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Trader Savvy Newsletter

November 8, 2006

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LME Metals are Hot!
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Futures Trading Summit: Nov. 15-16, 2006, Las Vegas

E-mini stock index futures give you the best market to trade

Name: Afshin Taghechiani

Company: Traders International

Learn More About Today's Author

E-mini stock index futures give you the best market to trade

In September 1997, the S&P 500 E-mini contracts were introduced by the Chicago Mercantile Exchange, followed by their NASDAQ 100 and, finally, the E-mini Dow futures by CBOT in March 2002.

The advantages of trading these markets include the unique combination of high volatility, high liquidity, high leverage, and the ability to trade with 100 percent electronic order execution platforms, which negates the need for pit or floor broker involvement.

Add to that minimal slippage, tight spreads, no uptick rule, ability to short as easily as going long, absolutely no market research to do, much less time consuming than other futures, very low commissions, great short-term tax advantages, hedging opportunities, and these markets are fair and open so you are not worried about corruption, price manipulation, and insider trading.

The fact that the E-mini S&P has experienced explosive growth of more than 2000 percent in just the last few years is no accident. A lot of traders are making the right choice for the best market to trade.

E-mini index futures price movement allows for significant and consistent results

The average price movement of the S&P 500 E-mini market is about 12 points per day and each point is worth $50 per point per contract. You can trade as many contracts as your margin account and financial temperament can handle. If you trade five contracts in a trade, for example, and gain just two points on that trade, you would gross $500/day. That's $10,000 a month or $120,000 per year, before commissions. The S&P E-mini index will typically move those two little points in about five to twenty minutes on average, which translates into an opportunity to make $500 in about five to twenty minutes.

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Wait! That's a five to ten-percent return on investment in practically a blink. Can that be? Why do you think E-mini's have been called "the most successful trading product ever launched in the financial industry?" To be fair, you can lose the same amount if the market goes against you. The key is using a system to manage the risk and increase the potential so you experience much more winners than losers.

By producing 5 to 8 high probability signals daily, achieving two points per day from a market that averages 12 points volatility a day, in up or down market, should not be a difficult task - especially when you utilize a high probability trading strategy combined with sound money management techniques.

See for yourself how frequently trading opportunities are identified

Take a look at the one-minute chart of the S&P 500 (Figure 1), and you'll notice something. The vast majority of the time, the index moves up or down at least two points or more every 5 to 20 minutes. By setting the profit target at two points from your fill price, you have a very high-probability target to begin with based on price movement characteristics of the index. This type of price fluctuation provides excellent trading opportunities over and over again throughout the day.

FIGURE 1: One-Minute Chart of E-mini S&P 500

You can utilize a proven system to consistently make good trades in that market

To increase the odds in your favor, avoid over-trading, and filter out price noise, you can adopt a simple yet powerful trading methodology that seamlessly blends squeaky tight stops, highly accurate signals and a sound money management approach to achieve superb trading results.

The stop for such a method shouldn't be more than two points. In order to determine the buy and sell signals, you can use a stochastic and moving average with specific parameters in a one-minute chart. (TI provides the entire set up in training workshops that are conducted twice a week.) The two indicators are based on different formulas and are looking at the market from two different angles. Whenever they both confirm a certain move, it implies a high-potential trade.

Better results come from focusing on smaller, single time frames.

Most traditional methods of trading utilize multiple time frame charts. The thinking is that the 1, 5, 10, 15 and 30-minute charts will give accurate signals when the charts confirm a certain price movement and all line up at the same time. The biggest disadvantage of those methods is how many opportunities are missed. For instance, if there is a four-point move total on a one-minute chart, you can get in and out of that move and make a couple of points from it with ease. But if you wait for a five-minute chart to confirm a 10-minute chart to confirm a 15-minute chart, etc., by the time they show the confirmation, guess what? The four-point move is over. Even if you use a single five-minute chart, 90 percent of the signals are never seen.

With multiple time frames, you miss many opportunities to catch the small movements that could be a substantial gain depending on how many contracts are being traded. Notice the simplicity of the chart shown in this article. It's clean and uncluttered. A single one-minute candlestick chart and two tuned indicators combine forces to seek out even the slightest moves in the market and let you turn them into quick in-and-out trades.

Predicting markets over long or multiple periods of time are just as difficult as predicting the weather for long periods. There are too many variables that can change that you cannot control. What if you are just trying to predict the weather for next 5 to 20 minutes? Do you still need a complicated technique?

When you use multiple time frame charts, you are trying to predict trends - some price the market will be at somewhere off in the future. An hour, a day, a week into the future...the farther out you go, the worse it gets, because you are trying to predict all the thousands of big and little events that will shape that future price.

But how about predicting the market direction for the next five minutes or so? What if you used the tremendous power of modern technical analysis to tell you that direction, and you let the natural tendency of the market itself tell you how far it would go in that direction? It's starting to make a lot of sense now, isn't it? You bet it does.

Combining best of breed pattern recognition with powerful technical analysis gives you the best signals

Combining the legendary "high-probability patterns" with simple, yet powerful, technical analysis is the single most accurate way to determine the highest possible probability for buy and sell points in certain time frames of the day, with the best hours being the first and last two hours of the market.

Using this model, it is also possible to accurately detect those long, strong trends at their very earliest stage and trade in their direction. You can even trade counter trend, or in a sideways market, as long as the market is not too choppy.

Master the market and the method and control your trading destiny

Trading success is nothing more than finding the market that offers the greatest consistent profit potential, like e-mini indexes, and then adhere to an easy to understand, reliable, accurate and simple trading method that works for you. Mastering the method means you're in the driver's seat. You're in total control of your trades and your financial destiny.

About Today's Author

Afshin Taghechian is one of today's most sought-after market based speakers and an internationally recognized educator and lecturer on all aspects of trading.

The founder of Traders and developer of the revolutionary TIMES trading method, he has spent many years studying advanced technical analysis and building a trader education and mentorship program. The comprehensive education he provides, along with interactive ongoing trader mentoring from seasoned instructors, has proven to be very effective for many trading professionals around the world.

The TIMES method has been recognized as a top-ranked trading strategy by Stocks & Commodities magazine. It has received the Editor's Choice award by Traders World magazine. Traders International is recognized as one of the leading trading education organizations and has trained thousands of traders worldwide in the past 8 years.

Mr. Taghechian has a Bachelor's degree in Business Administration and has been a contributor to many financial magazines. He has conducted trading seminars around the world, and has been interviewed by financial news programs on TV and featured by Investor's Business Daily, Stocks & Commodities, Futures, Traders World, SFO and Buy, Sell & Hold magazines. Mr. Taghechian is well known for his live market trading seminars, which he conducts on a regular basis in real-time for current and prospective trading students. Mr. Taghechian comprehensively demonstrates to his audience how ideal trading vehicles like the E-Mini Stock Indexes are for generating consistent profitable returns. By going to you can register for a live market trading seminar and watch, listen and interact with him and the whole TI team. You will see for yourself how simple and powerful the program is to follow and why so many traders have successfully built their trading futures based on his teachings. (Webcast: Tuesdays & Thursdays, 2pm, EST)

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