Topics of Trade Explained » ES Futures Trading Plan

Why Trade the S&P E-Minis?

The main reason that we trade the S&P 500 E-mini (ES) is because it is a very liquid market - meaning it has a lot of volume and a lot of action. You can get in and out very quickly. It is not generally effected by one company's news or a sector's move in a dramatic way. It also has superior profit potential and trades excellently from our channel readings, giving us a distinct advantage over other traders.

The ES closely tracks the price movements of the S&P 500 Index, the premier benchmark of stock market performance and is traded on the CME Globex platform - offering speed, reliability, anonymity and it trades around the clock, around the world. It also works closely with the DOW-30 stocks at least 97% of the time.

Futures require much lower margin requirements than normally associated with pattern day trading in stocks and Bid/Ask spreads are tight and there is potentially lower trading costs than trading a basket of equities or ETFs. You and your accountant may also find some tax advantages when compared to stocks.

Although we also focus on stock equity and index trading, many traders have found futures trading a profitable way to supplement their day's trading opportunities, especially on days when stock trends are narrow.

ES Trading Hours

Sundays and Holidays open at 6:00PM ET.

Mon-Fri 6:00PM-4:15PM the following day; break from 4:15PM-4:30PM, shut-down from 5:30PM-6:00PM nightly.

Friday's close is at 4:15PM until 6:00PM Sunday night.

A Simple Business Plan

This business plan is an example of how powerful trading the ES can be, but please remember that the #1 Rule in trading is to Protect Your Capital. Every trader has losing days, just keep them limited.

I like to teach and say, "an average of +4 points per day - can change your life!" This is a very achievable goal in the ES, and if you need to make more money, simply trade more contracts. To give you an idea of what +4 points a day on average can produce, take a look at the outline below.

As you will see, starting with just 2 contracts and a $5,000 trading account - you could make a considerable amount of money. Because I usually take Friday's off to enjoy time with friends and family, the chart below is based on only a 4-day trading week, Mon-Thurs. We also have several holiday related days off, so this is a fair example.

Assuming that you compound and add a contract each time you earn $2,250 (price on margin) ... ($4,500 per if 100% cash or holding overnight), your initial capital could double in about 3 weeks! But look how your money begins to compound after the 8th week! This is why record volume/trades have been running through the ES. *Contract margin pricing changes depending on your broker.

Starting Week #1: with $5,000, trading two ES contracts, targeting +4 points average per day, during four sessions per week...here is an example of what could happen to an account:

Week #	Contracts	Profit per	Daily TL	Weekly	Balance
1	2	$50	$400	$1,600	$6,600
2	2	$50	$400	$1,600	$8,200
3	3	$50	$600	$2,400	$10,600
4	4	$50	$800	$3,200	$13,800
5	6	$50	$1,200	$4,800	$18,600
6	8	$50	$1,600	$6,400	$25,000
7	11	$50	$2,200	$8,800	$27,200
8	12	$50	$2,400	$9,600	$36,800
9	16	$50	$3,200	$12,800	$49,600

The minimum price movement the ES can make is called a TICK, or .25 of a point (think of 4-Quarters and the relationship to $1.00). A Tick pays $12.50 (per contract). 4 ticks then makes a full point in the ES. 1 point pays $50.00 (per contract).

You can trade as many contracts as your capital permits. As far as actual trading goes, these trade almost exactly like shares of stock, but they expire every three months and move into a new contract.

To trade the ES you simply need a futures account with your broker. Most often this access is simply added to your current stock account. It is an easy process to do and can usually be set-up with one phone call.

Pigs Get Slaughtered! Ernie the Hog!

This all comes back to our goal of striving for +4 points per trading day. One of my father's favorite sayings when he was teaching me the importance of goals in life was, "How do you eat an elephant? And he would answer, One bite at a time!"

Bulls make money, Bears make money, but Pigs get slaughtered.

The US rally from October 1998 into March of 2000 was absolutely the best trading in recent history. The NASDAQ covered an upside range of nearly 3,800 points into an all-time high of 5,132.

Back then, traders who were in names like AMZN, ARBA, BRCD, BRCM, CMGI, DCLK, EBAY, INKT, JDSU, JNPR, QLGC, RBAK, RNWK, SEPR, and YHOO were offered a lifetime of profits - if they were not Pigs. But as rapidly as this happened - the party stopped.

Thereafter, I began to change my mindset to respect my father's suggestions. No longer would I look to make a killing on every trade - but to just take a bite and move on.

Now I trade for a living in small bites - and without all the stress often associated with trading. I take a small chunk everyday to make a very comfortable living. I work to pocket an average of 4+ points per day, and suggest that if you trade the ES, that you have a similar goal. And once you get there each day - step away and go enjoy your life!

Whenever you have profit in your trade, use a Trailing Stop to protect your gains but to allow for a move into the next Major or Larger Channel - which is posted within this letter each morning. In my opinion, you should never have a losing trade once you are ahead by 2-2.5 points. Stops are your tools - use them.

If a trade goes against you - get out with a loss not more than 25-30% of your original profit target. As an example, if you are targeting a possible 8 point move on a trade, keep a 2-3 point Stop Loss order in place at most.

Over time with good market knowledge and our lines - you will have the ability to be more successful than you ever dreamed you could be!

ES Emini Live Chart Alerts

Topics of Trade Explained » ES Futures Trading Plan