Don Miller's E-Mini Strategy Course, Part I

...you're looking at very close representation of the price action in the S&P 500 Index. The S&P E-minis are therefore a great way to trade the action in the S&P 500 Index.

Besides the S&P E-minis, I also trade the Nasdaq-100 E-minis.

The Nasdaq E-minis (which we’ll refer to as NQ because it reflects a common symbol used by many quote providers), like their ETF counterparts the QQQs, are an effective way to trade the Nasdaq 100 class of assets.

Like the S&P E-minis, when you trade the price action of the NQs....

...you're essentially trading off the price action of the Nasdaq-100 Index.


A Brief But Important History Lesson

When somebody slaps a label of anything that begins with "The History of..." my eyes usually glaze over. However, if you are considering switching from trading stocks to trading the E-minis, this section will probably have some impact on you. Once you understand the motivation behind their creation and why they've exploded in popularity, you will probably be even more motivated to open up your futures trading account!

The Chicago Mercantile Exchange is the largest futures exchange in the United States and the second largest in the world for the trading of futures. The CME offers trading in futures contracts and options on these contracts, primarily in interest rates, stock indexes, currencies and commodities. The CME uses two ways to bring buyers and sellers together: open outcry on their trading floors and GLOBEX around-the-clock electronic trading platform. The E-mini trades through GLOBEX, but has great synergy with the larger pit-traded S&P contract.

In 1997 the Chicago Mercantile Exchange (CME) launched the "E-mini" S&P 500 futures, which has become the fastest growing product in CME history. It was revolutionary in that it made electronic trading open to all investor and trader classes through GLOBEX, the CME's electronic trading platform. What else was visionary was the size of the contract was set at one-fifth of the standard pit-traded S&P, making it available to a broader base of traders.

What I like about the E-mini contract is that every trader is equal. The GLOBEX system is first in/first out, and if you have a better bid/offer, you are executed. In effect, you are in a queue and are price matched.

This contract has met with unprecedented success. The E-mini's opening day volume was about 7500 contracts, and recent average daily volume has seen approximately 500,000 contracts traded.

A recent single-day volume record reached almost a million trades!

While index-based Exchange Traded Funds such the QQQs and SPDRs (both of which I’ve traded in the past) have been catching on in popularity, they do not compare to the substantial growth I have seen with the E-mini futures contract. This contract has substantial liquidity and is an excellent way to trade stock indexes.

In Part II, we'll talk about the similarities and differences between the E-minis and stocks, as well as price moves and the types of orders you can place.

Don Miller