How to Trade E-Minis

by Todd Shriber ; Updated July 27, 2017

Items you will need

  • Brokerage account with a registered futures broker and between $2,500 and $5,000 in start-up capital
  • Demo account prior to trading for real money (for new traders only)

E-mini futures contracts provide a low-cost entry into futures trading. In addition to being more accessible to a wider group of investors, E-minis also involve far less risk than traditional futures trading does. This is because lower dollar amounts are used in E-mini trading, so while the rewards are smaller, the risk is as well; that makes trading E-minis the perfect way to get started in the futures game. Using the various instruments available in E-mini trading as well as practical strategies, traders have been trading futures successfully for years.

Decide What to Trade

Step 1

Trading E-mini futures gives investors exposure to many financial vehicles. Choosing between bonds, indexes and commodities can be confusing to those new to futures. Commit some time to studying a couple of the products you think you might want to trade; getting a handle on these instruments is essential to your success.

Step 2

Understand what you're trading. Trading the Dow E-mini means trading index futures on the Dow Jones Industrial Average. Remember there are E-mini futures available for other indexes as well, such as the Nasdaq and S&P 500. Keep a list of the various ticker symbols near your trading computer or on your quote screen.

Step 3

Know your broker's margin requirements. Putting up your own trading capital is a reality of trading any product, but some brokers have different margin requirements than others. Trading E-mini futures means each contract you trade is roughly equivalent to 10 percent of a standard futures contract in dollar terms, but your margin, or the available cash you must have on hand in your account, must be sufficient to cover the cost of your trade. Ask your brokerage firm what its margin requirements are for E-minis you want to trade.

Step 4

Use stop-loss orders. Futures move quickly and can be extremely volatile. E-minis are no different and traders should set a stop-loss order after entering every trade. Using stop-loss orders prevents huge losses and keeps you from having to manually get out of a trade, which can be difficult at times of brisk market activity. Using stop-losses is something nearly every successful trader does.

Step 5

Find a demo account to test your strategies prior to trading for real money. Ask your brokerage firm if it offers demo or simulated accounts.

Tips

  • Consider finding a trading mentor or joining a trading chat room. Read several books on futures trading as well.

Warnings

  • Futures trading involves substantial risk. E-minis only mitigate this risk--they do not eliminate it completely. This type of trading is not suitable for all investors.

References

About the Author

Todd Shriber is a financial writer who started covering financial markets in 2000. He worked for three years with Bloomberg News and specializes in analysis of stocks, sectors and exchange-traded funds. Shriber has a Bachelor of Science in broadcast journalism from Texas Christian University.