Emini or SPY? Trader or Investor?

(GLD)(SLV)(SPY)(DIA)(CNAB)

by DeWayne Reeves

Are Emini Futures As Good As Gold?

Special Guest - Craig R. Smith / Swiss America CEO
Joins Us 05/16/17 @ 1pm EDT

Are E-mini's as good as #Gold? It depends. Are you trading or investing? While some would say "What's the difference?", night and day I say. For less than $1,300 I can own an ounce of Gold. What's that worth? In American dollars less than $1,300. In Canadian dollars? Closer to $1,700.

How Much Does An S&P 500 Emini Contract Cost?

Tonight as I type, I can purchase 1 June S&P 500 E-mini Contract for $500. What's that worth? Tonight as I type, $119,850.00. Say what? That's exactly why Gold is Money and the S&P 500 Emini is the single most traded instrument this side of Elon's summer home (Mars).

Warren Buffett and E-mini Futures

This year in Berkshire Hathaway's annual letter to shareholders, the Sage of Omaha had this to say about Investing, not Trading.

"Over the years, I've often been asked for investment advice, and in the process of answering I've learned a good deal about human behavior," Buffett said in the letter.

"My regular recommendation has been a low-cost S&P 500 index fund," he said. "To their credit, my friends who possess only modest means have usually followed my suggestion."

Now to clear the air, investing in an S&P Index Fund and Trading S&P Emini Futures is as different as... yep, night and day.

Trading's Not Easy But It Can Be Simple

Let's face it. Not everyone has what it takes to become a Trader. What does it take?

• Patience
• Discipline
• A Personal Mentor 

That is the Trading Trifecta and most "would be" Traders are missing at least one of the three. The most common missing element? The Personal Mentor, who by the way, will help you develop discipline and learn to be patient. He or she, will also help you Learn How to Trade.

What Buffet Knows About Eminis That You Don't

He recommends investing in an S&P Index Fund because that takes no training, no special skill or talent. You buy it, forget it and hope for the best. So how much does that cost? If we use the Spyder S&P 500 ETF as an example, 1 Share (not a contract) the cost (as I type) is $240.30. What's it worth? In US Dollars - $240.30. Today was an up day in the markets and the share price of the SPY increased by $1.30 per share.

The S&P Emini which requires a Trader not an Investor at the helm, opened Sunday Night (last night) @ $2,3888.75. Over the course of the trading day today (Monday 05/15/17), price climbed to $2,402.25. That's a difference of $13.50 per Contract, not per Share. Each dollar or "point" the Emini Futures Contract rises or falls, is worth $50. 

E-mini Math

So the S&P Index Fund Investor made $1.30 per share today. Don't forget, as I type, each share will cost you $240.30. Just buy it and forget it. 

The Emini Futures calculation is a little bit different. Remember, the Emini rose $13.50 per contract. Each point is worth $50.00.  13.5 X $50 = $675.00 Hmmm... why would Warren put you in the Index Fund rather than the Futures Contract?

Simple! He knows most "would be" Traders do not possess the Trading Trifecta - Patience, Discipline, Personal Mentor. He's helping you play it safe. Nothing wrong with that.

Keep in mind that since the S&P 500 Emini contract costs $500 to Buy (or Sell), and trades around the clock unlike the Spy, you could have bought 2 Shares of the SPY with $500, so your gain Monday is actually $1.30 X 2 or $2.60, plus you sleep like a baby. Right? Well... as long as it continues to go up you do.

Who Are You? What Are Your Goals?

Based on a semi typical up day in the markets (Monday), for $500 the SPY Investor with 2 Shares made $2.60. The Emini Futures Trader if he bought the open last night and sold the high today (pretty tough to do unless you have Weekly Trading Zones or a Personal Mentor), the market made $675.00 per Contract available.

It doesn't take a CPA to figure out $675, or even half of $675, is slightly better than $2.60. Agree? However, remember this... arguably the world's greatest Investor just told you to buy the SPY. Why? Safety, peace of mind, no muss, no fuss. Almost.

Remember 2008? Many Investors owned the SPY. On October 1,2007 the SPY was trading @ $135.24 per Share. Fast forward to February 2, 2009 and the SPY was trading @ 66.56. 

During the "Great Recession" many retirees who were married to the SPY or many other Index Funds saw their portfolio drop in excess of 40%. Many were forced to come out of retirement and return to work. Can you say "Welcome to Walmart?".

Suffice it to say, both Trading and Investing are risky. While Futures may offer an opportunity to rack up outsized gains quickly, without a Trading Trifecta, you can actually lose it all and then some. 

Count The Costs

As you decide which path is correct for you, consider the amount of time you have to work with. How soon will you need to access your retirement funds. The longer the time horizon, the more risk you can afford. Please don't run scared and get that wisdom backwards. 

Each person and financial situation is unique. Always check with a licensed Investment Professional before making any investment decision. If you chose the "Way of the Trader", ask yourself this very important question - "Do I have the Trading Trifecta?". Unless your answer is a resounding YES / YES / YES! Take Warren's advice, buy an Index Fund and simply forget about it. 

Whichever decision you make, I wish you all the very best on your financial journey.

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CAN YOU DO IT? DO YOU WANT TO KNOW?

There's something on this earth you were created to be GREAT at! God created each of us to excel at something. Some of us know instinctively. Others spend years searching. Sadly, some just meander through life never finding the thing that wakes them up before the alarm and keeps them awake long after the Sandman has passed through Sleepy Town. Your spouse is snoring (gently), but when you close your eyes all you can see is Candlesticks. You slip out of bed at 3am to check the London open. If that's you, you might be a Trader.

FIND OUT AND GET ON WITH YOUR LIFE

It's this simple. Go to Apply.CFRN.net . Make a 5 Day - No Cost - Commitment. Put your name and your email in the little boxes, hit SEND, go check your email. Read the email, follow the instructions, then show up @ 9:30am EST any day M-F and let the journey begin. In a week you'll know. Don't let the past dictate your future. When your welcome email arrives with your Link and Password, keep reading.

THE EMAIL IS FILLED WITH INSTRUCTIONS.

We do Ninja and any Broker who clears through Gain Capital. If that's not you, there's instructions to download dtPro. We not only give you our Indicators for a week, we even provide the Platform (at no cost). There's no more excuses. Take the trial or go learn how to tie fly's. Bake a cake. Do something! You'll go blind if you keep watching Springer all day.

See you in the Trading Room - Apply.CFRN.net .

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Trading's Not Easy - But It Can Be Simple!©

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Emini Or SPY? Trader Or Investor?

SP500 Emini Futures Hit New Historic High

(QQQ)(DIA)(SPY)(GLD)(FB)

by DeWayne Reeves

S&P 500 Emini Posts All Time Historic High

Despite dire warnings from the likes of Dennis Gartman and others, in spite of "low volume" traffic, oblivious even to "holiday trading" conditions, the S&P Emini "ES" drifted up to our Weekly Trading Zone at 1897/1898 where it closed the week in virgin territory. Markets will open Sunday night for Globex trading and close Monday morning in observance of Memorial Day. The Tuesday session opens @ 6pm EDT Monday evening.

S&P 500 Emini - All Time Historic High

Price initially closed above the 1882/1883 Weekly Zone on May 21st at 2pm EDT. The first leg took us to 1890.50. Price pulled back to the Zone, confirming support and the move was on. The next high was 1894 followed by a 38% Fibonacci retracement to 1890 and then a grueling 21 hour "drift" to the next Weekly Trading Zone overhead.

Looking at a historical chart like the one above, it would seem the simplest way to trade Emini Futures would be to simply buy and sell at the Zone. Although you are correct, it can be more difficult than it appears. The 38% Fib Retracement could just as easily have turned into a gut wrenching 50% correction, a 61.8% pullback, or a full blown reversal erasing 11 full points of unrealized profit. Not fun.

The key is multiple contracts. In his book "Trading in the Zone", Mark Douglas talks about paying yourself something, as soon as you can. Developing a strategy that allows you to scale out of a position is the best way to achieve this. It can be a complex algo, or as simple as dividing the potential move (Zone to Zone) into thirds or even fourths. You will not get the perfect price, but you will get paid as long as the trade continues in the proper direction. Also determine before you enter, at what point you will bring your stop to break even. Some strategies do not move the hard stop until 50 to 75% of the target has been achieved. 

We take the written Business Plan and Trading Plan so seriously, it's baked right into our curriculum. Every successful business has a written business plan and your trading business should be no different. Would you believe 90% of those who attempt to become Professional Traders never write a business plan or a trading plan? Where have you heard that 90% statistic mentioned before in regards to trading success? In light of this perspective, is it any wonder?

Don't fool yourself. To become a successful trader will take hard work and determination. To learn more about starting your own Emini Trading Business, Apply Here.

Emini Zone to Zone

Let's look briefly across the 4 indices from this week and see how having this information before the market opens every Monday, can change our trading forever. Once the Zones are published, they do not change. As time permits, do wander through our blog back to 2011 and see how consistent the performance has been.

Russell - All we're looking at here are the Zone to Zone moves for the week. The first move labeled 1 to 2, was a 7 point move from 1107 to 1114. Next, 2 to 3 good for another 7 and 3 to 4 is another 7. In case you're counting, hat's 21 points. The Russell pays $100 per point.  4 to 5 covered 2 Zones for a total of 25 points and 5 to 6 was good for 17. From 6 to 7 we came up a little shy (1 point) for 16 points and then the return trip from 7 to 8 gives us another 16.  

This is also where we ran into a little tricky behavior. Consider you might have been stopped out for 2 points, once maybe even twice. 9 to 10 was a clean 7 points and at 10 again a potential stop out. As the week closed we were making a run for the highest Weekly Zone and simply ran out of time. The move however was still good for 10 points. All together - 112 potential points @ $100 per point = $11,200.00 per contract traded. 

Of course there were some trades that got stopped out and you do have to sleep. If you caught haldf that would be 66 points. If you caught just 1/3 that's still 37 points X $100 per point or $3,700 per contract. If you're a 10 contract trader that's a nice week. 

The question is... can you do it? The lines are on the chart before the opening bell every Monday. After that, it's simply a matter of waiting for price to fill in the blanks. Of course your job is to make sure you're trading in the same direction as the market. The question is... can you do it?

Russell Weekly Trading Zones

Dow - I didn't number these, but the flow is pretty easy to follow. The first swing was fom the Zone @ 16435/16440 to 16395/16400. Easy math - 35 points. The Dow pays $5 per point for a $175.00 move per contract. 2nd swing $175. 3rd swing was 60 points or $300. Number 4 covered 2 Zones for 100 points or $500 per contract. Swing 5 was 35 points - $175. Swing 6 covered 2 Zones for 100 points - $500. #7 was part of an Alert we put out which turned into a 180 point rally from where we triggered in. As far as just the Zones we covered 3 for 160 points - $800 per contract. The market got tricky at #8 and most likely stopped you out at least once. The next leg up, Zone to Zone #9 was 55 points - $275 and a reversal (#10) back down to the Zone for another 55 - $275 and #11 took us back up to the Zone for another 55- $275. As we rallied into the sunset the market simply ran out of time as we made it 20 points on our way up to the highest Weekly Zone on the Dow - YM. 

Total available would be 710 points @ $5 per point or $3,550 per contract traded. Remember, daily margin for the Dow / S&P / Russell and Nasdaq is $500. The "day" starts @ 6pm EDT. If you caught 1/3 of the movement that's still $1,183 per contract. For the 10 contract trader, that's a nice check to take home to mama. I feel obligated to remind you that the lines are drawn before the opening bell every Monday morning and they do not change. Wander through the blog and see what we've done for the past 3-4 years. Don't get the impression this is easy money, it isn't.  It is however, real money, but you have to show up and have the conviction to take the trade and let your Stop tell you when you're on the wrong side of the trade. 

