| When day trading futures, you enter and exit all | | | | much success. |
| positions in the same day - never carrying a position | | | | Locals also use the spread (the difference between |
| overnight. Since the overnight moves of the market | | | | the bid and ask price), to grab quick profits from |
| are difficult to predict, many traders avoid risk by | | | | orders that come in on either side of the market. |
| day trading. Ironically, the public believes that day | | | | This makes scalping easier for them. |
| trading is the riskiest way to trade. | | | | In the past, all these advantages made it impossible |
| THIS IS A MYTH! | | | | for a "retail" day trader to be a successful scalper. It |
| Some traders day trading futures, make 1 to 3 | | | | was insane to try. And to this day many traders |
| trades per day, trying to catch the major intraday | | | | have the idea that scalping is too difficult for the |
| moves. Others trade in-and-out very frequently, | | | | public because you have to compete against traders |
| trying to "scalp" a small profit on each trade. (My | | | | with an unfair advantage. |
| style uses a unique blend of these two strategies.) | | | | But all that has changed now. If you follow some |
| For those day trading futures, the Emini Stock Index | | | | simple, yet important guidelines then you too can be |
| Futures have become the most popular day trading | | | | successful scalping and day trading futures online. |
| vehicle because of their liquidity, leverage, and the | | | | They took the concept of the Maxi futures |
| ease of trading them online. You can go short or long | | | | contracts and came up with smaller contracts (the |
| with equal ease - unlike stocks where it's easier to go | | | | eminis) that move $50.00 per SP point instead of |
| long than short due to the "up tick" rule. | | | | $250.00. This allows all traders, big and small, to trade |
| The time relationship of the eminis (and the "big | | | | the stock index futures. |
| contracts") to the cash indices is important to | | | | But even more radically, they set it up so that the |
| understand. Let's start from square one. | | | | smaller contracts (the eminis) are traded only through |
| The S&P 500 stock index (the cash index, | | | | computers. This was revolutionary, they bypassed |
| symbol SPX) is central to day trading futures. It has | | | | the pit, taking away the advantage of the "locals," |
| an Exchange Traded Fund (the "Spyders," symbol | | | | and leveling the playing field in a way that has never |
| SPY) that trades like a stock, but without the "up | | | | been done before. And to level the field even more, |
| tick" rule. The price of the S&P 500 cash index | | | | retail commission costs fell like a rock. Today, any |
| moves up and down with the 500 stocks that make | | | | trader day trading futures with a small account can |
| up the index. The SPYders follow the S&P 500 | | | | pay $4.80 per round turn (entering and exiting a |
| cash index very closely. You can trade Exchange | | | | trade). |
| Traded Funds such as the SPY (and QQQQ for the | | | | This means that scalping is open to the day trading |
| Nasdaq 100) online from home. But for day traders, | | | | public for the first time in history. But most people |
| they are not as favorable as day trading futures. | | | | who are day trading futures don't even realize where |
| The concept of "futures" is a little confusing, but it | | | | the new advantage really is. |
| boils down to this: the financial industry has turned | | | | Scalping is one of the keys to making a living day |
| the S&P 500 cash index into a "contract" that | | | | trading futures as I do, because I follow a simple rule: |
| trades like a stock. The contract (or futures | | | | "Every trade starts out as a scalp until proven |
| contract) has a price that goes up and down from | | | | otherwise" . |
| one moment to the next. It has a chart that looks | | | | The SP emini futures became more and more popular |
| just like stock chart, and you can make money with | | | | and more liquid, breaking a lot of records along the |
| it by buying low and selling high, or vice versa. That's | | | | way. |
| a complicated as it needs to be for now. | | | | The SP Maxis futures and the SP emini futures are |
| The "big contracts" or SP Maxis were invented first | | | | both derived from the S&P 500 index (symbol |
| and they're still around. With the big contracts, a lot | | | | SPX), which, as I said, has an ETF that trades like a |
| of money changes hands. When the price of the SP | | | | stock (symbol SPY). |
| Maxis moves one point, $250 per contract moves | | | | So the question is - which of these is the leader and |
| with it. The SP Maxi contracts trade in a literal "pit" | | | | which are followers? |
| where the traders, called "locals," shout at each | | | | Today the emini futures track the Maxi contracts |
| other, buying and selling for everyone who wants a | | | | almost tick for tick, with the emini's beginning to lead |
| piece of the action. | | | | the Maxi's at times, and also "overshooting" the Maxis |
| The locals are not public servants, of course, they | | | | at emotional extremes, such as the at the top of an |
| make money for their own accounts. They have the | | | | intraday rally. |
| advantage of being able to read each other's body | | | | Both the SP eminis and the SP Maxis (the futures) |
| language and the tone of the other trader's voices. | | | | lead the S&P 500 cash index by a variable |
| They see what the strongest traders in the pit are | | | | amount of time, often in the range of a fraction of a |
| doing. They have several other advantages too, their | | | | second. Some people call this "the tail wagging the |
| costs per trade are tiny compared to the public's | | | | dog," because the futures are derivatives of the |
| commissions. | | | | stock indices, but call it what you want, the futures |
| The "locals" aren't born as professional traders | | | | are leading the way. |
| though, they learn to trade like everyone else, | | | | The fact that the futures lead the markets makes |
| except they have a huge advantage in learning as | | | | their chart patterns more "pure" and reliable for |
| well because they learn to scalp first! Their instant | | | | support and resistance trading. This makes a huge |
| access and low commissions make this possible | | | | difference to me. |
| compared to others, but those day trading futures | | | | I use the stock index futures (the eminis and Maxis) |
| online can take advantage of scalping trades as well. | | | | for calculating daily support and resistance areas, |
| Scalping is basically limiting your losses to only one or | | | | which are the basis of my own trading style - a style |
| two ticks while taking any profit you get as you get | | | | of trading that has paid my bills and built my financial |
| it. It's easier than going for several points per trade, | | | | security for about 20 years now. |
| I've been using this strategy day trading futures with | | | | |