, they are: • • • • • • • • •
10
Highly liquid with high leverage No uptick rule, easy to short 100 percent electronic - no trading pits and brokers Sized for the individual investor Fast moving, exciting and stimulating to trade Backed by a strong financial safeguard system Scandal and corruption free Monitoring only one index instead of dozens of stocks Less time consuming
1 - What Are E-minis?
Trading the E-mini S&P 500 - an example Let's say you are an individual investor who is bullish on the stock market. You have been following daily activity in financial newspapers and on financial news stations. You want to become involved in the stock market; however, you have only The E-mini can be traded around $10,000 to invest. You see every day in the at short intervals - it can newspaper that the market, as tracked go up or down 1 point in by the S&P 500, is moving and you 1-minute want to be a part of it. You have traded stocks before, but you have An average trade lasts 1015 minutes decided that being a stock picker is too difficult and time consuming. E-minis are a simple You also realise that you would process - the market can have to limit your investment to just only go up or down - a one or two individual stocks. Or, you 50/50 probability could buy a mutual fund; however, With training you can that only allows you to value your improve your chances of assets based on the closing price each success day, thus losing the trading In order to be able to opportunity within the day. You might instead consider going properly understand these long on Mini S&P 500 futures charts and how to use contracts to profit from your bullish them to trade E-minis we recommend that you outlook. Up to this point, S&P 500 attend an 21st Century futures have been out of your reach, Eminis training seminar with the minimum requirement to put that are conducted on a up far exceeding your total planned regular basis all over investment. Australia, New Zealand Here is your opportunity. E-mini and other parts of the S&P 500 contracts allow you to put world. your investment dollars to work by purchasing E-mini S&P 500 futures. Now you can participate in the leading stock index futures market at a fraction of the cost. This has made it possible for small investors to commence trading E-minis for as little as a $5,000 with the opportunity to generate profits of US$1,000 - US$5,000 per week. 11
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
The electronically traded CBOT (The Chicago Board of Trade) mini-sized Dow The Chicago Board of Trade is a global commodity futures exchange trading treasury bonds, corn, soybean, wheat, mini-sized Dow, gold, silver and more. For stock index futures traders, CBOT Mini-Sized Dow Futures offer: FEATURES
BENEFITS
BENCHMARK APPEAL
Capture the performance of the Dow - the most widely recognised stock index in the world.
TRADING PLATFORM
Fully electronic with a level playing field. Trade the Dow, anywhere, almost anytime
CONTRACT VALUE
Comparable to other mini-sized stock index futures. $5 x current price of CBOT minisized 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 VOLATILITY
Recent average daily range over 4 months: $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 TRACKING
The DJIA is a price-weighted average of 30 of the largest, most liquid US stocks. Dow moves can be easily anticipated by following price moves in these widelyquoted stocks.
DOW QUOTES
Free real-time depth of market quotes available at www.cbot.com/dow
12
1 - What Are E-minis?
Some Facts About the S&P 500 Index The S&P 500 Index represents about 70 percent of total domestic U.S. equity market capitalisation. S&P identifies important industry sectors within the U.S. equity market, approximates their relative importance in terms of market capitalisation and then allocates a representative sample of stocks within each sector of the S&P 500. The Index is capitalisation weighted (shares outstanding times stock price); each company's influence on Index performance is directly proportional to its market value. The daily Index values reported in the media are exclusive of dividend income, i.e. they reflect only price action of the underlying component stocks.
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 all13
For a free DVD and access to a free webinar go to 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 alltime 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 thirty-point gain the previous day by setting a new intra-day record of 1,555.10 points, its first of the 21st century.
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. 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.
E-mini Case Study
How Marcus made $9,000 in a night with a $4,000 outlay
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.
One morning with the market having sold off for three straight days, a friend of ours, Marcus, decided to bet the market would rally. Rather than buy the cash index (i.e. through funds or ETFs that track the SP 500), Marcus decided to trade the index futures, where he has far more margin power and where nearly round-the-clock trading enables him to buy before the open of the cash market. His early morning price was 1041.50, or, as it turned out, 5 points below the SP 500's opening price. Marcus bought the E-mini SP contract rather than the regular SP index contract. The E-mini is 1/5 the contract size and requires far less money down on margin. A single regular SP contract, which is valued at $250 per point (or about $260,000 on a 1041.50 price), requires about $20,000 in margin. An E-mini contract, valued at $50 per point, requires about $4,000 - and that is if you are holding overnight. If you are day-trading, as Marcus was, you can buy up to 49 E-mini contracts on just $500 margin using Global Futures Exchange. Marcus bought specific date E-mini SP contracts, and, at the same time, entered an intraday protective stop on his E-mini position to 15
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
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.
Background on the E-mini Contract
The above case study example is not aimed at enticing you to run out and start blindly trading E-minis. Rather, it is meant to provide a simple illustration of how E-minis are traded and why they have become such popular trading instruments. Since its introduction by the Chicago Mercantile Exchange in 1997, the E-mini equity index product suite today includes the E-mini SP 500, E-mini NASDAQ-100 and the E-mini Russell 2000. Based on their trading volume, these smaller-sized products are the fastest growing in CME history at an average of 130 percent over the past three years. One trader uses the E-minis (preferring to focus on the S&P and NASDAQ rather than the Russell) both as a trading instrument and a gauge for determining market direction. As a trading instrument, the example of Marcus's trading experience illustrates how E-minis can be profitable. As a market gauge, the sheer volume of trading makes it an ideal tool for studying how traders are viewing the broader indices. More than 139 million E-mini SP 500 contracts were traded in the first 10 months of a recent year, compared to just under 17 million of the big SP 500 contracts. On the NASDAQ side, the ratio was 56.9 million for the mini versus 3.7 million for the large contract. Given the volume, along with the virtually round-the-clock trading, E-mini futures can impact and anticipate the movement of the cash equity indices. Thus, people investing in stocks or funds that track the SP 500 or NASDAQ 100 may do well to follow the E-minis. E-minis trade on the CME's GLOBEX electronic trading platform, which is accessible to traders either directly through a CME-certified front-end system or through a futures broker online or by phone. The symbols vary by quote system, but on the CME's system they are ES for the E-mini SP and NQ for E-mini NASDAQ - plus a letter for the expiration month (i.e., NQZ for December). The minimum price movement of the SP E-mini contract, called a 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 highprobability 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.
17
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
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.
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
18
2.
TRADING E-MINIS
“The creation of a thousand forests is one single acorn.”
Emerson
How to Trade E-minis
An Introduction to Trading E-minis Trading E-minis is an attractive investment option for people to use to create financial independence in the 21st Century. This introduction is intended to demonstrate the advantages of trading E-minis. Before attempting to trade E-minis we recommend that you attend a 21st Century Eminis training seminar that are conducted on a regular basis all over Australia, New Zealand and other parts of the world.
For dates and locations see www.21stcenturyeminis.com.au
Trading E-minis has many advantages over other forms of trading and share investment including: • E-minis offer volatility and liquidity. A market needs both of these factors to be present in order to create market opportunities and trades. • There are no gaps in the E-minis market and the market offers risk protection. • There are no E-mini market makers. • Trading E-minis offers low commissions - only US$5.00 round trip commissions. • The E-minis market only needs to move 1 point to make a 5% return. • The E-minis market offers excellent profit potential and 70/1 leverage. • The E-minis market offers a genuine chance to make a 5% to 10% return on investment daily. • The E-minis market is very predictable. • When trading E-minis there is just one simple choice and you only need to be better than 50/50 to make a profit. 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.
To trade E-minis we use three basic indicators.
1. MACD (Moving Average Convergence Divergence). Briefly this technique takes the difference between two exponential moving averages (EMA's) with different periods. This produces what is generally referred to as an oscillator. An oscillator is so named because the resulting curve swings back and forth across the zero line. This series is plotted as a solid line. Then a 9-day EMA of the difference is plotted as a dotted line. The 9-day EMA trails the primary series by just a bit, and trades are signalled whenever the solid line crosses the dotted line. 2. Stochastic. In the mathematics of probability, a stochastic process or random process is a process that can be described by a probability distribution. The two most common types of stochastic processes are the time series, which has a time interval domain, and the random field, which has a domain over a region of space. 3. Price gaps and variations. Market gaps are common during times of volatility.
E-minis traders use a range of charts to make informed decisions In order to be able to properly understand these charts and how to use them to trade E-minis we recommend that you attend an 21st Century Eminis training seminar that are conducted on a regular basis all over Australia, New Zealand and other parts of the world. 21
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis Candle sticks
A candle stick is a price chart that displays the high, low, open, and close for a security each day over a specified period of time. The candle sticks paint us a picture
Understanding candle sticks the highest price for the day open or closing price body is black (or red) if stock closed lower. body is white or green if it closed higher open or closing price the lowest price for the day
22
2 - Trading E-minis
These charts shows buy and sell signals - matching W's and M's
MACD and Stochastic
This charts shows MACD and Stochastic trends
23
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Double tops
This charts shows 'exact double tops'
Technical double bottoms
This charts shows 'technical double bottoms'
24
2 - Trading E-minis Lower lows
This charts shows ''lower lows'
Because E-minis are futures, they offer some unique additional features: • The capital requirement to trade is low relative to stock margin • • • • •
•
25
requirements (minimum $1,000) Returns can be quite substantial - returns of US$1,000 to $5,000 per week and even higher are common You have the opportunity for profitable trading strategies regardless of market direction or volatility You can trade E-mini stock contracts as a day trader, simply with an eye to making a profit. But you can also use them as hedging tools or to get a particular kind of market exposure. For example, you may decide to sell these 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. For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade 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.
