Benefits of E-mini Trading | RJO Futures (2024)

FAQs

Benefits of E-mini Trading | RJO Futures? ›

While futures can pose unique risks for investors, there are several benefits to futures over trading straight stocks. These advantages include greater leverage, lower trading costs, and longer trading hours.

While futures can pose unique risks for investors, there are several benefits to futures over trading straight stocks. These advantages include greater leverage, lower trading costs, and longer trading hours.

Not accounting for commissions and slippage, these strategic frameworks show that it is theoretically possible to make a living trading E-mini futures. Given a solid success rate and positive risk versus reward scenario, long-run profitability is attainable.

E-mini S&P 500 futures are traded on the Chicago Mercantile Exchange (CME) and allow traders to gain exposure to the S&P 500 index, a widely recognized barometer of the U.S. stock market.

A micro futures contract is a smaller version of the same futures contract. This means they require significantly less capital to trade—which can help you speculate on the stock market and commodities at a lower initial cost.

When trading futures vs. stocks, there are no rules requiring a minimum account balance or restricting how many trades can be placed in a week. As a futures trader, you can trade long or short multiple times a day or week without worrying about day trading restrictions.

The most prevalent benefits include simple pricing, high liquidity, and risk hedging. The primary disadvantages are having no influence over future events, price swings, and the possibility of asset price declines as the expiration date approaches.

The contract size of an E-mini is the value of the contract based on the price of the futures contract times a contract-specific multiplier. The E-mini S&P 500 has a contract size of $50 times the value of the S&P 500. 2 So, if the S&P 500 is trading at 2,580, the value of the contract would be $129,000 ($50 x 2,580).

Entry: Buy orders from either the 38% or 62% Fibonacci retracement of the intraday range. Stop loss: Stop loss orders are best placed beneath the 50% or 78% Fibonacci retracement level. Profit target: Aligning a 1:3 or 1:4 risk to reward is ideal for a trend trade, given adequate time for the position to gain value.

How much money do you need to trade E-mini futures? ›

There is no legal minimum on what balance you must maintain to day trade futures, although you must have enough in the account to cover all day trading margins and fluctuations which result from your positions. These can vary by broker however some require as little as $500 to open an account.

In other words, if the E-mini is trading at 2,380.00, the full cash value would be $119,000/ contract (2,380.00 * $50.00). Therefore, a trader would be able to hold $119,000 worth of stock for only $5,060/contract (initial margin) or 4.7% of the full cash value.

How Many E-mini Contracts Can I Trade? Theoretically, you can trade as many E-mini contracts as your account balance allows you. Because E-mini contracts are traded on margin ($500/contract) you can trade more contracts with less money.

As a risk management tool, the smaller size of micro E-mini contracts provides more precise tailoring of exposure to major stock indices so you can help mitigate risk to some or all equity exposure without disturbing an underlying stock portfolio.

For Micro E-mini S&P 500 futures (/MES), the minimum tick or price fluctuation is also 0.25 index point, or $1.25 per contract (one-tenth of the $12.50 per contract of the /ES). The value of one contract is calculated by multiplying the current level of the index by $5.

Tick Value:

Each tick represents a specific monetary value, which may vary depending on the prevailing market conditions. For Micro Nasdaq Futures, the tick value is $0.50. This means that for every tick movement in the price, a trader's profit or loss changes by $0.50.

Stock futures investing

Some traders like trading futures because they can take a substantial position (the amount invested) while putting up a relatively small amount of cash. That gives them greater potential for leverage than just owning the securities directly.

The futures markets provide direct access to trade a variety of products and contracts, both financial and commodities, which are not available through stock option trading. This means that futures can offer greater diversification which can help offset the risk of having all your eggs in one directional basket.

Minimum Account Size

A pattern day trader who executes four or more round turns in a single security within a week is required to maintain a minimum equity of $25,000 in their brokerage account. But a futures trader is not required to meet this minimum account size.

In the world of futures trading, success can mean significant profits—but mistakes can be extremely costly. That's why it's so important to have a strategy in place before you start trading.