By David Adams
E-mini scalping technique employs components from technical trading, fundamental trading, and efficient market theory. Further, it seems that no two e-mini traders utilize some or all of these components in the same manner. In this short article we are going to limit our discussion of scalping to e-mini futures contracts, specifically index e-mini contracts. There are ways to scalp stocks, ETF’s, and a variety of other equity and debt measurements, but I focus on index e-mini contracts for a variety of reasons.
For larger traders, scalping may mean taking advantage of disparities in bid/ask prices of certain equity. This style of scalping is similar to arbitrage, and is presently accomplished using computer based trading instruments.
With the onset of Internet-based trading platforms, scalping became a trading technique available to anyone who chose to desirous of trading in the scalping style.
But what is modern e-mini scalping style?
Most modern day scalpers enter the market (either long or short) in search of 6-10 ticks. (Or more, should the trade decide to run a bit) By repeating this formula for scalping 6-8 times a day using high probability setups, scalpers can accumulate a considerable amount of daily earnings. Many scalpers or intraday traders (as some e-mini traders prefer to be called) use a variety of tools to help them make the buy/sell decisions. Some of the more common trading tools are:
• Rate of change indicators
• Momentum oscillators
• Combinations of moving averages
• Channel-based indicators (Bollinger bands, Keltner channels, Donchian Channels…etc)
• And a host of less scientific tools like Elliott wave theory, Gann Methodology… The list is long.
Whatever technology an e-mini scalp trader employs, his or her goal remains essentially the same; he or she wants to snap up a small portion of a market move or a section of market momentum. This style scalper trends to employ wider stops in his or her trading. Most good scalpers tend to trade in the direction of the trend, though there are some countertrend specialists who make a living trading against the trend; but they are far and few between.
There is a type of us e-mini scalp trader who trades a very large number of contracts and attempts to on only 3-5 points. Typically these traders employ very tight stops to protect them should the market spike in an unfavorable direction. I find this style of trading the least enjoyable, as it places a great deal of pressure on the trader to choose his or her trade in a very structured manner. There is a small margin of error in this type of trading.
In summary, we have looked at a number of flavors of trading that come under the umbrella called scalping. Some very large traders take advantage of disparities and bid/ask prices and scalp enlarging our narrowing spreads. Other scalpers are looking for 6 to 8 trades every day and to earn 6 to 10 points on each trade. And finally, some intraday e-mini traders trade very large contract lots for very small (say, four or five ticks) gains.
About the Author
Real Live Trading Doesn’t Lie. Spend 3 days with me, in my trading room, and see if you are one of the many that can profit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here.