21st Century Eminis advice on how to profit from learning, understanding and trading the E-mini index. • E-minis are a smaller version of large share index contracts • Large share index contracts carry larger risks • A S&P big contract costs $350,000 and a 1-point movement represents $250 = 7.5% • For an E-mini contract $1,000 and 1-point = $50 = 7.5% • Because of high leverage if the index goes up 1-point you make $50 on a $1,000 contract - a 5% return • If you go short and the Index goes down 1-point you make a 5% return • The E-mini can be traded at short intervals - it can go up or down 1 point in 1-minute • An average trade lasts 10-15 minutes • E-minis are a simple process - the market can only go up or down a 50/50 probability • With training you can improve your chances of success • Commissions are only $5.00 per trade - $2.50 in and $2.50 out • There is no market maker • The E-mini market has $40 billion dollars per day liquidity • The E-mini market has no gaps 26
2 - Trading E-minis
• There is a point range of 12-20 points per day • 2 points in E-mini market = 10% ROI in minutes • The E-mini market has had exponential growth in 9 years - zero to $400 billion • E-mini trading is transparent - you can watch trading live • Our three 21st Century Eminis signals (T1, T2 and T3) will come up on an average of three times per session • Using three signals (T1, T2 and T3) there is an 85% probability of a 5% return • Experienced traders will be able to recognise and understand these No other financial signals which occur on average three product has gone from zero (when the CBOT times in three hours. introduced E-minis) to • Experienced traders recognise and $40 billion turnover in understand that it usually takes 8-15 9 years minutes for a trading pattern to form Daily trading of E-minis • Some people worry that a one-minute exceeds US$40 billion. trading window is insufficient time to make a trading decision - not so for experienced traders • Share Index trading has always been largely the preserve of fund managers by using futures share contracts as hedge instruments. Fund managers hedge their risks by taking an average position • A fund manager might have a $400,000 position in the market at a cost of $30,000 • E-minis offer simplicity of trades • E-minis trade as a one single item • How does the market rate E-minis? E-minis are widely accepted as the most successful financial product ever launched • No other financial product has gone from zero (when the CBOT introduced E-minis) to $40 billion turnover in 9 years • The large fund manager market is diminishing • With E-minis Index trading is no longer just for large traders • Daily trading of E-minis exceeds US$40 billion. 27
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade 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 manipulation
• For stocks - how will I manage my portfolio?
• For E-minis - no portfolio to manage
• For stocks - what research reports will I need I need to study?
• For E-minis - one simple choice • For E-minis - no skill your probability of success is 50/50, but by using 'signals' the chance of success in some cases is increased to 70 percent and more. • For E-minis - no reports to read because we are trading the top 500 stocks
• For stocks - how reliable are the accounting reports? • When trading stocks investors have to rely on financial information which may be misleading • People may be able to manipulate the market • Research may be very 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
How do E-minis compare to CFD's (Contracts for Differences)? • CFD’s are influenced by market makers • CFD Trading carries a high level of risk, therefore you should only speculate with money you can afford to lose • You will be charged interest • CFD prices can be very volatile and the resulting losses may require further payments to be made. It is not suitable for all customers and requires that you fully understand the risks involved, seeking independent advice if necessary. • CFD Trading is a way of trading shares or markets (e.g. FTSE 100 Index, Gold, FX). One of the key differences to share dealing is that you can potentially benefit from falling markets or share prices (as well as rising ones)
How do E-minis compare to Options?
• Options present all the challenges of CFD's plus you can take a call or put • You may be: in the money / at the money / out of the money • You have to decide if you will be a taker or a writer? • You have to decide if you will go naked or cover? • Options are affected by time decay
E-minis, ease of use versus options:
Rocket Science Factor - Options traders can call market correctly and still lose money because they must juggle four items: 1. Underlying price 3. Volatility
2. Strike price 4. Time decay
Futures traders care about only two things:
1. An advancing market, or 2. A declining market Futures have more constant order flow and are usually much more friendly regarding bid/offer spreads.
Trading hours
The US market trades from 1.00am - 8.00am Australian Eastern winter time, with a one hour break in the middle. 29
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
How can you be right more times than wrong? The key is to become an educated E-mini trader. • You need education to understand basic buy and sell signals. We provide education to teach people how to understand basic buy and sell signals on E-mini charts. • We provide education to enable people to trade using a live oneminute-chart. • You need access, preferably to a live trading room. We have a live trading room where you watch your trades and listen to our trader. • If you require more education in E-mini trading than this book covers, see the rear of this book for further information.
E-mini market profit potential • The E-mini market has a liquidity of US$40 billion per day • No gaps = Risk Management • Markets need some volatility to make markets the E-mini market volatility is 12 to 20 points per day • A 1 point gain = 5% • A 2 point gain = 10% • Investors can obtain returns of 5% - 10% in 10 minutes • The market has 100 percent transparency • There are no market makers - just point-spread • Commission is just US$5 per round trip • Results are published daily
30
2 - Trading E-minis
How do our 21st Century Eminis signals perform? Some real trading examples Following are monthly results from just two trade signals (T1 and T2) we announce every day to our E-mini traders. 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.
How do I make money trading E-minis? • • • • •
One E-mini index contract costs US$1,000 When the market moves 1 point this = US$12.50 A one point gain = US$50.00 = 5% ROI A two point gain = US$100.00 = 10% ROI With market volatility the market may gain 2 points in a time frame of 10-15 minutes
How do we identify signals? We use three basic indicators: 1. Price 2. MACD (Moving Average Convergence/Divergence) 3. Stochastic (see Glossary) 31
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Trading Signals - The Power of T3 • T3 signals uses a 3-minute chart • T3 trades usually occur during the first 2 hours of training • T3 trading in July/August in a recent year showed a gain of 24 points • T3 uses same entry definition as T1 and T2 results • Our three 21st Century Eminis signals (T1, T2 and T3) will come up on an average of three times per session • Using three signals (T1, T2 and T3) there is an 85% probability of a 5% return
What is the cost of trading E-minis?
The biggest cost to you is your initial education. Is this expensive? Compared to buying a lawn mowing franchise for instance, this represents excellent value. You can work for just a few hours a day and spend more time with your family. E-minis represent the opportunity for financial freedom. As a first step, watch the free E-mini DVD available to all readers of this book. For more details www.21stcenturyeminis.com.au
Money, Money, Money
In life too many people look for instant gratification. You will not get instant gratification by trading E-minis. Many traders focus too much on profit when trading E-minis. Good E-minis traders will forget about the profit and concentrate on winning trends, while amateur traders draw impulsive conclusions from small, limited experiences. E-mini trading tip
Practice before you commit. And when you do commit start with just one trade. 32
2 - Trading E-minis
When to enter the E-mini market • Identify where the Gap and the Pivots are on your charts • Wait for one of these points to be hit by price • Now wait for a buy or sell signal (confirmation candle) to confirm no more than 1 point away from the Pivot or Gap • For a buy signal, the price must confirm above the P.P. (Previous Price) • For a sell signal, price must confirm below the P.P. • Look to see if the signal is choppy • Enter the trade with a limit order at the closing price of the confirmation candle • If you do not get filled, do not chase the trade.
When to exit the E-mini market • With a 'bracket' of a 1.5 profit target and a 1.5 stop stop-loss, let the trade develop and automatically exit you. • A trailing out or a trailing stop can be utilised with this strategy, however be aware of other areas of support and resistance in the market such as other Pivots.
When not to enter an E-mini trade Do not enter a trade under adverse conditions. Do not for example: • Take the trade when other areas of support or resistance, such as highs, lows and gaps can threaten the trade. • Take the trade in congested conditions. • Trade around pending news. • Trade after 3.30pm New York time.
33
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Trading E-minis - some frequently asked questions What is the most I can lose on any given trade? If you use a 1.5-point stop on all your trades as we recommend the most you will lose on any trade is 7.5% of the investment you made on the trade plus commission to the broker. What start up capital will I need? We recommend that each trader starts off with a minimum of US$3,000 in his or her trading account. Will I be trading in Australian (AUD) or United States (USD) dollars? You will be trading in USD, however if you open your account with a recommended broker you will deposit AUD and trade in and out of the account in USD at the exchange rate of the day. At the end of each trading day you will receive a statement with your trades and account balance. 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. How many hours per day do I need to trade? We recommend you only trade 2 to 3 hours per day. This time frame each day will give you multiple trading opportunities for a 5% to 10% return per trade. Do I need a special computer system to trade the E-minis? You require a PC with Internet Access (High Speed Connection recommended) - Windows 98 Second Edition or newer 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
E-mini Money Management
It is recommended that as a potential trader you complete 15 successful paper trades over 20 trading days before committing real money and that you commence with one or two contracts and build your account slowly.
The Road to Riches
What it takes to be a consistent winning E-mini trader As a potential professional trader you should crave, consistent winning ways over weeks and months, trades that offer a high degree of success, trades that offer a high degree of low stress. This should be coupled with patience and discipline while avoiding fear and greed. There are signals that are successful 80 percent of the time - they are right in front of you, so it is up to you to capitalise on those signals.
Can I trade E-minis without day-trading them?
At 21st Century Eminis we are often asked questions similar to this one. Since E-Minis are similar to options on futures, isn't it possible to trade them on an out-month instead of waiting by the computer for a two-tick move? For instance, if I think NASDAQ is going to be 1,200 by the middle of November, can't I use November or December expirations and buy them now while they are relatively cheap? Yes, they are just mini futures contracts (they are not options on futures). E-mini's trade just like the full size contracts, except the dollar value is smaller and so are the margins. Everything you do with a futures contract you can do with a mini contract. In the case of Eminis you will just make or lose less money than if you had lower margin requirements.
