Emini Trading - what exactly is emini day trading?

Emini futures, or simply eminis, are smaller-sized contracts of "full-grown" futures contracts that have been around for a few decades. Unlike the latter that have been traded on physical exchanges, eminis have always been traded electronically, allowing retail traders with access to the Internet to compete against institutional traders from the comfort of their homes or home based offices. That's what the "e" in their name stands for, namely "electronic."

The most popular such contracts include ES, YM, and ER2, that is the emini contracts of S&P 500 futures, the Dow futures and the Russell 2000 futures. In other words, these are eminis of stock index futures.

Scores of emini traders trade these highly popular trading vehicles every day, sometimes several times a day. Day trading emini futures does not require you to have a large capital to risk. Some emini brokers can open an account for you with only $3,000 if not slightly less, so no wonder that many try their luck at this game that can be quite lucrative to those who have mastered it.

But what exactly is day trading?

Some people may think that this is self-explanatory, but this may not necessarily be so. If you think that day trading means trading every day, then this is really not the thing. Even though, it is true that many daytraders take more than one trade virtually every day if not every day, day trading really means a form of trading that assumes that you close your position the same day you opened it, that is, by the end of the daily trading session, which spans approximately the same period as the regular stock trading session. In other words, daytraders want to be out of their positions by four oclock PM EST, or more precisely by 4:15 EST (or even 5:00 EST if you happen to trade YM) as that's the end of the daily trading session of most electronically traded US stock index futures.

There are some good reasons why you would like to be out of your position by then. First of all, once the overnight session starts, which happens shortly after the close of the daily session, the overnight emini margins kick in. Since they can be several times bigger than those allowed for daytrading, what this means is that if your account is small, you may even be unable to hold your position overnight and so you are simply forced to close it. Second of all, holding your position overnight is a more risky proposition than holding it during a day as it remains exposed to worldwide events, often unpredictable and turbulent that are likely to produce wild fluctuations in futures markets. And who would really want to lose their sleep over that? Certainly, not so many.

So while it is true that many day traders trade several times a day, daytrading is hardly about frequent trading. It is simply about closing your position before the end of daily trading session. That's how daytrading differs from other forms of trading such as swing trading where you keep your position open for a few days to a few weeks and from position trading where you keep your position open for months.