Trading the Top E-mini

Wherever future traders gather, the conversation inevitably turns to what index e-mini is best. Popular internet trading message boards, such as elitetrader, are a buzz with discussions about the benefits and pitfalls of the 3 major index e-mini products. One truth that rises above the banter is, like it or hate it, the S&P 500 e-mini, the undisputed king for experienced traders.

It’s daily volume and constant liquidity dwarfs the other contenders, making it an ideal vehicle for day trading. It is by far the most popular of the index e-minis, institutionally and on the retail side, with literally 100’s of blogs and internet sites dedicated to trading it. The institutional auto trading quants, speculators and hedgers keep the volume high, so retail/small proprietary traders always have a deep pool of liquidity in which to buy or sell instantly, at anytime during the regular trading session. This fact makes the contract a favorite of scalpers and ultra short-term day traders throughout the trading world. However, it’s also an excellent vehicle for longer-term day trading and swing trading once you understand the nuances and can handle its sometimes jumpy nature.

This article will take a closer look at the S&P e-mini future contract and provide some thoughts on how to swing trade it successfully, right now.

The S&P 500 e-mini has the ticker symbol ES and it trades 5 months in the March quarterly cycle. It moves in quarter point increments with each tick being worth $12.50, therefore every point is $50.00. This fact is why many beginning traders and those who are not capitalized adequately sometimes avoid the ES. As a comparison the DJIA e-mini YM moves in $5.00 per point increments which makes it far more forgiving instrument when wrong. Many traders learn on the YM then, when comfortable, move to the ES for its many benefits. The ES is 1/5th the size of standard S&P future contracts and it trades over a million contracts daily. It tracks the cash S&P 500 index very closely and as you can see from the two 3 minute intraday charts, I just grabbed from my trading station, it often mirrors the DJIA e-mini.

ES 3 minute Chart

YM 3 minute Chart

The S&P 500 has been in an erratic uptrend since its mid July lows. Yesterday it broke through the 50-day Simple Moving Average (SMA) on the upside and so far this morning, it has dropped back near the SMA which is at 1295.57 on the cash index. The 200-day SMA is quite high above the 50-day at 1373.87.

SP 500 Chart

This is my plan for swing trading the ES right now. Go long if 1307 is broken on the upside by 3 minutes, short if 1287 is broken by 3 minutes on the downside on the ES chart. Remember to always position size properly based on your equity and only use risk capital, anything can and does happen in this market! As you can see, my personal bias is down from here. We will see what happens.

Best Wishes!

David Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.