E-mini trading - risk and reward
In order to make a profit trading E-minis traders will need to take some risks. There is no such thing as a holy grail when trading Eminis - it does not exist. E-mini traders need to be conscious and aware of how much risk they are prepared to take. Choppy trades with no support will reduce the chance of success to 50/50. 35
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Regular buying or selling with support will increase the chance of success to 60/40. When you trade E-minis (and even when you practice trading) ask yourself this basic question - what is the probability of success? Is it 50/ 50, 60/ 40, 80/ 20? When you simulate a trade, bear in mind that you are doing it without emotion. You need to be able to trade calmly and creatively. When you commence trading with real money, fear, greed and emotion come into play and there is a temptation to take low profitability trades because humans are greedy by nature. When trading E-minis you can profit by being patient. Practice patience and discipline. It is vital to healthy and successful trading.
Some simple advice for trading E-minis • Remember, the market does not care about you. • The market has no emotion and does not care whether you win or lose. • You must take responsibility for your trades, whether you win or lose. • The more knowledge you have of the E-mini market does not necessarily ensure success. • Some of the worlds' leading CEO's, accountants and analysts are the biggest losers. In many cases their knowledge of trades talks them out of trades. • Trading E-minis is a simple game of probabilities. • Without any skill you have a 50 / 50 chance of success. • If you are losing money, you are sabotaging 50/50 odds. • All great traders have suffered losses at some time. • Do not be concerned about just one single trade. • By practising paper trades, you can prove to yourself that success is possible.
36
2 - Trading E-minis
E-minis trading advice from a successful trader Andrew Barnett is a successful and regular trader in the E-minis market and is PS146 qualified and licensed according to ASICs requirements. Based on his own experience he offers these E-mini trading suggestions: • • • • • • • • • • •
• • • • • •
37
To succeed you need patience and diligence. You need to develop good quality trading habits. As a trader you should set goals and aim to earn money. The difference between professional traders and amateur traders as well as success and failure can be paper-thin. As a new and fresh trader you come to the E-minis market without any baggage. When you trade, trade to have a good time and enjoy yourself without focusing entirely on the dollar angle. It is possible to have more winning trades than losing trades and to still lose money. To successfully trade E-minis you need good money management skills, a methodology and the right mindset. Consistent, professional traders appear to trade with ease and are patient and disciplined - they are waiters. All markets, including E-minis, are driven by fear, greed and emotion. Markets usually go up by the stairs and can go down by the elevator shaft. Trading any market, including E-minis, is 100 percent psychological. When trading E-minis, you are actually buying a futures contract for US$1,000. When trading, buying or selling = support or resistance. Trading markets lack certainty but offer probability. Bear markets present opportunities for E-minis traders. By trading E-minis, traders can avoid catastrophic losses that may be associated with other markets. You need to place trades in areas where other traders will be attracted and step in and trade. For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Your Trading Plan Developing a Trading Plan, A trading plan can provide you with the framework that you need to succeed in your E-mini trading. Treat the business of E-mini trading as seriously as if you were managing a major business. Define your personal level of aggression, estimate the returns for different strategies and be realistic about your own capabilities. Consider every conceivable occurrence in advance. Money is made as a by-product of following a sound trading plan, and adhering to the principles of money management. If you end up losing a significant proportion of your trading capital due to greed and ignorance, you can no longer trade and you are out of the game. What to include in your Trading Plan Your plan should cover some basic issues such as your trading goals and objectives, which accounting structure from which to trade and how you will handle your positions when you go on holidays. A trading plan must also cover 3 essential areas: 1. Entry 2. Exit 3. Position Sizing 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. Trading Plan tips • Commit to a clear, concise and disciplined trading plan. • Ascertain what risk you are prepared to take - you must take this risk each time it presents. Having decided your risk level, you can then decide which trades you will take. • Keep your trading simple in your simulation and then adopt the same pattern in your real trading. • When trading there are four key questions for you to answer: 38
2 - Trading E-minis
•
• • •
• •
1. Is the market in a trend? 2. Do I have correct signal information? 3. What support do I have for my trade? 4. Is there any news to be released that may impact the market? Commit yourself to meeting your trading plan for a period of at least 6 months and to taking high profitability trades that meet your trading plan. Resist the temptation to take low probability trades. Accept that you will have some losses however always work at having more winning trades. When you trade, trade as if you are running your trading as your principal business activity (which for some traders it will be). Be passionate about your E-mini trading. Use energy. Have fun. If you have a losing trade do not attempt to get even with the market. Analyse if you made a mistake. In your initial trading it is inevitable that there will be mistakes. If you have 3 or 4 consecutive losing days, stop trading and seek some advice. Remember that signals don't lose - people do!
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.” 39
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Douglas views the trading zone as an outgrowth of trading discipline and a positive mindset. Once the trader lapses into patterns of fear, greed, and frustration, the zone is lost and instincts born of long hours of observing market patterns cannot emerge. For the trader, turning off the mind is a crucial element in success Douglas wrote. Douglas claims the true culprit for lack of consistency when it comes to stock picking is a lack of focus and self-confidence.
Day Trading E-minis US based trader Mike Reed offers this interesting advice in regard to trading E-minis. “Day trading E-minis takes a combination of discipline, caution, aggressiveness, fortitude, and willingness to take small losses quickly”, writes one experienced trader. He continues, “I 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’s 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 the E-minis you have to learn to take small losses quickly to succeed. “We naturally get excited when the market starts making a big move. The new trader feels anxious about being ‘left behind’, and chases the market, usually getting on board near the end of the trend or just before the next pullback. “By doing this, they have to suffer through the pullbacks as they approach their hard stops, often stopping out for a loss. A trader day trading the E-minis needs to develop the discipline to wait for the pullbacks that end at high-probability set-ups before entering a position.” Sometimes a monster trend will falter at a key support and resistance zone with a high TICK spike, looking like a great scalp setup or a possible trend reversal. Those inexperienced in day trading the E-minis will jump all over this set-up and too often get run over by the continuation of the strong trend. This is where caution is important. A very strong trend cancels a classic reversal entry set-up. After a losing trade or two, a new trader will be apprehensive to 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. To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound framework for making decisions and the ability to keep emotions from corroding that framework. Warren Buffett
41
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
An E-mini Trading Time Table One successful US day trader shares his trading time table with us (times are US midwest): 8.00 am
Wake up, eat breakfast and read the news
9.00 am
Search the Internet for important announcements that might affect the market.
9.30 am
Market opens. I stay passive. Just observing.
9.45-12.30 Enter a trade if there are any opportunities. Stop loss and profit targets are already predetermined before entry. After placing a trade I wait for the trade to develop itself and watch my profits grow. Usually my profit target will be hit before 12.30 and I exit the trade. 12.30-2.00 Eat lunch and workout in my home gym. Relax and take my mind off the market. 2.00-4.15
Wait for another chance to rip money off the market. Sometimes when I am lazy, I just wind up the day and ignore the afternoon market. The advantage of day trading is it is flexible. You are in total control and opportunity abounds everyday.
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
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
Trading E-minis - How Dennis does it A very experienced E-mini trader (we will call him Dennis for our case study) recalls how he resigned from his highly paid job and took a second mortgage on his house in order to trade E-minis. He also says that he had to contend with a very worried wife. Dennis practised and simulated trading E-minis for weeks before committing to real trades and committing real money. During this practice period Dennis used to transfer $5 notes from one side of his home based trading desk to the other side to simulate real profit or loss situations for many weeks in order to, in his words, 'get a real feel for trading.' After about six weeks of simulated E-mini trading practice the $5 notes on the win side of his desk exceeded the $5 notes on the loss side of his desk. At the same time one of his friends (we will call her Josephine for our case study) commenced trading E-minis and took out 25 contracts for her very first trade, despite the recommendation for all new traders that they commence with just one contract. Thus the inexperienced Josephine had committed US$25,000 to buy the 25 E-mini contracts instead of the recommended US$1,000 for just one E-mini contract. If the market moved up just one point Josephine stood to gain a 5 percent profit of US$1,250. Should the market drop by just one point Josephine stood to lose US$1,250. As luck would have it the market favoured the inexperienced Josephine who thought that trading E-minis was easy and Josephine profited by US$1,250 with her very first E-mini trade. Dennis was inspired by Josephine's success and he decided to try his hand at trading E-minis with real money. Despite losing money on his first trade, which with hindsight Dennis says was a good thing, Dennis soon became a successful trader. Dennis now takes his laptop on holidays with him and loves to tell his friends about how he can make profitable trades while on holidays. Ever the realist though Dennis cautions anyone thinking of trading E-minis that they will never win on all of their trades. These days thanks to his success in trading E-minis, Dennis has assumed mentor status but he still reminds potential E-mini traders that 'you must have a trading plan' and recommends that potential traders commit to a clear, concise and disciplined trading plan. 44
3 - E-minis Case Studies
Further Dennis advises potential E-mini traders to ascertain what risk they are prepared to take and that they must take this risk each time it presents. Then Dennis says, having decided your risk level, you can decide which trades you will take and to keep your trading simple, initially in your simulation and then by adopting the same pattern in your real E-mini trading. Is Josephine still successfully trading E-minis you ask? After a few drinks Dennis will explain to you the importance of becoming a professional trader as distinct from an amateur trader. Then Dennis will tell you that Josephine was extremely lucky with her first, and in hindsight very irrational and amateur initial trade, even though she made a handsome profit. Josephine was not so lucky with her second, more modest trade for just one contract but with experience Josephine is now trading E-minis successfully on a regular basis. The final advice from Dennis is that when you simulate and practice E-mini trades, you need to bear in mind that you are doing it without emotion or real money. When you trade with real money, fear, greed and emotion come into play, so you need to be able to trade calmly and creatively.
