Trading e-minis with right expectations

E-mini futures, often referred to as simply e-minis, are very attractive day trading instruments. You can trade them with only $3,000-5,000 in your account, assuming you want to do this with 1-2 contracts, which is about the right size for the beginners.

There are plenty of emini brokers out there, their numbers growing every year, that allow emini margins as low as $500 per contract if all you do is day trading. And that means entering and exiting your position before the daily session close. Holding it overnight requires much bigger margins and with only $3,000 or so in your account you might not be able to do this without facing a margin call which is a broker request to deposit some more funds.

Trading e-minis seems to be rather straightforward too. The majority of people doing so rely on technical analysis, others may look for fundamental factors to decide how to trade, yet others may combine both of these approaches. Most traders, though, lose money, and this is, quite naturally, particularly true about the newcomers to this highly competitive field. One may ask why. That's a good question and the one with rather simple an answer. Or perhaps answers, as more than one compelling reason for this can be advanced.

The main reason, though, I believe, has to do with unrealistic expectations. Such expectations are often the result of the relative ease to open and fund one's account and then to trade it. As mentioned earlier, it does not take much in terms of money to be able to trade with a contract or two. It is relatively easy to find right tools to do so too, with many brokerages very interested in pointing out such tools for their clients' convenience. Such tools, including charting software and trading platforms that facilitate the order placement, abound and are relatively inexpensive. This ease to start trading is thus often mistaken for the ease of trading. It is thus natural for many beginners to think that since they have been capable of setting the trading workspace quite quickly and easily, they should also be able to make money trading e-minis equally fast and easily.

Unfortunately, that's not the case. The ease of doing one thing does not necessarily imply the ease of doing other things even if they are somewhat related. This often comes as a shock to the beginners who end up depleting their accounts, sometimes almost as quickly as they managed to fund them. Talk about unrealistic expectations, wrong ideas what it takes to succeed in this field and how long it may take one to do so.

If you are considering trading eminis, don't assume that you know how to trade just because you were able to open and fund your account. It is possible to make a living trading eminis, but to this end you need to get prepared. And that means not only getting the tools for charting and executing your trades, but learning how to do this in order to convert your trades into cash. Learning how to do this may take you a few weeks if not months and until you do find a reliable, consistent way to do it, you are better off to stick to trading on a simulator. I am sure you agree that this is a pretty good piece of advice, but you may be surprised to find out how many people ignore it. I hear from them all the time.