Monday
Feb042013
Benefits Of Trading Emini Futures - Part 2
February 4, 2013 at 10:24 PM (QQQ)(DIA)(SPY)(GLD)(SLV)
The Benefits Of Trading Emini Futures - Part 2
We covered a lot of ground in the first article. Let's recap what we've discussed so far:
- Liquidity is never a problem
- No $25K minimum account balance for daytraders
- Margins as low as $500 intra-day
- 100% electronic means no front running, pump and dump or other shenanigans
- Taxes are based on the 60/40 split given to commodity traders
If you missed Part 1, you can read it here. For me, what I've already listed is more than enough reason to move from Stocks to Emini Futures, but wait... there's more!
- Commissions - also known as the cost of doing business. When I first started trading stocks through a flesh and blood broker, the average commission on a trade was $100-$200 to get in and a % of the profits to get out. The commission on the last equity position I closed out through a traditional brokerage firm was in excess of $3k. True story... Times have changed and with discount brokerage firms you will pay substantially less to trade stocks if you are a self-directed trader. Unfortunately, you do get what you pay for. No help, no advice and no shoulder to cry on. We use Daniels Trading exclusively for our Emini Futures Trading. Not only do we enjoy extremely competitive rates ($6-$7) per round turn, we also benefit from Burt and Leslie's many years of experience. They're not just brokers, they also trade. When you call in, you aren't sent to a phone room in another country, Burt or Leslie will answer the phone, on most days by the 3rd ring. You receive over 25 years of combined trading experience at a price that makes turning a daily profit, a little less daunting. If you trade 1 Emini Contract and make 2 points, that's $100. Subtract your transaction cost ($7) and you're left with $93.00. If you trade in size you might even qualify for a reduced rate. One thing you'll never get, is reduced service. This part of the equation puts you far ahead of every stock trader on Wall Street.
- Spread - The difference between the Bid and the Ask is called "the spread". With Emini Futures you will rarely see a spread larger than 1 tick during normal trading hours. 1 tick is the smallest increment that any market trades in.
- Research - There is none. No homework, no analyzing 50 different companies and 100's of charts every night to figure out where you might have some opportunity tomorrow. When you trade the Emini, you are trading the best of breed stocks lumped together. When you go long the ES you are buying 500 stocks at once (for $500 intraday). The folks who put the indices together have already done the heavy lifting. S&P, Dow, Russell, Nasdaq... these companies are the best of the best, that's why they are in the index. You simple apply your technical and/or fundamental prowess to determine if the next move is up or down. Your wife (or girlfriend) is going to love this. Your kids might even start to recognize you in a crowded room, like when you show up for their birthday party.
- Options - We've given the stock traders a hard time throughout this article, but what about the option traders? There's a tough job. Right? They have to deal with the underlying price, the strike price, volatility and time decay. Time what? Exactly! As an Emini Futures Trader you're only concerned with one thing - Will the market go up or down? Period! However, for those who are truly gluttons for punishment, you can trade Options on Futures. Here's the good news - Burt is an Option Savant. If you really want to go down that road, he can place and manage the trades for you. That service will obviously cost more than $7, but believe me, it's well worth it.
- Selling - Selling stocks often has a negative connotation. Some consider it un-American. Some have turned it into a criminal enterprise - Naked Short Selling, and on occasion the government simply says "Don't do it" as was the case with financial stocks not too long ago. There's also things to worry about like the up-tick rule. When you "go short" in the Emini Futures, there's no restrictions, no bans and no stigma. As Emini Day Traders, volatility is our greatest friend. If it's a trend down day and we have to wait for the market to move up before we can go short, half the magic is gone from our equation. As an Emini Futures Trader, you'll never deal with any of those headaches. If the market is tanking, catch a ride. When it starts to rally, change buses. I never said it was easy, but it could be that simple.
Turns out we need a Part 3 to finish this up. Stay tuned, there's more to come...
Emini Tweets And Other Stuff
Euro 6E Tweet - 111 Pip Drop
DOW YM Tweet - 99 Point Drop
DOW YM - CFRN Weekly Trading Zone
S&P500 ES - Weekly Trading Zone
As opportunities unfold we'll keep you posted.
Trading's Not Easy - But It Can Be Simple!
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