Learning to Trade the

S&P 500 E-Mini

TOS Symbol /ES

Steve Fought

Version 1-28-12

File – Beginning Emini 1-28-12

DISCLAIMER

• The following is not an investment or trading recommendation.

• The losses in investing and trading can be very real, and depending on your investment vehicle , can exceed your initial investment.

• I am not a licensed trading or investment adviser, or financial planner.

• You should make your own trading and investment decisions based off your own research, and tolerance for risk.

This is mainly just reference tool if you are thinking about trading the ES.

If you see anything you like,

all this will be saved on Brian’s web site

XSProfits.com

XS Profits.com

WHAT is the S&P 500 E-Mini ?

The S&P 500 E-MiniIs the most popular equity index

FUTURES CONTRACT in the world.

ES was created in 1997 by the CME because the value of just one S&P contract was over $500,000.

Too large for most traders.

OTHER EMINI PRODUCTSFollowing the success of the /ES,

the exchange introduced other E-minis like :

/YM the Mini Dow Jones/NQ the E-Mini Nasdaq 100/TF the E-mini Russell 2000

WHY TRADE the S&P 500 E-Mini ?

SIMPLICITY

Simplicity in this case is a relative term.

ES trading is simple compared to the analysis I used to do with Options.

But , over all , the ES is a simple but Very difficult trade

High LIQUIDITY

Less slippage , easier to get in and out of trades

HIGH PROFIT POTENTIAL

The knife cuts both ways

See next page

PROFIT POTENTIAL EXAMPLEThe FOMC Announcement 9:30 Pacific (12:30 Eastern) Wed 1-25-12

“Fed pushes out low rate pledge to late 2014”

13 point move on 3 contracts is $1950

ES is 12.50 per contract per tick

3 contracts

37.50 per tick

150 per point

3 contracts on a 13 point move = $1950

Daily ATR on ES now is around 15

13 point move

1.5 hour

3 contract is $1950

From my research, here is good site for starting your Emini Education

Emini Watch. Com

Barry Taylor’s web siteRecorded its one millionth visit last Nov 2011

http://emini-watch.com/emini-trading/why-trade-emini-futures/

The video has a good summary of the ES - good and bad -

and why so many people trade it

Other ES Trading Education Sources

http://www.tradingacademy.com/ ( ONLINE TRADING ACADEMY by the John Wayne Airport)

http://www.investools.com/ INVESTOOLS

http://electronicfuturestrader.com/jeffs-blog/ (Jeff Quinto)http://donmillereducation.com/journal/ (Don Miller) http://www.lbrgroup.com/ (Linda Raschke)http://www.dangramza.com/ (Dan Gramza)http://www.ireallytrade.com/ (Larry Williams)

Others:http://www.proactivefutures.com/http://www.eminiacademy.comhttp://www.unitedfutures.com/emini.htmlhttp://www.tradingconceptsinc.com/http://www.daytradingcourse.com/http://www.easyeminitrade.com/http://www.daytradeemini.com/http://www.daytradingradio.com/http://emini-watch.com/

Note - The above sites probably can reduce the amount of time it takes to become profitable.

But costs can run from $300 to $20,000+ for the education

HOW to trade the S&P 500 E-Mini ?

The million dollar question

The following slides show some good sources of HOW others trade the emini

And then at the end ,

I will show you my current strategy

ProfessionalTraderMentoring.com

Jeff Quinto web site

Click on the FREE tab

Page down and click into the FREE CME VIDEOS

Watch all 3 videos starting with DEVELOPING YOUR TRADING STRATEGY

Or here is the link

http://www.professionaltradermentoring.com/free/

Go to the CME web site CMEGROUP.COM

The videos are on the EDUCATION tab

Here is the link to the videos

http://www.cmegroup.com/education/interactive/emck/index_content.htm

THE CME GROUP and

DAN GRAMZA

TOS chat archivesJust click here on your Live Trading account

(Archived Seminars not available on the Paper Trade account)

