How Mechanical Trading Systems Help In Emini Trading?

By Author: Francisco Mandelbaum
Total Articles: 28
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Mechanical trading systems are recommended for trading these contracts. Usually, these systems help trader on deciding on a strategy with clear rules for entry, exit and stop loss orders. Most of the mechanical trading systems are pre-programmed to generate buy and sell signals.

E-mini contracts are popular derivative contracts that trade on the Chicago Mercantile Exchange. They originated a smaller version of the then existing contracts such as S&P 500 futures, Dow Futures. The main S&P 500 contract has a notional amount equal to 500 times the value of the index and was too huge to suit smaller investors. E-mini contracts have a notional value of 50 times the index. Due to increase in popularity of E-mini contracts, several popular emini trading systems have emerged. Emini contracts are now more popular than the main contracts due to high liquidity and low margin requirements. They are suitable for a variety of retail and institutional traders. Due to this, the availability of research material and trading systems has increased in the emini futures space.

Emini contracts are highly volatile and can be ...
... difficult to trade manually for shorter time frames. Hence mechanical trading systems are recommended for trading these contracts. Usually, these systems help trader on deciding on a strategy with clear rules for entry, exit and stop loss orders. Most of the mechanical trading systems are pre-programmed to generate buy and sell signals. They also support usage of several types of orders like iceberg order, limit order, etc. Usage of these systems minimizes time required to place orders and helps traders in placing several orders at a time. Special order types like Order-Covering-Order (OCO) are also supported by these trading systems. It is recommended to select a trading system that fulfills the trader's requirement. It is also recommended that the trader understands the trading strategy at a basic level.

There are several strategies that are used by these systems. Most trading systems use market data to generate buy or sell signals. Pattern recognition is employed by these trading systems to generate a buy or sell order. Trading setups which have a high probability of success and good risk to reward ratios are programmed into the system. Technical Analysis, Momentum driven approach, Pivot Points etc. are some of the commonly used concepts in trading systems. Some common strategies are reversal trades, opening range scalp etc. Opening range scalp trades aim to generate a small profit when the market opens and previous day's orders are executed. Reversal trades usually take an opposite position when the markets move in a single direction. Most of the trading strategies are intra-day strategies and are designed to give a decent amount of profit with reasonable risk-reward ratios.

Emini trading systems usually back test their strategies before incorporating them into their systems. Back-testing ensures that a given trading strategy is sound and based on objective principles. These mechanical systems also help trading multiple emini contracts like Emini S&P 500, Emini Dow etc.

Spread trading is also possible with the usage of trading systems. Spread trading helps trader make smaller profits multiple times with smaller risk. CME also offers good margin discount for spread positions. Most emini futures systems specialize in one or two high probability strategies. These systems are designed for ease of use and a good source of secondary income.

Author of this article enjoys listening to the CFRN Emini Futures Live Market Commentary each day and also watching the CFRN Professional Emini Traders place live trades in their Live Emini Trading Room.