How To Day Trade Futures Markets

If you’re ready to start earning a living rather than just earning a paycheck, you can make a lot of money trading the futures market.  A futures contract is an agreement between two separate entities on the future price of an asset.  Whereas day trading stocks requires a trading account of at least $25,000, many brokers allow you to trade futures with only a $500 account. 

Other advantages of trading the futures market are that it is highly liquid, meaning you can get in and out of trades quickly, and that they are traded electronically, meaning you can trade from the comfort of your own living room.  We’ll talk about the various futures contracts that are best for trading, and we’ll also go into a couple of trades to get your started making real money in the shortest amount of time.

As stated earlier, the futures market is highly liquid, so traders trading both small and large contract size can enter and exit the market easily, with little to no slippage.  The four most popular futures to trade are the S&P E-mini (ES), the Nasdaq E-mini (NQ), the Dow (YM) and the Russell (TF).

Both the ES and the NQ are traded electronically on the Globex electronic trading system.  The S&P Emini (which we’ll refer to hereon as the ES) is the largest traded futures market among these four and hence the most liquid.  ES trades in tick increments of 0.25, with a dollar equivalent of $12.50.  4 ticks make a point, so a point in the ES is worth $50. 

The NQ’s are based on the Nasdaq 100 stock index, and also trade in tick increments of 0.25.  The dollar equivalent of a NQ tick is $5, so that a point in the NQ is worth $20.

The Dow, or YM, is based on the Dow Jones Stock Market Index, and is traded through the Chicago Board of Trade, or CBOT.  YM trades in tick increments of 1 point each, with a tick/point worth $1.

The Russell, or TF, is based on the Russell 2000, and is traded on the Intercontinental Exchange, or ICE.  It trades in tick increments of 0.1, with a dollar equivalent of $10.  As 10 ticks make up a point, a point on the TF is worth $100.

See the table below for a summary of these four futures contracts.

Futures Contract Abbreviation Exchange Tick Increment $/Tick Ticks/Point $/Point
S&P 500 ES Globex 0.25 $12.50 4 $50.00
Nasdaq 100 NQ Globex 0.25 $5.00 4 $20.00
Dow YM CBOT 1 point $1.00 1 $1.00
Russell TF ICE 0.1 $10.00 10 $100.00

The key to successfully day trading in the futures market is to develop one highly probable trade and use it over and over again, with larger and larger contract sizes as your trading account grows.  Here are two trades with which to begin building your trading arsenal.

Trading the Gap

A gap in the market is a difference in price between one day’s close and the next day’s open.  Traders know that all gaps fill, eventually.  One popular trade is to trade this gap fill.  This is one way to do it.  Open up a 5 minute candlestick chart.  If there is a difference between yesterday’s close and today’s open that is large enough from which to pull profit, place a limit order to trade the break of the first 5 minute bar in the direction of the gap fill.  Your stop would be placed a tick or two above the first 5 minute bar. 

If the second bar does not break in the direction of the gap, you can trail your entry to the break of the second bar or third bar in the gap’s direction.  Don’t do this past the third bar, because you may be fighting a developing trend day.  Your target is gap fill, in other words, yesterday’s close, though some people take profit off at half-gap as well. 

Make sure you have more ticks to gain from the gap fill than you have to lose from the stop.  If the stop is too large, skip the trade. 

Early Morning Breakout

Also use a 5 minute chart for this trade.  Wait for the market to put in its first half hour of trading.  Mark the high and low of the first half hour.  Trade the breakout to either the upside or downside of this first half-hour channel.  Take profit at +1, +2 points, and so on.  Exit the trade if the market returns to the original 30 minute range.

As you can see, there are many ways to pull money from the market as a day trader.  Trading futures is an excellent choice for day traders because of their small account requirement and their liquidity.  Choose among the four most popular ES, NQ, YM and TF markets, and practice these two trades using a free trading simulator before you put your own money on the line.

It is oftensaid that there is a beginning to all things, and then an ending, and then you start all over again.  Being a “Beginner” at something is the nature of life, but when the activity involves money, common sense tells us to be wary and cautious or we may soon lose what money we have.  This common sense axiom is especially true in the world of forex trading.  Trading currencies has gained tremendous popularity in the past five years, but this popularity has done nothing to reduce the risks that accompany this highly complex investment vehicle.  Inexperience and impatience have quickly destroyed many a newcomer to this popular activity.

The allure of forex trading is its apparent flexibility.  You can trade almost anytime and from anywhere as long as you can access the Internet.  The sophistication of trading software is astounding and masks to some extent the real risks of retail forex trading.  Beginners must accept their amateur status and seek out professionals to mentor their progress.  A trading regimen is no place to learn by “hit and miss” or “trial and error”.