How Bill Trades E-minis One November morning with the market having ‘sold off’ (prices dropped) for three straight days, a friend of ours, Bill, decided to bet the market would rally. Rather than buy the cash index (i.e. through funds or ETFs that track the SP 500), Bill decided to trade the index futures, where he has far more margin power and where nearly round-the-clock trading enables him to buy before the open of the cash market. His early morning price was 1041.50, or, as it turned out, 5 points below the SP 500's opening price. Bill bought the E-mini SP contract rather than the regular SP index contract. The E-mini is one-fifth the contract size and requires far less money down on margin. A single regular SP contract, which is valued at $250 per point (or about $260,000 on a 1041.50 price), requires about $20,000 in margin. An E-mini contract, valued at $50 per point, requires about $2,000 if you are holding overnight. If you are daytrading, as Bill was, you can buy up to 49 E-mini contracts on just $500 margin using Global Futures Exchange. 45
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Bill bought 10 December E-mini SP contracts, and, at the same time, entered an intraday protective stop on his E-mini position to 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), Bill was able to sell the contracts at more than 18 points. That is 18 times $50 per point times 10 contracts - or a $9,000 profit on the trade. 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!
E-mini trader Glen’s three-step method for long-term Emini trading success Step 1. Decide that trading E-minis is a business just like any other. Traders who are successful over a long period of time treat their trading as a business, not a hobby. Traders who stick around for a while, blow their accounts and give up are usually trading for the excitement the action gives them or for the rush of being in the market. If that sounds like your current trading style, beware. You are due for a lot of emotional and financial pain before your trading days are over. Treat trading as a business, learn and test different approaches, and you will massively increase your chances of long-term success. Step 2. Don't try to forecast where the market is going - trade reality. If you think you can forecast where the market is heading consistently, you are deluding yourself. The bottom line to whether you can forecast will be your account balance, and for most people who try, it is not a pleasant experience. 46
3 - E-minis Case Studies
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... Step 3. Learn how to trade from somebody who is prepared to coach, guide and mentor you until you are proficient and making money on your own. To succeed long-term at E-mini trading you must think and act like a competent business person in any other market. You will need to study and learn your craft by taking courses, you will need to develop a trading plan or a business plan. You certainly need sufficient capital to ride out your learning curve and become a successful trader. You will need a certain amount of on-the-job training. You will learn how to trade the E-mini much more quickly if you have somebody who's done it professionally watch over your shoulder and guide you as you trade. You need to be shown how to do it... If you were mining for gold, what would you prefer; somebody to sell you a map, a shovel and a compass and tell you where to go, or somebody to actually take you down deep into the mine, physically show you to where to dig for the gold, and then help you carry it up to the surface? The answer is obvious isn't it? Practice does not make perfect - only perfect practice makes perfect Only perfect practice makes perfect according to Brad, a US based trader. “I learned this in my younger years, pursuing a professional baseball career. Perfect practice will keep your losses smaller than your gains in the trading business. “There are a lot of things involved in perfect practice. When you get tired, or when the phone rings, or what not, don't trade.”
47
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Extracts from an E-mini traders diary
We have included this extract as an example of how one committed and successful trader thinks, works and operates. This story uses the trader’s own E-mini trading vocabulary. Friday, January 19th: Morning Comments 9:58 AM CT - It's off to work as Trader Shrink. The AM illustrated a few important things. First is the importance of flexibility. The odds of taking out yesterday's lows in ES were quite high, and that was my initial leaning. When selling dried up early in the AM with only a modestly negative TICK and not many stocks declining relative to advancers, I entertained the reverse hypothesis: that we were not getting selling and that leaning to the long side was the way to go. The second principle illustrated is the importance of patience. It was a choppy morning session, and it was easy to get scared out of a good position. But as long as the overall dynamics of supply and demand were not shifting, patience was indicated. Finally, you can see how a drying up of selling (today relative to yesterday) often precedes an influx of buying. That's a pattern that sets up intraday as well as on a swing basis. Hope that's helpful; as I write, keep an eye on NQ showing a bit of short-term relative weakness. Have a great weekend; update tonight on the Weblog. 9:44 AM CT - Finally! We couldn't muster selling and once again the semis (and DAX) led the way before we got a price breakout in NQ and ES. Notice how in this kind of market, you either have to be very shortterm oriented and take profits quickly or very patient and let a larger move unfold. As long as the dips in the TICK couldn't bring us to new price lows, staying with the long side leaning made sense. But it took real patience, given the chop. Back for a wrap up shortly. 9:31 AM CT - We continue to see very modest selling and recent strength in semis. I continue to lean to the long side as long as we don't see lower TICK lows. DAX has been a good leader this AM. 9:23 AM CT - Well, I've scratched two trades this AM, both on good ideas, but just no follow through on the market moves. We're oscillating around that 1435 area VWAP; advancers lead declines by only 100 or so issues - no real conviction, and that's not my best trading environment. In such a market, you want to identify the day's average trading price as early as possible and fade moves away from 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 49
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Robert Kiyosaki on financial information and financial leverage If you are seriously considering becoming an E-mini trader you may like to reflect on what Robert Kiyosaki has to say about becoming financially independent - financial freedom. Kiyosaki is best known for his books Rich Dad, Poor Dad and Rich Dad's Guide to Investing. His teachings are of interest to anyone seeking financial freedom. A large part of Kiyosaki's teachings focus on generating passive income by means of investment opportunities, such as real estate and small businesses, with the ultimate goal of being able to support oneself by such investments alone. In tandem with this, Kiyosaki defines ‘assets’ as things that generate money, such as rental properties or businesses, and ‘liabilities’ as things that cost money, such as house payments, cars and so on. Kiyosaki also proclaims financial leverage to be critically important in becoming rich. Kiyosaki stresses what he calls ‘financial education’ as a means to obtaining wealth. He says that life skills are often best learned through experience and that there are important lessons not taught in school. He says that formal education is primarily for those seeking to be employees or self-employed individuals, and that this is an ‘Industrial Age idea’. According to Kiyosaki, in order to obtain financial freedom, one must be a business owner or an investor, generating passive income. Kiyosaki speaks often of what he calls ‘The Cashflow Quadrant,’ a conceptual tool that aims to describe how all the money in the world is earned. Depicted in a diagram, this concept entails four groupings, split with two lines (one vertical and one horizontal). In each of the four groups there is a letter representing a way in which an individual may earn income.
It is not how much you make, it is how much you keep, and how many generations you keep it. Robert T. Kiyosaki
50
3 - E-minis Case Studies
Robert Kiyosaki's Cashflow Quadrant Employee
Business Owner
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
Self Employed
Investor
Robert Kiyosaki’s CASHFLOW Quadrant
The letters are as follows. E: Employee - Working for someone else S: Self-employed or small business owner - Where a person owns their own job and is their own boss. B: Business owner - Where a person owns a ‘system’ of making money, rather than a job to make them money. I: Investor - Spending money in order to receive a larger payout in return. 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. 51
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Chart showing the exponential growth in the number of E-mini contracts traded
Five key trading tips that every e-Mini Futures trader should know to ensure your success as a futures trader. 1. Time frames - There are certain times of day that are best to trade. In general, you can count on the first 2 – 3 hours of the trading day, after the New York markets open (9:30am US EST) and the final 2+ hours of the day (2pm – 4:15pm US EST) to yield the most consistent results. The midday can be rewarding but almost every time we’ve reviewed trading results, you end up with much more work and effort for a lot less return during the midday. 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. 52
3 - E-minis Case Studies
3. Market Context - Know the ‘Average Trading Range’/ATR of the market you are trading and compare it to the norms. This is important because many systems/strategies will have fixed targets and stops. This is fine since you probably will not need to fine-tune these that often (though you should on occasion, as market conditions and levels change substantially.) However, your expectations are going to be different when a market is trading at 50% of its normal trading range vs. 150% of its normal trading range. When you start to see some real variance from the norm, that is the time you are going to want to adjust your targets and stops to accommodate. For example, if the average trading range in a market over time is 10 points but it drops to 6 or 7 you can bet your normal expected targets are going to consistently “just miss” – it’s very important to know the overall context of the market you are trading. 4. Trading the News – You should always be aware of major economic news. There are many economic calendars available on the Internet. One of the most comprehensive that also rates the expected volatility is: http://www.Forexfactory.com Don’t worry that it says Forex if you are trading futures. The idea there is that you should know the major reports – and keep in mind that if you take a trade right at the same time as a release is coming out, you have gone from a predictable trade per your system to a completely random event. Many experienced traders are not against trading in front of or after the news, or even holding through the news assuming you have set target/stops, but markets love to pull a complete ‘180’ reversal right at the release, and trading right into that event typically puts the odds well against you. 5. Key Numbers - Always watch round numbers. Human psychology has traders doing exactly the wrong things around round numbers. What we mean by that is entering a buy just below a major round number such as a 1400, 1500, 1600. This can even extend down to ‘0’ and ‘5’ levels such as 1405, 1410, 1415. Be aware that markets have an uncanny way of stopping at these levels and reversing – you cannot adjust for every potential resistance/support point but again, just like with news you should adjust your entries and/or exits if they happen to fall right in line with a key round number. That small extra adjustment will make all the difference for you. 53
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
E-minis - Making Leverage and Volatility Your Allies Given the right tools, strategies, and mental approach, I believe that E-mini trading is the single most powerful way to deploy trading capital today. And it’s where I’m spending the majority of my trading time says E-mini trader D. R. Barton, Jr. Highly experienced market trader, researcher and teacher in the markets since 1986 D. R. Barton, Jr. offers these thoughts and advice for trading E-minis. Barton is the Chief Operating Officer and Risk Manager for the Directional Research and Trading hedge fund group. He has been actively involved in trading, researching, and teaching in the markets since 1986. He has taught extensively in many investment areas including risk management techniques. The thought of trading E-mini futures elicits the broadest range of responses of anything in the markets from “They’re the greatest thing in the world!” all the way to, “I wouldn’t touch them with a ten foot pole,” E-mini futures evoke strong and even polar responses. Given the right tools, strategies, and mental approach, I believe that E-mini trading is the single most powerful way to deploy trading capital today. And it’s where I’m spending the majority of my trading time. Before we jump in and look at the power of E-minis, let’s cover the basics of E-mini futures contracts. In the futures trading world, E-mini index futures have become something of a phenomenon. They have experienced growth unlike any other instrument and for good reason. Let’s start with a very basic overview. E-mini contracts were started by the Chicago Mercantile Exchange (CME) in 1998 with the S&P 500 Emini. It currently is worth 1/5 of the larger, pit-traded S&P futures contract. However, the S&P E-mini has far eclipsed its older and more higher-valued sibling. Currently, the S&P E-mini trades 4.5 times the dollar volume of the large S&P 500 contract. There are many reasons for its popularity. Here are just a few: The E-mini contract is traded electronically on a platform called Globex. Trades are executed instantaneously and are basically error-free, 54
3 - E-minis Case Studies
especially relative to the pit-traded contracts that may require several levels of human interaction before orders are executed. The smaller size and therefore reduced margin requirements of the E-mini contracts allow a high degree of retail participation. The extreme popularity of the S&P E-mini has led to a number of other equity indexes trading electronically in the E-mini size. The most popular among traders are the Nasdaq Composites, Dow Industrial, and the up and coming Russell 2000. E-mini trading has also spread to commodities (gold, oil), bonds, and currencies. Let’s look at why traders love these instruments so much. 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! Liquidity. Liquidity is usually thought of in terms of volume, and it is the characteristic that gives us the ability to get in and out of a trade both quickly and at a preferable price. E-mini index trading gives us exceptional liquidity and great fills with little slippage. And these attributes are very necessary to allow us to take advantage of the available leverage. 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.
