1. Beginner's Guide To E-Mini Futures Contracts: Introduction
  2. Beginner's Guide To E-Mini Futures Contracts: What Are The E-Minis?
  3. Beginner's Guide To E-Mini Futures Contracts: E-Mini Characteristics
  4. Beginner's Guide To E-Mini Futures Contracts: E-Mini Specifications
  5. Beginner's Guide To E-Mini Futures Contracts: Who Trades The E-Minis?
  6. Beginner's Guide To E-Mini Futures Contracts: Trading The E-Minis
  7. Beginner's Guide To E-Mini Futures Contracts: Other E-Mini Contracts

A wide variety of market participants are actively involved in trading the e-mini markets.

Institutions
Institutional traders place high-value trades on behalf of an institutional investor, such as a mutual fund, pension fund, hedge fund, bank trust department or insurance company. Institutions typically have the ability to trade extremely large positions. The great liquidity offered by the e-minis (particularly the ES), allows institutional traders to execute and liquidate positions without drawing a lot of attention. Institutional traders may also use the e-minis to hedge against the larger futures contract.

SEE: Introduction To Institutional Investing

Managed Funds
Managed funds are investment funds operated by a single trader or group of traders, depending on the size of the fund. Since managed funds typically rely on one or two proven trading strategies, the e-minis make prime instruments due to their technical nature. The e-mini are based on numerous stocks (rather than a single stock) and, as such, do not tend to move in relation to one company's fundamental news. As a result, technical analysis allows e-mini traders to evaluate past and predict future price moves.

High Frequency Trading (HFT) Firms
High frequency trading firms seek to make money on extremely short-term trades. These firms utilize advanced electronic systems that allow them to identify and execute trades rapidly. All positions are typically liquidated by the end of the day. Because high frequency trading depends on substantial volume, the e-minis (again, particularly the ES) make ideal trading instruments. In addition, HFT firms may trade the e-minis because of their technical patterns and behavioral structures.

High frequency trading, which may have accounted for roughly 70% of equity trades in the United States in 2010, was blamed for the May 6, 2010 Flash Crash where the Dow Jones Industrial Average (DJIA) suddenly plummeted about 1,000 points (about 9%), and the ES dropped about three percent between 2:41 and 2:44 p.m. Figure 8 shows a daily chart of the ES during that time. Notice the extreme spike in volume that accompanied the move.


Figure 8: Flash Crash. The May 6, 2010 "Flash Crash" that pummeled the ES during three minutes of trading. The price move was accompanied by a huge spike in volume.


Retail Traders
Retail traders are individual traders who are not employed by institutions, funds or HFT firms. Working from an office or from home, retail traders attempt to earn a living by trading on a daily basis. Retail traders develop a trading style based on level of trading experience, risk tolerance, account size, personality and the amount of time available to dedicate to trading. Trading styles (shown in Figure 9) can be defined by the time frame and holding period in which positions are opened and closed:


Figure 9: Trading styles can be defined by the time frame and holding period in which positions are opened and closed.


SEE: 4 Common Active Trading Strategies

Beginner's Guide To E-Mini Futures Contracts: Trading The E-Minis

Related Articles
  1. Trading

    Should You Trade Forex Or Stocks?

    Deciding which markets to trade can be complicated, and many factors need to be considered in order to make the best choice.
  2. Investing

    Should You Trade Forex Or Stocks?

    Deciding whether to trade stocks, foreign exchange or futures contracts typically comes down to risk tolerance, account size and convenience.
  3. Trading

    How to Trade Dow Jones Future Contracts

    Learn about the Dow Jones Index futures contracts available and obtain step-by-step instruction on how to trade the stock index futures.
  4. Trading

    US Presidential Hopefuls And The Flash Boy Tax

    High-Frequency Trading is highly controversial - and now even presidential candidates are weighing in.
  5. Investing

    How You Could Have Made Money Between the Trump Win and Opening Bell

    There's money to be made on election night, even after the markets close. Here's how you could have done it last night.
  6. Trading

    How The Retail Investor Profits From High Frequency Trading

    Stock markets and high-frequency trading seem inseparable. As an individual investor, try and make the best of the mess, starting now.
  7. Trading

    Activities You Can Take Advantage Of In The Pre-Market And After-Hours Trading Sessions

    A great deal can happen in between the New York close of the market and the open the following morning. Learn how you can access opportunities and hedge against risk outside regular trading hours.
  8. Personal Finance

    A Day in the Life of a Day Trader

    Day trading has many advantages and, while we often hear about these perks, it's important to realize that day trading is hard work.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center