Dow Weekly Trading Zones

Nasdaq -  25 point initial Zone to Zone move followed by 15 / 15 / 15 / 15 and an overshoot most likely leading to being stopped out. Back on track the next Zone to Zone move was again 15 followed by 40 and we actually closed above the highest Weekly Trading Zone in this market by 5.75 points. Such an occurrence is somewhat rare, but as we can see from the chart, it does happen.

Total available points - 140 X $20 per point = $2,800.00 per contract. Considering Stops and Sleep, 1/3 of the potential would be $933.00. Again we are struck by the twinkle in the eye of the 10 contract trader. 

Nasdaq Weekly Trading Zones

 S&P 500 Emini - The initial Zone to Zone move from 1871 to 1882 was good for 11 points, then back down for another 11. This area was obviously unexpected and would most probably Stop Out even the most astute trader. Heading higher we post those same 11 points yet again, followed by the weeks final Zone to Zone move, good for 14 points. All together the potential was there for 47 points @ $50 per point or $2,350.00. Using our most humble number of only 1/3, we arrive at $783 making the S&P trader this week, the pauper at the party.

We've spoken a number of times in this article of the 10 contract trader. The dollar amount required during the day session for such a position is $5,000 (10 contracts X $500 per contract). At the closing bell one can exit their position and simply re-enter the market moments later when the "new day" begins. This maneuver will cost you a few dollars extra in commission, but does prevent you from being exposed to the full $5k initial margin. At $6 per round turn X 4 days, as you will not re-enter on Friday, the additional cost is $24 per contract, per week. Money well spent in my humble opinion.

As opportunities unfold we will keep you posted.

 

Trading's Not Easy - But It Can Be Simple!

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S&P 500 Emini Posts All Time Historic Highs

The Biggest Triple Top In Trading History

S&P 500 | The Biggest Triple Top In The History Of Wall Street

We talked about this last night but we need to talk again. It's not only quite possible, it's highly probable that you will never be confronted with a Triple Top in the S&P 500 of this magnitude again in your lifetime. Does this mean you should trade it? It means you need to be aware of it. It means you need to understand the potential ramifications.

Is this a doomsday warning? No, in fact... we could be on the brink of the greatest bull run in history. Do I believe that? Not really. However, if there is one thing I can say that I do know with great certainty, it is this - "anything can happen". There was a phrase coined on a CFRN live broadcast several years ago - "Embrace the possibilities". More than anything, my clarion call today is to encourage you to avoid becoming biased as to the ultimate outcome. To remain neutral, is to remain nimble, which allows you the luxury of participating in whatever unfolds. Both the Bulls and Bears offer very compelling arguments in regards to what lies ahead.

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Price Coil Creates Powerful SP500 Trade Setup

Price Coil Creates Powerful SP500 Trade Setup

Whenever we see extended price consolidation at a Weekly Trading Zone we anticipate a powerful move. Today was certainly no exception. The most difficult aspect of trading a consolidation, or coil as it is often referred to is patience. Price spent a total of 14 hours coiling at the 1451/1452 Zone before we called an entry based on the hourly chart and a secondary chart pattern which I will be teaching in the near future. Just before the Live Trading Room session ended we suggested that if the market presented the opportunity to buy 1451 on a pullback that the upside potential was significant.

During the 30 minute break which we take each day between the Trading Room and the Emini Daily Radio Broadcast the entry was triggered and the trade only suffered a 2 tick draw down. On the chart below you will see the entry highlighted by the first yellow arrow. The initial target in this case was the previous swing high at 1457.75 which occurred 2 candles prior. Based on recent market ranges an intraday shot at 6.75 points for a 2 point risk is very acceptable. The previous swing low was 1448.75 so using as much as a 3 point stop for a potential gain of 6.75 is still in our book well worth the risk.

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