Are S&P500 Emini Futures Contracts Right For You
Whether you are new to the markets or a seasoned trader, you might want to consider trading S&P500 emini Futures.
One of the best things about trading the S&P 500 emini Futures is leverage. S&P500 emini Futures are based upon the S&P500 index, or the value of the top 500 stocks traded on the NYSE. Wouldn't it be wonderful to be able to trade all the 500 stocks in the index at once, not having to research any one in particular? Unfortunately you cannot trade an index. So the Chicago Mercantile Exchange (CME) created a futures contract based upon this index. Instead of having to buy shares in 500 companies that would cost a fortune, you can pay 400 per contract, and trade as if you owned all 500 stocks. Now that is leverage.
Large Institutions and Hedge Funds trade the larger S&P500 Futures contract instead of the emini version, leveraging their money, not having to invest in any one company but actually able to trade all 500 companies in the index at the same time. The S&P500 emini Futures contract is a smaller version of the exact same futures contracts traded by these large institutions. It is designed primarily for individual traders to trade. But it follows along exactly with the larger S&P500 the institutions trade. That way, when the large S&P500 contract rises, the emini rises along with it.
Emini S&P500 Futures offer great potential for traders. The margins for trading the emini contract can be as low as $400 per contract, depending on the brokerage firm you use. But low margins are not the only reason traders turn from trading the Stock Market. If you are tired of being in stocks "for the long haul", or if you are afraid to invest in stocks afer the 2008 recession and/or the flash crash, find out how you could be trading S&P500 emini Futures.
Another reason professional traders are attracted to trading the S&P500 emini Futures contract is the ability to day trade. For $400 per contract, you can be a day trader. What could you buy for $400 if you were trading stocks? And many futures brokers will allow you to open an account with $2,500. Daytrading stocks makes you what is known as a "pattern day trader." Regulations require that you have a margin account of at least $25,000 in order to daytrade stocks.
Not convinced yet? Look, here's another good reason to daytrade the S&P500 emini--no research.
You won't need to do hours and hours of research just to find the right stock to trade. No more investing hundreds of dollars monthly in a Real Time stock screener. And most important, you won't need to have 5 or 6 charts open at the same time. You can trade with just one chart. This means you can concentrate on your technical analysis trading strategies on just one instrument. You won't need to open one chart, then minimize it, and then open another chart, etc. Trading just one instrument can often mean that you minimize risk because your attention is narrowed to only what you are trading.
As we know, every instrument trades differently, requiring its own profit targets and stop losses. Trading emini contracts, you can identify profit targets and stop losses easier because you only need to set them for 1 instrument.
Much of trading is watching highs and lows, hard to do if you are watching a portfolio of 5 or 10 stocks. But if you only need to remember one high and one low (since you are trading just one instrument). Wouldn't that be easier to trade?
Whether you are a fundamental analyst or stricly using technical analysis, the S&P500 emini Futures contract will work for you. With the institutional traders trading the larger S&P500, you get the benefit of their research without the cost because you are trading the same instrument they are trading. Are you concerned with news announcements, overbought or oversold conditions, Federal Reserve interest rate cuts? The S&P500 emini is a perfect tool for taking advantage of those specific movements. Why? Because it trades 24 hours a day.
Are you a master chart technician? If so, this Futures contract is for you. It works well with moving averages, macd's, stochastics, pivots, and any other trading system. If you prefer to look at the markets through a fundamental or sentiment-based approach, then the same techniques for determining oversold markets or markets where emotions have run to extremes, will apply to emini contracts.
Like any other trading, whether it is stocks or bonds, options, or trading currencies, trading the S&P500 emini offers great potential for gain and loss. Before you start trading futures, it is advisable that you learn to trade it. Take an online course, do a seminar, read a book.
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