At the start, immerse yourself in research about the craft.  The objective is to gain enough knowledge so that later training lessons will seem familiar, and your mind will be more receptive to understanding and retaining the information.  Knowledge is key before moving onto the next step in the process.  Your mentor will guide you through fundamental and technical analysis, trading platforms, risk management, fraud prevention, forex broker selection, trading strategy and psychology, and basic money management techniques for prudently handling your own account and investments.

Use these to assist in choosing a domestic forex broker.  Many overseas brokers may tempt you with their offers, but local regulators do not favor trading from offshore, nor do you want the potential problems of attempting to exercise legal rights overseas, a nightmare waiting to happen.  Your chosen broker will most likely supply you with his preferred trading software or allow you to interface with your own.  Be sure to read your agreement closely, as there may be exceptions or obligations that you will want to be aware of when you actually begin trading.  There will also be Help screens and more tutorials to enhance your effort.

Is it now time to start trading?  NO, with emphasis on both letters!  Experience is your next objective, and the only way to gain it without losing your capital is with a forex trading demo account.  Your broker will also provide this system for you with an account of “virtual” cash that you can trade at will using real time quotes and his trading platform.  Experts in forex trading have claimed to have spent months refining their trading strategy and gaining the confidence and consistency necessary for real-time trading.  Invest the time if you want to succeed, but be aware that there are no actual guarantees that past performance or historical data indicates future events or results.

Having a detailed trading plan is paramount to blocking emotional intervention during your trading experience.  Knowledge and experience are key factors for success, but controlling one’s emotions is, perhaps, more important in the long run.  Your mind can play tricks with you if allowed, undermining even the most secure decision-making process.  The stress of having real money on the line and having to respond decisively to a rapidly changing marketplace can easily overwhelm the unprepared.  Practice your trading plan until it can be repeated as if it were an ingrained habit.

Forex trading is high risk.  Knowledge, experience and emotional control can create a platform for ultimate success.

When I look at cash flow, fundamentals, technicals, many …. most stocks do not look all that attractive. The news talks them up, but most on their balance and income statements…..their real income levels do not look all that great!? And yet, many of these share prices continue to rise …in the commodities and energy sectors and a few tech stocks?

Where is their momentum coming from ? Is there a momentum measuring stick or some indicators or signs of expectations that I should be looking at, or do you see the same thing…..a flat to declining market that is desparately looking for places to most safely park devaluing currencies?

I want to momentum trade on breaking corporate news. Is there a site that provieds real time breaking news and investment analysis of that news. If a company reports earnings of .00/Share but analysts are looking for .50 that would be bad news but I won’t know what analysts are looking for so I need some quick analysis of how this news will effect a stock price. Anybody out there doing this?

here’s the link:

Look at a 5-year chart below the stock table from Yahoo! Finance.

1. How many times has Intel had a stock split during the last 5 years?

2. If students bought 100 shares of Intel in 1995, how many shares would they have now? Click on the "vs. S&P 500" link on the bottom right hand corner of the chart.

3. Intel and the S&P index were at the same value in January 1996. How many percent did Intel outperform the market (S&P) at the current share price?

4. Is Intel’s current price above or below its 50-day moving average? 200-day moving average?

Note: If the share price is above the 50-day or 200-day moving average, investors will expect the price to go even higher due to upward momentum. The opposite is true if the price is below the moving averages.

For example, I know that I can place a Buy Stop order if I want to take advantage of momentum from high volume at a price level above the existing level. This is only when I’m long on a stock. I want to activate a sell short once it hits a lower price level .Basically, I am asking for the name of the concept of a Buy stop except when you apply it to a short sale trade. Thanks.

If one was trying to sell short or be long any stock ie.OTCBB, PK, Nasqd, AMEX, NYSE, or other American listed stock what would be the best screen to use to find the ones under .00 in the first stages of a rally for buying or droping quickly to sell short in the first few minuits after trading starts in the morning? Paid for or free does not matter, wich screen is the best? Will it require more than one screen?
And thank you all in advance for your sharing of information.

I know that there is no straight factual answer to this, however, are there any types of tools or signs that i can use such as momentum, that may help predict the stock market’s strength or weakness in the upcoming day?

With the table below as an example, what is the best way to measure relative momentum, comparing EACH DAY TO THE PREVIOUS DAY? Each of the numbers in the table represents the number of stocks up minus the number of stocks down on the New York Stock Exchange each day. I have been doing it thus far by simply measuring percent change and then removing the negative signs. On a related issue, my numbers don’t look correct the last two days. For instance, is a move from 7 to -749 really a greater percentage change than from -749 to 1611. The latter seems like a much larger move percentage wise, but according to the excel formula =(a1-a2)/abs(a2), it’s not.

8/2: 1611/ 315.09%
8/1: -749/ -10800.00%
7/31: 7/ -99.65%
7/28: 2020/ 541.05%
7/27: -458