Click Seminars Put in key words here to search archived seminars

Linda RaschkeLinda is one of the MARKET WIZARDS in Jack Schwager’s book

Just enter her name in the search field

One of my favorites is the SEPTEMBER 1, 2010 seminar

John Carterof Trade the Market.com and the book “Mastering the Trade”

Just enter his name in the search field

One of my favorites is the August 17, 2011 seminar

Denise ShullRecent book release “Market Mind Games”

3 hours of interesting seminars on general trading Psychology

Learn to use the TOS Active TraderMost use the Active Trader on TOS for ES trading

Here are 3 hours of video educationJust enter ACTIVE TRADER in the search field

DON MILLERDon’s blog is dedicated to trading the ES

http://donmillereducation.com/journal/

SHOULDER TO SHOULDER

Also, check out this TRADING after DARK link for some actual trading sequence samples which are also similar to my trading style.

800 pages of Blog

discussions about trading

the ES

Current Trading WEEKEND Routine

Get 3 perspectives on the upcoming week

Charlie’s ReportCharles Kirk from the Kirk Report http://www.kirkreport.com/membersonly/Weekend Chart show video

2. Tom’s ReportTom Soznoff and the team at TOS TD Ameritrade

TOS live account seminarsWALL STREET WRAP UP from Friday afternoon

Same seminar is at the Investools web site each weekend

3. Peter’s ReportPeter Reznicek

http://shadowtrader.net/archives-main/Click the WEEKEND UPDATE box.

Current TradingDaily Routine

• Up at about 5 am - Bfast , coffee and read the news.

• Macro market news links :

– KIRK REPORT • http://www.kirkreport.com/membersonly/• $100 per year

– SHADOW TRADER DAILY UPDATE• http://www.mytrade.com/shadowtraderproswing

– MARKET WATCH• http://www.marketwatch.com/

– Then, I go into the Shadow Trader CHAT ROOM by 6:10 – Be ready to trade at 6:30

Shadow Trader chat roomFree to all with an active TOS account

Everyday, there are roughly 2500 people in this chat room

Just click this WATCH button to get the video

Shadow Trader• Catch the Macro market overview at 6:15.

• ShadowTrader Squawk Box Moderators: Brad Augunas, Senior Market Strategist

Brad does the daily chat• Peter Reznicek, Chief Strategist, Founder

– Peter does the weekend update videos

• They also day trade stocks on the chat

Brad watches this “Quad” or “Internals”See the next slides for the video link on what are the internals and how to set them up on your TOS platform

SHADOW TRADER INTERNALS AND OTHER EDUCATION

• The next slides show how to get the educational videos which describe what are the INTERNALS and how to set them up on your screen.

• Plus the links provide other education on how to get up to speed with the trading logic of the Shadow chat room

• First . go to this link

http://shadowtrader.net/archives-main/

Then see the next slides

http://shadowtrader.net/archives-main/

Click here for the Education videos

This is also where you can find the

weekend Updates each Sunday night

Shadow Trader free educational video series.View these videos to help understand the daily Shadow Trader trading logic.

The Shadow Trader also has a free User Guide with more in depth explanation of the terms and trade set ups

• Just go to this link for the User Guide

• http://www.shadowtrader.net/images/SHADOWTRADERPRO_SWING_TRADER_USERS_GUIDE.pdf

Comments on the Shadow

Shadow (Brad) mainly trades the ES but will also day trade some stocks.

Brad has been working this chat room since 2007. Peter did it before that.

The Education videos provide background as to what Brad is talking about during the trading day.

It takes a fair amount of time to watch all the Shadow education videos, set up the screens on your platform and then paper trade for awhile to learn the logic behind the Shadow trades.

Shadow uses the internals to increase trading success probabilities

Brad takes the RB3 trade frequently in the morning. See Bill’s presentation link later

Shadow also uses an “80% rule trade” which is 5 for 7 so far in 2012. See the Shadow education video on this subject

Shadow Trader notes:Brad frequently moves up stops to breakeven to take risk off the table.