55
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
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. For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
56
4. BONUS SECTION MORE INFORMATION ABOUT TRADING E-MINIS “If one really wishes to be master of an art, technical knowledge of it is not enough. One has to transcend technique so that the art becomes an ‘artless art’ growing out of the unconscious.”
Daisetz Suzuki
How to Trade E-minis
Using Dynamic Pivot Points to Time E-mini Moves There are many ways to measure price action in financial markets according to Austin Passamonte. Basic floor trader pivots are one long-time chart tool. Floor trader pivots are static levels for any given day, the levels do not change. They are useful points of reference for determining different things about price action. Another similar tool most traders aren't familiar with are dynamic pivots. Standard floor-trader pivot levels are derived from the prior day's high/low/close divided by three and then factored to arrive at several measures of ‘relative value’ of current session's price movement. Dynamic pivots are values that change with flowing price action in a given period of time. One of many versions would be measuring the current price period's range from low to high, and then price points of 25%, 50% and 75% levels of current low to high range. These values are based on the high and low measure of any given period on a chart. For intraday or short-term trading, using the cash session (pit) only chart or all-session (24 hour) chart will give different grid levels in E-minis most days. The same is true for any market that trades electronic and pit session periods. It is not a question of which time period settings ‘work best’ for price measurement tools like this... they are designed to be used within the timeframe you already trade. Whether your charts are set for cash-session only in or the entire 24-hour period reference is likewise the same preference for dynamic pivot settings. They compliment your existing approach, whatever it may be.
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.
A similar view is shown on a 5-minute chart of the Russell 2000 (ER2) chart. It doesn't matter which timeframe setting is used, price action clearly adheres to the dynamic price levels as it moves up or down through a given range. There are many ways to use this tool as part of your trading approach. Directional bias filters would be one of those. Price action moving up or down through the scale demonstrates continued direction or possible trend reversal depending on where it stops and starts. Using the levels as secondary price points to add contracts for bigger trade size is another. Aggressive trailed stops or outright exits at certain levels when open trades appear to be stalling out is another good use. 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 59
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
manner. Regardless of all else, price action reacts to these evolving price levels through any given period of time. Knowing that fact and using the tool for predictive or reactive purposes can help add to anyone's overall success. Austin Passamonte is a full-time professional trader who specialises in Emini stock index futures and commodity markets. Passamonte's trading approach uses proprietary chart patterns found on an intraday basis. He trades privately in the Finger Lakes region of New York.
Day Trading E-minis
Personally, I trade for 1 point and stop for the day. Why do I do this? Simple, trading for income is my goal - a consistent and conservative approach to daily income. I do it every single trading day. I like to be done early in the morning, so I can have time to do the things I want to do. Isn’t time what it’s all about really? You trade your time for an hourly wage working 8 to 12 hours a day, 5 to 6 days a week, just to come home tired, bombarded with bills, burdened with chores, and no time for yourself or your family. It doesn’t have to be this way, not for the people who choose to learn a new way using my E-mini commodity futures trading course. What if you could ‘work’ 30 to 90 minutes a day trading the E-mini markets? Trading with discipline and a methodology for the purpose of generating a daily income and then stopping for the day? Day trading the E-mini Futures Market is a great way to do just that. Learn to day trade E-minis and learn to make a minimum of 1 point a day. But honestly, you can make more - usually 2 to 3 points a day. Interview with E- mini Trader David Marsh.
Would you like to control your own financial future? By attending our E-mini seminars you will discover why in the past 10 years thousands of traders worldwide have chosen and enjoyed our award winning training course. Now you can find out for yourself how we can help you to become a professional trader. 60
4 - Bonus Section
Why trade E-minis? E-minis are cutting-edge products designed for the active trader who wants to trade electronically and who likes to have maximum control and highest profit potential. You can use E-mini stock index futures to: • Actively trade stock indexes • Hedge your portfolio or other investments • Gain broad market exposure at relatively low cost
Trading the E-mini market in Australia
21st Century Eminis conduct regular E-mini training seminars all over Australia and in Pacific Rim countries. In this chapter we highlight and detail some of topics covered in the E-mini seminar. 21st Century Eminis offers you the opportunity to learn the simple yet powerful E-minis trading technique in the live market.
E-mini Indexes are the ideal market to trade 21st Century Eminis offers more than just a class, manual and support services. It also offers a breakthrough hands-on training chat room by an expert trading instructor who walks you through the market and explains every opportunity to you as they form. In our trading seminar, you will experience how you can achieve long-term success with short-term trading. You will learn one of our simple, yet most powerful trading methods to trade the high potential index market, and you will walk away with a wealth of knowledge that can be used for life. You can spend a day at our E-mini workshop and learn: • • • • • • •
The technology of Index Trading Risk management Profit potential Demonstrating the E learning course Teach you the probability signals Show video footage from their live trading room Teach you a winning trading plan
If you don't like what you see, 21st Century Eminis will refund your money with no questions asked.
61
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
What you will learn at a 21st Century Eminis seminar and on our DVD program: This is an overview of what is required to learn to master the strategies involved in trading E-minis. • What E-minis are and why trading them has become so popular • A step-by-step, simple, powerful and precise winning strategy • How to achieve success in live simulated trading before trading with money • How to trade professionally full or part time, anytime, anywhere • How to succeed with 100% online interactive training • Gain confidence and experience trading E-minis • The consistent trading range of the E-mini markets along with their high volume and leverage, offers a perfect trading environment for short-term trading. Each day, multiple high potential trade opportunities occur. You can profit whether the market goes up or down • Taking advantage of these opportunities is easy using the simple, powerful and precise Traders • International training solutions. Whether you want to begin a career as a professional trader or become a better trader by managing your financial assets more efficiently, we can help you become successful
Through dynamic, interactive trading seminars delivered online and backed by unmatched professional live market mentorship, the 21st Century Eminis system builds the confidence and skills you need to effectively and successfully trade E-minis. State-of-the-art educational technologies that deliver realistic market simulations enable students to gain real experience before risking real capital.
62
4 - Bonus Section
The valuable topics covered in the Live Market Online E-Mini Training Class include: • Candlestick basics - What are they and what do you really need to know about them? • Correct correspondence - Finding the six secret points to every signal. • Signal definitions - How to apply them and see the powerful signals that other traders never see. • Market trends - How to anticipate them, catch them and stay in them for maximum profit potential. • Shorts and longs - Simple ways to profit by going short or long by focusing on market signals. • Tight market ranges - How to leverage TIMES to profit from the slightest market movements. • Money management and risk control - Remember, survival before success - these are two top topics every trader must know. • When not to trade - How to recognise low potential trades and avoid them.
The E-mini Mentor course is taught in four stages Learn the simple yet powerful E-minis trading technique in the live market.
Stage one - Comprehensive Manual Review
Shortly after your registration you will receive our comprehensive training e-course. Our e-course is extremely thorough and easy-tounderstand with voice over power point, charts and examples. It is done professionally and includes 26 chapters. It is available to you online at your free time and you can review it at your own pace on your computer like watching a DVD. Novices can easily follow along and experienced traders will gain new insights from the straight forward clarity, detailed charts and the logical stepby-step methods. Once you have done a thorough review of the e-course, usually within two to four days, you are ready to schedule your live online class. 63
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Stage two - Live Market Online Training Class
You will participate in a live online training class that will take you completely through the methodology. From the basics to the most advanced signal structures, the Online Training Class brings the method together as it walks through each step of a trade. Our live e-learning approach creates a convenient and comfortable teaching environment while enabling total interactivity with the instructor. Participants can offer comments and ask questions directly to our instructor.
Stage Three - Trading Internship
This is where the real fun begins. We call it the Trading Internship. Just as a doctor must complete residence in a hospital after graduating medical school, you too must do your hands on trading with real button pushing using a modern state-of-the-art trading simulator before trading with real money. Simulated trading almost operates like the real thing, giving you real fills in real time in the real market with real reports. Since no actual money is at risk, you are free to hone your skills and have fun as you gain total mastery and unshakeable confidence in the TIMES method. All your previous instruction comes together here as you conquer signal after signal. Once you achieve 15 consecutive days of successful trading in simulation, you are ready to graduate to the live market trading real capital.
Stage Four - Live Market Online Mentorship for five weeks
Even after graduating with full mastery of our method, 21st Century Eminis is still available to help you improve your trading skills. As a graduate of 21st Century Eminis you can learn in the live market Tuesday through Friday, from bell to bell, with your instructor virtually by your side expertly guiding you through the best trades in the mentorship room. This means you will have access to your instructor and join other traders in these Live Market Online trading sessions for five weeks, at no additional charge. What better way to learn than in the real market finding real trade signals and continuing your trading education in a live environment? 64
4 - Bonus Section
Are you ready to start trading E-minis? If you are ready to get started, our professional staff can get your training package on its way to you today. If you have ever taken any other type of training course for trading E-minis, you will quickly see the difference. 21st Century Eminis delivers professional instruction, instant access to information using state-of-the-art technology and ongoing mentorship to build the confidence and experience you need to be successful. Couple that with this powerful trading method and you have an unbeatable combination that could prove to be the most sensible investment you've ever made in yourself and your trading career.
Gain confidence and experience trading E-minis The consistent trading range of the E-mini markets along with their high volume and leverage, offers a perfect trading environment for short-term trading. Each day, multiple high potential trade opportunities occur. You can profit whether the market goes up or down. Taking advantage of these opportunities is easy using the simple, powerful and precise 21st Century Eminis training solutions. Whether you want to begin a career as a professional trader or become a better trader by managing your financial assets more efficiently, 21st Century Eminis can help you become successful. Through dynamic, interactive trading seminars delivered online and backed by unmatched professional live market mentorship, 21st Century Eminis training builds the confidence and skills you will need to effectively and successfully trade E-minis. 21st Century Eminis invested heavily in state-of-the-art educational technologies that deliver realistic market simulations so that students gain real experience before risking real capital. To access the recommended E-minis Mentor training program designed to teach investors how to make US$1,000 to US$5,000 per week starting from as little as $5,000 log on to our website www.21stcenturyeminis.com.au
65
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
F.A.Q’s. for E-minis Some frequently asked questions people ask about trading E-minis: Do you assist me after I finish the education program? Yes. You receive access to a live trading room where we announce all the high probability trades in the live market every day. You also receive access to all our workshops, monthly newsletter and all updates to the training and education. You also receive access to a 2-day live seminar which you can revisit as many times as you wish for for free for 5 years and a Homestudy Program plus online tutorials - and your spouse can attend the 2-day seminar free of charge. There is an incredible amount of hand holding and the ongoing education for all students that is unmatched by any other trading education company in the world. How many trades per day can I expect to get? There are multiple trading opportunities during the trading day however our goal is to provide you with a set of high probability trading signals. Do you offer trials for non-members in the Trading rooms? No, members are the only traders allowed access to the live trading room. Do we run other workshop dates? Yes we do. 21st Century Eminis currently runs workshops virtually every month in all major capital cities and regional areas of Australia and New Zealand and soon world-wide. What is the minimum investment per trade? Just US$1000 is all you need. You can be as big a trader or as small a trader as you like. Do you have a payment plan? Yes we do, from as little as $495 a month and $995 deposit - and the program comes with a 100%, 90 day money back guarantee - email info@21stcenturyeminis.com.au and we will send you the details. 66
4 - Bonus Section
How soon can I start? You can start the full program as soon as you pay your full membership and receive the course within 48 to 72 hours. Simply email info@21stcenturyeminis.com and we will send you the membership application forms. Is the program user friendly for novice traders? The education program is designed to accommodate all levels of trading experience, from complete novice to advanced level trader. You do not need to have trading experience to join and trade with 21st Century Eminis. How many hours per day do I need to trade? We recommend you only trade 30 minutes to 2 hours per day. This time frame each day will give you multiple trading opportunities for a 5% to 10% return. Do I need a special computer system to trade the E-minis? You require a computer with Internet Access (High Speed Connection recommended) - Windows 98 Second Edition or newer Do you help me set up my trading account, charts and execution platform? Yes, we run live web-cast seminars weekly on how to do this and we walk you through step by step the process of how to set up your trading account, charts and trading platform. Is this a black box system or do I need to watch the live market? You will be watching live charts and therefore 21st Century Eminis is not a black box system. We are continually updating our trading system based on the movements in the live market every day. 21st Century Eminis never stands still and is always moving with the market to ensure we pin point the best entry and exit points. Are you the broker? 21st Century Eminis promote the educational company that provides live training and a live trading room on how to trade the E-minis market. We are not the broker, charting service or trading platform provider. 67
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
However, we assist traders in setting up their charts, platform and brokerage account. In fact we run live classes in our web seminar conference room every week. We make available to 21st Century Eminis clients access to an online trading platform for placing trades. What is the next step? How can I get more information? We recommend We recommend you attend an evening workshop or webinar for free. This is a fantastic way for you to find out all the details about E-mini trading, terminology, platforms, signal identification and how we successfully trade. You will prove to yourself our signals really do work. Simply go to the Booking section and select the next seminar in your area.
To access the recommended E-minis training program designed to teach investors how to make US$1,000 to US$5,000 per week starting with as little as $5,000 log on to our website www.21stcenturyeminis.com.au
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
68
5. E-MINI GLOSSARY HANDY INFORMATION AND TERMINOLOGY IN REGARD TO TRADING E-MINIS “Financial education needs to become a part of our national curriculum and scoring systems so that it is not just the rich kids that learn about money... It’s all of us.”
David Bach
How to Trade E-minis
E-mini Glossary and Terminology ASIC. Australian Securities & Investments Commission Bear Market (bearish). A market condition in which the prices of securities are falling or are expected to fall. Although figures can vary, a downturn of 15-20% or more in multiple indexes (Dow or S&P 500) is considered an entry into a bear market. Bull Market (bullish). A financial market of a group of securities in which prices are rising or are expected to rise. The term ‘bull market’ is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities. Bull markets are characterised by optimism, investor confidence and expectations that strong results will continue. The use of ‘bull’ and ‘bear’ to describe markets comes from the way the animals attack their opponents. A bull thrusts its horns up into the air while a bear swipes its paws down. These actions are metaphors for the movement of a market. If the trend is up, it is a bull market. If the trend is down, it is a bear market. Call Option. A Call Option is an agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. It may help you to remember that a call option gives you the right to ‘call in’ (buy) an asset. You profit on a call when the underlying asset increases in price. CBOT. Chicago Board of Trade CFD's. Contracts for Differences CME. Chicago Mercantile Exchange Convergent strategies. Convergent strategy is based on the notion that every security has an intrinsic value. For equities, that value is based on the company's expected future earnings and dividend payments, the expected growth rate of those earnings and dividends and the degree of uncertainty surrounding these forecasts. The convergent strategist believes that the intrinsic value of a security can be estimated and that the price of the security will eventually will converge to this intrinsic value. Thus the strategy 70
5 - E-mini Glossary
searches for undervalued or overvalued securities, securities whose prices are out of line with their intrinsic values hoping to profit from the price correction. Examples include equity market neutral, relative value event driven and arbitrage strategies. Divergent strategies. Divergent strategy is based on the premise that past patterns in security prices can reliably predict further price patterns. The divergent strategist believes that these patterns reflect the changing attitudes of investors to a variety of economic political and psychological factors. The strategy has been successfully applied to equities, equity indexes, foreign currencies, and many other commodities investments. Examples include managed futures and global macro strategies.
Dow Jones. The Dow Jones is a price-weighted average of 30 actively traded blue-chip stocks. It is the oldest and most widely used of all stock market indicators. The Dow Jones is an indicator of stock market prices; based on the share values of 30 blue-chip stocks listed on the New York Stock Exchange; "the Dow Jones Industrial Average is the most widely cited indicator of how the stock market is doing" EMA. Exponential Moving Averages E-minis. An E-mini is a futures contract that can be traded electronically on the Chicago Mercantile Exchange 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. Short for Electronic Mini S&P 500. E-mini® S&P 500® futures provide investors with an innovative tool for accessing and managing risks on stock market investments. Fully electronic and 1/5th the size of a standard CME S&P 500® futures contract, it closely tracks the price movements of the S&P 500® Index, the premier benchmark of stock market performance. More than 1 million contracts traded on average per day in 2006, making it one of the most highly-traded futures contracts in the world and reinforcing CME's (Chicago Mercantile Exchange) position as the world's leading provider of stock-index futures. E-Mini S&P, often abbreviated to ‘E-mini’ and designated by the commodity ticker symbol ES, is a stock market index futures contract traded on the Chicago Mercantile Exchange's Globex electronic trading platform. 71
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
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, 72
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 clearinghouses. 73
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Also, in order to ensure that payment will occur, futures have a margin requirement that must be settled daily. Finally, by making an offsetting trade, taking delivery of goods, or arranging for an exchange of goods, futures contracts can be closed. Hedgers often trade futures for the purpose of keeping price risk in check. Futures contracts guarantee a transaction at a date in the future. Learn the details behind futures trading, settling future contracts, and how to price futures. Gann Predictions based on of price movements on three premises: 1. Price, time and range are the only three factors to consider. 2. The markets are cyclical in nature. 3. The markets are geometric in design and in function. Based on these three premises, Gann's strategies revolved around three general areas of prediction: 1. Price study – This uses support and resistance lines, pivot points and angles. 2. Time study – This looks at historically reoccurring dates, derived by natural and social means. 3. Pattern study – This looks at market swings using trendlines and reversal patterns. Gap. A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release. Gap Trading Strategies. Gap trading is a simple approach to buying and shorting stocks. Essentially that have a price gap from the previous close and hour of trading to identify the trading range. Rising signals a buy, and falling below it signals a short.
and disciplined one finds stocks watches the first above that range
Hedge fund. A hedge fund is a private investment fund that charges a performance fee and is typically open to only a limited range of qualified investors. Hedge fund activity in the public securities markets has grown substantially in recent times. Hedge Funds dominate certain speciality markets such as trading in derivatives with high-yield ratings, and distressed debt. 74
5 - E-mini Glossary
Indexes or indices. A stock market index is a listing of stocks and a statistics reflecting the composite value of its components. It is used as a tool to represent the characteristics of its component stocks, all of which bear some commonality such as trading on the same stock market exchange, belonging to the same industry, or having similar market capitalisation's. Many indices compiled by news or financial services firms are used to benchmark the performance of portfolios such as mutual funds. Some Australian Indexes All Ordinaries, ASX 200, Industrial, Property Some Overseas Indexes Dow Jones (USA), Frankfurt DAX, Hang Seng (Hong Kong), London FTSE 100, NASDAQ (USA), Paris CAC 40, Russell 2000 (USA), S&P (USA), Tokyo NIKKEI 225 JOT. ‘Jump on trend’ based on price Leverage. Financial leverage. The degree to which an investor or business is utilising borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Financial leverage is not always bad. However, it can increase the shareholders' return on their investment and often there are tax advantages associated with borrowing. Long selling (or Long Position). Long selling is the buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value. In the context of options, it is the buying of an options contract. Long selling is the opposite of ‘short’ (or short position). For example, an owner of shares in Westfield is said to be "long Westfield" or "has a long position in Westfield". Buying a call (or put) options contract from an options writer entitles you the right, not the obligation to buy (or sell) a specific commodity or asset for a specified amount at a specified date. MACD. The Moving Average Convergence/Divergence (MACD) was invented by Gerald Appel in the 1960s. The technique is to take the difference between two exponential moving averages (EMA's) with different periods. This produces what's generally referred to as an oscillator. 75
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
An oscillator is so named because the resulting curve swings back and forth across the zero line. Appel's version used the difference between a 12-day EMA and a 25-day EMA to generate his primary series. This series was plotted as a solid line. Then he took a 9-day EMA of the difference and plotted that as a dotted line. The 9-day EMA trails the primary series by just a bit, and trades are signalled whenever the solid line crosses the dotted line. MIT. MIT stands for ‘Market If Touched’ meaning that upon reaching this value a ‘Market Order’ will be automatically placed. NASDAQ. The NASDAQ (acronym of National Association of Securities Dealers Automated Quotations) is an American stock exchange. It is the largest electronic screen-based equity securities trading market in the United States. With approximately 3,200 companies, it lists more companies and on average trades more shares per day than any other U.S. market PITT traders. Are large volume traders. Pivot Point Trading. Floor Pivot Point Trading Method. Floor trader pivot points, or floor numbers, are specific support and resistance price points that have been calculated using what is referred to as the floor pivot point formula. Pivot traders. Trade using pivot points. Price Gap. A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release Put Option. An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time. The buyer of a put option estimates that the underlying asset will drop below the exercise price before the expiration date. When an individual purchases a put, they expect the underlying asset will decline in price. They would then profit by either selling the put options at a profit, or by exercising the option. If an individual writes a put contract, they are estimating the stock will not decline below the exercise price, and will not increase significantly beyond the exercise price. 76
5 - E-mini Glossary
Consider if an investor purchased one put option contract for 100 shares of ABC Co. for $1, or $100 ($1*100). The exercise price of the shares is $10 and the current ABC share price is $12. This contract has given the investor the right, but not the obligation, to sell shares of ABC at $10. If ABC shares drop to $8, the investor's put option is in-the-money and he can close his option position by selling his contract on the open market. On the other hand, he can purchase 100 shares of ABC at the existing market price of $8, then exercise his contract to sell the shares for $10. Excluding commissions, his total profit for this position would be $100 [100*($10 - $8 - $1)]. If the investor already owned 100 shares of ABC, this is called a "married put" position and serves as a hedge against a decline in share price. ROI. Return on Investment. S&P 500. 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. 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. Many index funds and exchange-traded funds track the performance of the S&P 500 by holding the same stocks as the index, in the same proportions, and thus attempting to match its performance (before fees and expenses). Partly because of this, a company which has its stock added to the list may see a boost in its stock price as the managers of the mutual funds must purchase that company's stock in order to match the funds' composition to that of the S&P 500 index. In stock and mutual fund performance charts, the S&P 500 index is often used as a baseline for comparison. 77
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
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 78
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 79
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
a broker-dealer to confirm that it is able to make delivery of the shorted securities. This is referred to as a ‘locate’, and it is a legal requirement that U.S. regulated broker-dealers not permit their customers to short securities without first obtaining a locate. Brokers have a variety of means to borrow stocks in order to facilitate locates and make good delivery of the shorted security. The vast majority of stocks borrowed by U.S. brokers come from loans made by the leading custody banks and fund management companies (see list below). Sometimes, brokers are able to borrow stocks from their customers who own ‘long’ positions. In these cases, if the customer has fully paid for the long position, the broker cannot borrow the security without the express permission of the customer, and the broker must provide the customer with collateral and pay a fee to the customer. In cases where the customer has not fully paid for the long position (meaning, the customer borrowed money from the broker in order to finance the purchase of the security), the broker will not need to inform the customer that the long position is being used to effect delivery of another client's short sale. Most brokers will only allow retail customers to borrow shares to short a stock if one of their own customers has purchased the stock on margin. Brokers will only go through the ‘locate’ process outside their own firm to obtain borrowed shares from other brokers for their large institutional customers. Short selling mechanism. Short selling stock consists of the following: An investor borrows shares, but since there is a general rule in the United States that one must only borrow money based on shares up to 50 percent of the shares' value, one must deposit 50 percent of the value of the shares in cash with one's brokerage firm. The investor sells them and the proceeds are credited to his account at the brokerage firm. The investor must ‘close’ the position by buying back the shares (called covering) - If the price drops, he makes a profit. Otherwise he makes a loss. The investor finally returns the shares to the lender. SOQ. Special Opening Quotation Stochastic process. In the mathematics of probability, a stochastic process or random process is a process that can be described by a probability distribution. The two most common types of stochastic 80
5 - E-mini Glossary
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. 81
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Stop-Loss Orders - Positives and Negatives. The advantage of a stop order is you don't have to monitor on a daily basis how a stock is performing. This is especially handy when you are on vacation or in a situation that prevents you from watching your stocks for an extended period of time. The disadvantage is that the stop price could be activated by a short-term fluctuation in a stock's price. The key is picking a stop-loss percentage that allows a stock to fluctuate day to day while preventing as much downside risk as possible. Setting a 5% stop loss on a stock that has a history of fluctuating 10% or more in a week is not the best strategy: you'll most likely just lose money on the commissions generated from the execution of your stop-loss orders. There are no hard and fast rules for the level at which stops should be placed. This totally depends on your individual investing style: an active trader might use 5% while a long-term investor might choose 15% or more. Another thing to keep in mind is that once your stop price is reached, your stop order becomes a market order and the price at which you sell may be much different from the stop price. This is especially true in a fast-moving market where stock prices can change rapidly. Structured products. Are Synthetic investment instruments specially created to meet specific needs that cannot be met from the standardised financial instruments available in the markets. Structured products can be used: as an alternative to a direct investment; as part of the asset allocation process to reduce risk exposure of a portfolio; or to utilise the current market trend. A structured product is generally a pre-packaged investment strategy that is based on derivatives (i.e. options and to a lesser extent, swaps) but which features protection of principal if held to maturity. For example, an investor invests $100, the issuer simply invests in a risk free bond which has sufficient interest to grow to 100 after the 5year period. For example, this bond might cost 80 dollars today and after 5 years it will grow to 100 dollars. With the leftover funds the issuer purchases the options and swaps needed to perform whatever the investment strategy is. Theoretically an investor can just do this themselves, but the costs and transaction volume requirements of many options and swaps are beyond many individual investors. 82
5 - E-mini Glossary
The benefits of structured products (such as principal protected notes) can include: • Principal protection • Tax-efficient access to fully taxable investments • Enhanced returns within an investment • Reduced volatility (or risk) within an investment Weighting. An index may also be classified according to the method used to determine its price. In a Price-weighted index such as the Dow Jones Industrial Average and the NYSE ARCA Tech 100 Index, the price of each component stock is the only consideration when determining the value of the index. Thus, price movement of even a single security will heavily influence the value of the index even though the dollar shift is less significant in a relatively highly valued issue, and moreover ignoring the relative size of the company as a whole. In contrast, a market-value weighted or capitalisation-weighted index, such as the Hang Seng Index, factors in the size of the company. Thus, a relatively small shift in the price of a large company will heavily influence the value of the index. In a market-share weighted index, price is weighted relative to the number of shares, rather than their total value. Traditionally, capitalisation- or share-weighted indices all had a full weighting i.e. all outstanding shares were included. Recently, many of them have changed to a float-adjusted weighting that helps indexing.
