Basic introduction to day trading e-mini futures

Have you ever thought about day trading for a living? I am sure you must have at least heard about it, right? Yes, there are people doing it for a living, some making big bucks in the process, others losing their shirts, trophy wives, and mortgages. Not necessarily in this order. And I am quite positive that you would rather be in the former category.

I have been contacted by more than just a few folks who wanted to know what it was like to be a day trader once they had somehow found out through my relatives or friends that that’s what I had been doing for a living for a few good years. I don’t blame them for this curiosity. Everyone once in a while wants to improve his or her life and day trading can be a very alluring way to do it. And quite lucrative too, if you know how to make it work for you, which is not always so easy as most people actually never succeed at this business. But then again, most businesses fail routinely, and most people never succeed at anything big, so these challenging circumstances should not necessarily discourage you from giving it a try.

Now, when thinking about day trading, most people think this has something to do with the stock market. Yes, that is correct, but that’s not the only way to approach it. In fact, this could be put day trading out of the reach of the majority of folks, for to embark on day trading stocks you would need to come up with at least 25,000 US dollars to be deposited with your broker.

It turns out that there is an easier way to do this. And a simpler one, too, for you don’t have to be interested in the whole universe of stocks, but just in a single trading instrument. It has to do with trading e-mini futures rather than stocks and to do this no more than $3,000 is necessary if you are just starting. In fact, with some e-mini brokers, you may never need to deposit more and still be able to make $100 to $200 a day, if you are really good at it. More money is better though, making it safer to start and to keep trading and easier to make more money as you simply have more to trade with.

E-mini futures, or e-minis for short, are traded in contracts. One contract is just like one share when it comes to trading stocks, that is, it is the smallest unit you can trade. There are many e-minis currently available for trading, literally dozen or more, but some are more popular than others. The most popular is the S&P 500 e-mini contract, known under its symbol, or ticker, as ES. Another one is YM, the the Dow Jones Industrial Average (DJIA) e-mini futures contract.

In what follows, I will focus on this contract as it is more suitable for beginners, in my opinion.

The moves in this contract mirror the moves in the DJIA index, sometimes being ahead of it, sometimes being behind it. One point is the smallest amount the Dow e-mini futures can move and this move can make you 5 dollars. Usually, one targets more than 1 point, 5-10 pt targets being among the most popular targets for quick scalps. If you happen to make a 10 pt trade, you profit 50 dollars minus the commission that can be as low as $5 or even less for a round turn with most broker out there, although some may charge more than that. I would avoid them, though.

Now, imagine that you are lucky enough to make only 5 trades like that. That would give you about $225 after commissions, which would amount to a nice monthly paycheck if you were good enough to keep repeating this day after day.

And that is, in a nutshell, how you make money day trading e-mini futures for a living. Quite simple in principle, much less so in reality, though it gets easier with practice.