Beginning to Trade the S&P 500 E-Mini TOS Symbol /ES Steve Fought File – Beginning Emini 7-31-10-B

DISCLAIMER The following is not an investment or trading recommendation. The losses in investing and trading can be very real, and depending on your investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. You should make your own trading and investment decisions based off your own research, and tolerance for risk. What follows are just some helpful tips which I have found in my countless hours of researching the subject

What is the S&P 500 E-Mini? Commonly called just the “E-mini” - ticker symbol /ES on the TOS platform, E-mini is a stock market index futures contract traded on the CME (Chicago Mercantile Exchange) Globex ELECTRONIC trading platform. The CME created the emini in Sept 1997 because the value of the existing (big) S&P contract cost was over $500,000 at the time which (of course) is just too large for many small traders. The E-Mini quickly became the most popular equity index futures contract in the world. Hedge funds like trading the E-Mini over the big S&P because the big S&P still uses the open outcry pit trading method, which has inherent delays, versus the all-electronic Globex system. The average daily implied dollar volume for the E-mini can run over $140 billion, far exceeding the combined traded dollar volume of the underlying 500 stocks. Following the success of this product, the exchange introduced other E-minis like the NASDAQ-100 geared primarily towards small speculators, as opposed to large hedgers. The E-Mini contract trades 23.25 hours a day, five days a week, on the March quarterly expiration cycle

What are the S&P 500 Emini Futures ? Why trade the Emini Futures ? The below video and text article seem to be pretty good summaries to answer the above questions. Just go to - Emini Watch. Com (Barry Taylor’s web site) Inside the web site, just click the EMINI TRADING tab and then click on the 2 articles below: 1.Why trade the Emini Futures ? This is a video Here is the link http://emini-watch.com/emini-trading/why-trade-emini-futures/ 2. What are Emini Futures ? This is a text article http://emini-watch.com/emini-trading/emini-futures/

Directions for the TOS Paperwork The info below is required by TOS if you want to trade futures from an IRA account TOS says you have to have a min of $25,000 in your IRA to trade They also say you need 3 years experience trading derivatives but I think that is up to broker discretion Below are the details to sign up with TOS to trade from IRA account Go the TOS website, www.thinkorswim.com log in to your account Click the MY ACCOUNT tab Click the ACCOUNT SERVICES CENTER selection Your basic IRA account info should populate the screen Scroll down and until you see the link Click Here to Request Futures Trading on Eligible Accounts Fill on the online forms. Then print out the PDF format signature card and customer agreement for the Futures account Scan the signed doc and email to accounts@thinkorswim.com  or by fax the doc to 773.435.3232. My registration only took about 48 hours to get approved

Developing an EDGE Trading Plans for S&P 500 – E-minis Your edge is your trading plan which gives you a higher probability of making money. I have spent the last few months researching and testing different strategies to gain an edge trading the ES From my personal research, it seems like there are literally hundreds of web sites which can help you develop an edge. The cost for these educational subscriptions, newsletters, and/or coaching can cost from $150 to $7000 + Right now, I am researching to see if I can gather enough information and education on my own to successfully trade this underlying

You might want to check out the Don Miller Blog for some general E-MINI trading Info http://donmillereducation.com/journal/

My Edge (still in development as of 7-31-10) My current strategy is just working what I call the “STRETCH” This is a relatively simple strategy (which makes it easier to stick to the plan) It is a form of “reversion to mean” or some might call it a “rubber band” theory We all know one thing for sure: We know the market is not going to keep going in one direction forever What we don’t know is: When it will turn How much will it turn The STRETCH concept The more a market STRETCHES in one direction, the Higher the probability the market will turn … except for outliers like the flash crash May 2010 Never trade in No Man’s Land – This is the area between the daily high and low Never trade before the market has established a high and low for the day Drop in trades when the market turns from the daily high or low. Wait until you get the 2nd candle in the opposite direction which is a tell of conviction

EDGE DESCRIPTION IN A VIDEO Below is a video which I found pretty much summarizes a lot of my current trading ideas Just search in GOOGLE for “Building Your E-mini Futures Trading Strategy” A CME / Dan Gramza site will pop up Here is the link http://www.cmegroup.com/education/interactive/webinars-archived/building-your-emini-trading-strategy.html Here is another link if above does not work http://www.cmegroup.com/education/interactive/emck/index_content.htm This appears to be some CME Education – not sure that connection They will ask for your name and email address in order for you to get this 35 minute video

Price and Volume Idea The STRETCH idea uses price as the key indicator I also watch the common TA (Technical Analysis) indicators (RSI WILDER, MACD, and Stochastics) But right now to me , it seems like most TA are just lagging indicators So I just watch Price closely relative to the first high and low established for the day And also watch price relative to SMA (Simple Moving Averages) My main chart is an Intra day, 10 day, 1 minute candle chart I have 3 simple moving average – 9 period (minutes) , 50 period, 200 period I also have volume on the chart I also watch on another chart with TICK, DVOL-UVOL, ADVN-DECN – But again, these seem to be lagging indicators and I am just watching for correlation now and not using these particular charts for entry and exit decisions. Here are some web sites with videos exploring the idea of just watching price and volume to make entry and exit decisions Day Trade to Win .com – John Paul Triple Trading profits . com – Stuart McPhee

Here is a book I read recently Trading in the Zone: Mark Douglas Recommended by a number of emini traders This book does not give any specific trading strategy edge. This book is mainly about the psychology of trading Particularly day trading

My personal take away ideas Trading in the Zone: Mark Douglas My personal take away ideas Trade a system - Remove the emotion – Stick with the system Trade one underlying Develop a feel for how your underlying moves Get a feel for the market rhythm i.e get into the “Zone” when trading

Getting a feel for the market See Don Miller Education .com Blog entry 7-22-10 Beyond the Technicals Video Discusses how TA pales in comparison for a market feel that comes from hundreds of hours of just following and trading a single underlying day in and day out

The Future Will continue to rack up the hours to get a feel for this trading and report back at a future meeting Running pretty close on the trail stops right now. 0.08% to 0.10% max Update report in a month or three