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
83
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
6.
E-MINI
TESTIMONIALS
How to Trade E-minis
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 “Believe me or not but this is my 1st testimonial ever and trust me, i've been in a couple of trading rooms since i first started back in 2001. When I read testimonials from other trading website, i'm amazed by those who after only a week, feel comfortable writing the most amazing testimonial. Well, I've been with David for just over 1 year and I'm still here. I guess it all depends on what the you're looking for. Personally i was sick and tired and going basically no where learning from moderators who would just shout out trades left and right. With David, it's a different story. For me he's the mentor i was always looking for. The mental aspect of trading, the money management and risk management are the basis of his success. Trading is a tough business but if you are willing to put in the time and effort, i would strongly recommend any serious trader to join David's room and your odds of success will definitely increase. When i look back at the mistakes i use to make and my trading today, it's a different story and that i truly owe it to David.” Sebastian W. 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 Testimonials are not indicative of future performance success and may not be representative of the experience of other clients.
86
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis
Successful E-minis trader David Lougnan David started his search for a better career around 8 years ago. Looking over the magazine section of the newsagency while on holidays he came across an investing magazine. Instantly intrigued he decided to purchase every investment book and magazine out there. From there he completed several courses in property and share markets; however, he still felt there was something missing. It wasn’t until 2004 when a friend introduced him to the E-minis that David really found the core of his passion. Once started, he completed a few courses that were mainly E-mini driven and started to participate in a few trading rooms. He made all the same mistakes that every new trader makes. But what he quickly discovered was that none of the teachers teaching the E-mini courses suited his own learning style and personality. They did however have a few qualities’ that would help him in his future. Whilst learning to trade, David worked full time running his own business, which would often take up to 12 hours each day. He would sleep for approximately 4 hours before waking and undertaking his trading session. It soon became a family joke that his wife would find him a third job to fill in the couple of hours he had to spare. This went on for a period of about 12 months before he was able to cut back his day job hours and increase his trading times. Once trading successfully, David began to share his passion by teaching his friends which soon evolved into a career as both an educator and trader. David has been trading full time for the past 4 years and teaching trading everyday for the past 2 years. When speaking to people about trading and investing today, David still finds that many people think of futures speculating as high risk. Instead, David feels the opposite and believes them to be the lowest risk markets in the world offering the most sense for many people looking to get involved in market speculation. He believes that futures offer incredible leverage and whilst many think they need to get involved in options to attain large leverage, David believes the futures markets offer much more leverage than stocks or options do and that people have been trained to think that this means high risk, which in fact is not true. He believes that by using protective stops, these markets become some of the lowest risk markets in the world and that in the high volume/liquid futures markets you are much more likely for your stop 87
5 - E-mini Testimonials
to be filled where you want than you are in stock trading. David understands that what traders really want is the guidance, mentorship and support of a professional trader. For this reason he has developed an all round professional training program that offers education, support, sound methodology that is executed live using real money, in simple terms that new traders will understand. David believes in leading from the front and does everything he talks about and educates people based on his own methodology.
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
88
For a free DVD and access to a free webinar go to www.21stcenturyeminis.com.au
How to Trade E-minis A trading career in Eminis 2 Advantages of Trading Mini S&P 500 Futures and Options 8 Advice for trading Eminis 36, 37 Affordability 8 An E-mini Trading Time Table 42 An introduction to trading E-minis 20 Are you ready to start trading E-minis? 65 Background on the Emini Contract 16-17 Barton D. R. 54, 55 Because E-minis are futures, they offer some unique additional features 10, 25, 26 Benefits of E minis 6, 7 Buffett, Warren 14, 41 Can I trade E-minis without daytrading them? 35 my super fund and pay for the course using it? 34 Candle sticks 22 Case Studies E-mini trader Glen’s three-step method for long-term E-mini trading success 46, 47 Extracts from an Emini traders diary 48, 49 How Bill Trades Eminis 45 How Marcus made $9,000 in a night with a $4,000 outlay 15, 16 Trading E-minis How Dennis does it 44, 45 Cashflow Quadrant, Robert Kiyosaki's 51 CBOT mini-sized Dow 12 89
Chart showing the exponential growth in the number of E-mini contracts traded 52 Chicago Mercantile Exchange (CME) 4, 5, 8, 15 CME index products 8 Comprehensive Manual Review 63 Cost of trading E-minis, What is the? 32 Day Trading E-minis 40, 60 Dennis, How, does it 44, 45 Developing a Trading Plan 38 Do I need a special computer system to trade the E-minis? 34 Double tops 24 Douglas, Mark 39 Dow 30 5 Dow Jones Industrial Average monthly price chart 7 The 7 DVD program 62 DVDs free offer 85 Dynamic Pivot Points to Time E-mini Moves, Using 58-60 E-mini charts 22 Contract, Background on 16-17 Glossary and Terminology 69-84 Indexes are the ideal market to trade 61 market profit potential 30 Money Management 3 S&P 500 futures 5 testimonials 86-89 trader Glen’s threestep method for longterm trading success 46,47 Trading Time Table 42
trading - risk and reward 35 trading tip 32 Making Leverage and Volatility Your Allies 54, 55 E-minis traders use a range of charts to make informed decisions 21 trading advice from a successful trader 37 v. Stocks 28 A trading career in 2 ease of use versus options 29 Edison, Thomas 56 Equities investors like the great ‘tradability’ of E-minis 10 Exchange-Traded Funds (ETFs) 7 Exit Plan 38 strategies 28 Exposure 8 Extracts from an E-mini traders diary 48, 49 F.A.Q’s for E-minis 6666 Financial future, Would you like to control your own? 60 information and financial leverage 50 Five key trading tips that every e-Mini Futures trader should know 52, 53 Free DVDs offer 85 Frequently asked questions 34 Futures traders care about only two things 31 Gain confidence and experience trading Eminis 65 Glen’s three-step method for long-term Emini trading success
Index 46,47 Globex electronic trading platform 5 Glossary and Terminology 69-84 How Bill Trades E-minis 45 can you be right more times than wrong? 30 Dennis does it 44, 45 do E-minis compare to Options? 29 do E-minis compare to stocks, CFD’s and options? 29 do I make money trading E-minis? 31 do our signals perform? 31 do we identify signals? 31 long does the training take and how long till I trade real money? 34 many hours per day do I need to trade? 34 Identifying signals 31 Indexes, E-mini 61 Integrity 8 Items for consideration and comparison 28 Key Numbers 53 Kiyosaki, Robert 50, 51 Leverage 55 Linear graph of the S&P 500 Index 4 Liquidity 55 Live Market Online Mentorship for five weeks 64 Training Class 64 Logarithmic graph of the S&P 500 13 Lougnan, David 87 Lower lows 25
90
MACD (Moving Average Convergence Divergence) 21 MACD and Stochastic 23 Making Leverage and Volatility Your Allies 54, 55 Market Context 53 Marsh, David 60 Money Management 35 Most people are afraid to fail 56 NASDAQ 4, 13, 15, 35 Only perfect practice makes perfect 47 Opportunity 8 Passamonte, Austin 5860 Practice does not make perfect - only perfect practice makes perfect 47 Price gaps and variations 21 Profit potential 30 Remember, when you trade, you are your own best friend or worst enemy 46 Risk and reward 35 Russell 1000 5, 15 S&P 1500 4 500 13 500 index 4, 9, 13-15 500 Index, Linear graph 4 500 record 14 90 13 Global 1200 4 MidCap 400 8 Scalability 55 Some benefits of E minis 6, 7 Facts About the S&P 500 Index 9, 13-15 real trading examples 31
simple advice for trading E-minis 36 Special Opening Quotation (SOQ) 9 Stochastic 21, 23 Success or failure 55 Suzuki, Daisetz 57 Technical double bottoms 24 Terminology 69-84 Testimonials 85-87 The Chicago Board of Trade 12 components of the S&P 500 14 Dow Jones 7 Emini Mentor course is taught in four stages 63, 64 electronically traded CBOT mini-sized Dow 12 Road to Riches. What it takes to be a consistent winning E-mini trader 35 S&P 500 Index was market-value weighted 15 valuable topics covered in the Live Market Online E-Mini Training Class includes 63 Thoreau, Henry David 49 Three basic indicators 21 Time frames 52 To trade E-minis we use three basic indicators 21 Trading hours 31 Internship 64 Plan tips 38 Plan, Your 38, 39 Signals - The Power of T3 32 the E-mini market in Australia 61 the E-mini S&P 500 an example 11
How to Trade E-minis the News 53 Trading E-minis 21 Advice for 36, 37 An introduction to 20 has many advantages over other forms of trading and share investment 20 How Dennis does it 44, 45 some frequently asked questions 34 Trend and Chop 52 21st Century Eminis advice on how to profit from learning, understanding and trading the E-mini index 26, 27 training seminar 11
trading E-minis? 6 you will learn at a 21st Century Eminis seminar and on our DVD program 62 When not to enter an E-mini trade 33 to enter the E-mini market 33 to exit the E-mini market 33 Why trade E-minis? 3 Why trade E-minis? 61 Will I be trading in Australian (AUD) or United States (USD) dollars? 34 Would you like to control your own financial future? 60
Understanding candlesticks 22 Using Dynamic Pivot Points to Time E-mini Moves 58-60
You can spend a day at our E-mini workshop and learn 61 Your Trading Plan 38, 39
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