The E-mini lineup of products available at the Chicago Mercantile Exchange (CME) gives traders a variety of options. The Exchange offers many asset classes, including energies, equities, ag commodities, and metals. With so many viable alternatives, finding E-mini trading strategies that work is not as difficult as you may think.
In order for a strategy to be deemed viable, it must give the trader an edge. An edge is a competitive advantage — something that ensures the trading strategy will be profitable over time. All E-mini trading strategies that work have a quantifiable edge and typically fall into one of these five categories:
Let’s take a look at one strategy from each of these disciplines that has historically proven effective.
Any trades are educational examples only. They do not include commissions and fees.
When it comes to trading strategies, trend-following is among the most popular. One tried-and-true strategy for following trends is to buy or sell a Fibonacci retracement level in concert with the prevailing trend.
For instance, assume that E-mini copper (QC) futures have broken out to the bull on intraday time frames. To get in on the uptrend, buying a pullback in price can provide solid trade location:
A rotational or compressed market lacks a direction and exhibits choppy price action. These markets can be a challenge to trade effectively because all market structure has broken down. Subsequently, implementing E-mini trading strategies that work for rotational markets takes time and patience.
However, compressed markets can be rewarding if approached within the context of a reversion-to-the-mean methodology. Assume that it’s a lazy Monday for the June E-mini S&P 500 (ES). A modest midsession range of 40 ticks has been established from high (2821.25) to low (2811.25). Also, no market-moving economic events are scheduled for the late session. Here’s one strategy to trade the lackluster action:
Capitalizing on the momentum of price action is a favorite approach among short-term traders. Scalping and high-frequency strategies often rely on a spike in order flow to drive price a small distance before profits are locked in.
Momentum trading strategies are best executed during periods of extreme volatility. For instance, suppose that a momentum trader anticipates a positive run in April E-mini gold (QO) following a negative 8:30 am EST U.S. GDP release:
Any trades are educational examples only. They do not include commissions and fees.
Similar to trends, trading breakouts can be a great way of maximizing potential gains. Breakout trades are often used with larger risk vs. reward ratios in anticipation of a sudden directional move in pricing.
Breakouts are typically a product of institutional participation stemming from a market fundamental or violation of a key technical level. They frequently follow periods of compression and are enhanced by momentum traders and trend followers. Here’s an example of a breakout strategy:
The only multisession plan on our list of E-mini trading strategies that work falls within the realm of swing trading. Swing trading is an attempt to secure market share by holding an open position for several consecutive sessions.
You can apply the four strategies above to swing trading, simply by using longer time frames and greater risk vs. rewards. However, be careful: Swing trading involves larger margin requirements and potential liabilities. Although multisession strategies may be extremely profitable, they do carry an added degree of risk.
For more information on how the E-mini lineup of products can help you achieve your financial goals, schedule a free consultation with a member of the StoneX team today.