Stock Market Day Trading
E-mini Futures Day Trading
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Daily Trading Log
There are reasons why a day trader would
prefer e-minis over stock market day trading, and vice versa. Here are a few
Stock market day trading
can take advantage of the small and variable lag time between stocks and the
futures. This can give a day trader who is
stock market day trading
an edge, especially if he/she is a scalper. And, if you are trading a liquid
stock which is highly correlated to the Dow or S&P500, it’s possible to
latch on when a “buy program” hits the market.
This variable lag, however, explains why the eminis often times give more
accurate support and resistance levels than stock market indices or
individual stocks. Since the stock index futures lead the stock market,
they’re not constantly lagging behind, playing catch up, or over-shooting a
leader’s path, as the stock market is. The emini’s movements are more pure,
reflecting supply and demand instantly and accurately.
The leverage and size…
Stock market day trading allows you to use less
leverage and reduce your trading size to a level that may be more
comfortable for some traders.
Trading one contract in the emini’s carries a hefty bit of leverage that
some traders may not want. On the other hand, many traders prefer the
If you are stock
market day trading, you may have noticed
that many individual stocks are not very liquid, at least not liquid enough
for the kind of defensive day trading I do. To use my crucial rule, “every
trade starts out as a scalp until proven otherwise,” you have to trade
something that is extremely liquid, or slippage will ruin you. However, if
you are interested in stock market day
trading, there are some stocks that do have
The eminis are one of the most liquid markets in the world, with very little
The professional competition…
The NYSE stocks trade in a pit with specialists taking
advantage of the spread, scalping with minimal costs per trade, a huge
advantage over the public. The playing field is not level. Specialists are
not in business to lose money. (The Nasdaq stocks, however, trade
electronically, eliminating these problems.)
Emini’s are traded electronically without a pit and
without locals taking advantage of the spread. (The Maxi contracts are still
in the pit, but the eminis appear to be leading the Maxis now, so there
doesn’t appear to be direct competition between scalpers of the eminis and
the locals in the Maxis pit.) It’s true that big emini traders who own a
seat on the exchange and trade “size” have a cost advantage, but by historic
standards, their costs are not much lower than the “retail” traders. Any
emini trader can now trade a “round turn” (buy and sell combined) for $4.80
per contract. And retail costs have been dropping. They’ll probably continue
The ease and psychology of two-sided
In Stock Market Day Trading, stocks used
to be a bit difficult to short due to the “up-tick” rule (which
means a stock has to move up one tick before you can short it).
However, since the “up-tick” rule was done away with, shorting is as
easy as buying a stock. Still, there is a view widely held by retail traders
that shorting a stock is not the most “wholesome” thing a person can do.
(But actually, short positions are “squeezed” in up trends so they provide
additional “fuel” for up trends. After all, a price rally normally doesn’t
stop until most of the buyers have bought and most of the shorts have been
squeezed out. Take the shorts out of the equation and rallies are not as
sustainable.) Also, some stocks will not be trading in the same direction as
the market indices, making it less predictable than trading a stock that
mirrors the market indices with its moves.
Emini day trading
is a "pure play" on market direction. Going short is
as easy as going long. Also, there’s no stigma attached to shorting the
e-minis. In fact, most professional stock index futures traders
I’ve met prefer shorts over longs. Maybe it’s because the public is more
comfortable making money on up-trends.
Preparation to trade…
Stock market day trading doesn’t necessarily involve stock
fundamentals. But stock fundamentals, including the stock’s “story,” can
help determine whether you want to favor longs or shorts. For instance, if
you’re day trading the stock of company that has just announced a cure for
cancer, you might favor the long side. But you’ve got to dig and read
excellent sources to find good fundamental stock info. And even if you’re
not day trading with stock fundamentals, you’ve still got to search hundreds
of stock charts for technical setups and chart patterns. This can take hours
Day trading the eminis
doesn’t necessarily involve anything like stock
fundamental analysis. I don’t even pay attention to the content of important
news releases, such as the Fed’s decisions on interest rates. I just keep
track of when the important reports are scheduled, and I get out of their
way until after the news hits. When the news hits, there are usually two
false moves. Then a decent trend often emerges, and I try to get on board.
With no stock fundamentals to consider, and only the same charts to analyze
each night, I save myself hundreds of hours of work each year.
I’m not an expert on taxes, but one thing is for sure, it’s much easer to
prepare you own tax forms if you’re
trading the eminis than if
you are a taxpayer who is making a living stock
market day trading or exchange traded funds (like the Spyders and
QQQQ’s). There may also be some dollar tax advantages. Check with your tax
adviser, of course.
Size of your trading account…
Stock market day trading requires a $25,000 minimum in your account.
The government stepped in to protect us from ourselves, I guess.
I suppose you could trade the emini’s with $2,000 in your account, but I
wouldn’t advise starting with less than $15,000… unless you’re already a
Being an emini day trader myself, I may not be the most unbiased source of
information on this subject. But no matter which way you decide to go, my
services can be extremely valuable to you whether you are
stock market day trading,
Day trading the eminis.
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