For me, this reduces risk but also reduces profits.

Brad normally waits for 15 to 45 minutes after the market opens before he entering his first trade

They say the INTERNALS help show which way the wind is blowing.

Shadow discusses entering trades with the wind to your back.

My stress is a tad higher trading the ES verses Options. But they say some stress is healthy. Trick is the balance

Shadow Trades uses the VALUE AREAMarket ProfileMonkey Bars

From my research, a good book for more info on Value Areas is

Markets in Profile:

Profiting from the Auction Process

by James Dalton in 2007

Here is another good source of education on Value areas or MONKEY BARS

Here is the Shadow on You Tube. On 1-24-12, Peter filmed some live trading. From my experience so far, this pretty much shows what is it like to trade the ES.

See the links are on the next slide

Links to the Live You Tube Shadow Trading Videos 1-24-12

• PART 1

• http://www.youtube.com/watch?v=40FJQxG7X84&feature=context&context=G2b43644FAAAAAAAAAAA

• Part 2• http://www.youtube.com/watch?v=3WDwikG5kFg&feature=g-all-u&context=G2b43644FAAAAAAAAAAA

• To fully understand the 2 above videos, you might find it helpful to view and understand the key Shadow educational videos. And then as you paper trade with the Shadow each morning, the logic will become easier to understand.

XS Profits.com

11-5-11 - Reference Bar 3 Trading, Bill Heimerdinger,11/5/11

Shadow Trader frequently uses an Opening Range Breakout (ORB) trade.

See Bill’s presentation

Just from some quick google searching, it seems like Tony Crabel’s book from 1990 was one of the first books on the

ORB (Opening Range Breakout) trade

Notes on my Current trading plan

• Fire up the Shadow Trader at about 6:10

• Get the Shadow (Brad ) market overview from 6:15 to 6:30

• At 6:30 I generally just sit back and wait for market to establish itself

• Most mornings, I will look for the RB3 trade at 7 am.– RB3 - See Bill’s presentation on Reference Bar 3– RB3 is essentially an ORB trade

• Shadow Trader is also looking for a 15 or 30 minute ORB trades.– ORB = Opening Range Breakout trade

• Brad will also take bounce trades depending on internals

• Shadow is essentially a trading coach and I am still testing his ideas.

• Will get back with you later with a summary of trading performance.

So, if you would like to try trading the ES ….

• Check out the educational links and Videos in this presentation.

• Start trading on a simulator (Paper trade)– Don’t trade live until you get consistent Paper Trading success.– Live trades is really different from Paper Trading.– Especially psychologically.– Live trades won’t fill as fast as Paper Trades. You have to wait in line.

• Trade every day – Get in a lot of practice

• Manage distractions – probably the #1 trader killer.

• Develop your own style of trading … of course

Note on Margins and Commission

• TRADING FUTURES OUT OF AN IRA

– TOS requires a minimum of $25,000 if you trade from an IRA.• Just email to TOS and they will give you a link to the paperwork you need to

fill out.

• MARGIN REQUIREMENT• Different brokers have different requirements• TOS requires $5000 per contract margin from regular accounts• And $7031 per contract when trading from an IRA

• COMMISSIONS– Different brokers have different commissions.– TOS charges $3.50 a trade or $7.00 round trip

Example, If you buy 1 contract of ES, it costs 3.50If you buy 2 contracts , it cost 7.00Same charges to exit trades

Other stuff

The next slides list some interesting movies on trading

Margin Call

A 2011 thriller that revolves around the key people at a investment bank over a 24-hour period during the early

stages of the financial crisis.

FLOORED -

A free internet movie about Futures Traders Linda Raschke is interviewed a few times in these videos

Just go to http://www.babelgum.com/floored

INSIDE JOB – THE MOVIE• This is sort of the

movie version of THE BIG SHORT book

• Academy Award - Best documentary movie of 2010

• Inside Job provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse.