Index Trading
Index Trading is an alternative way to trading a portfolio of single stocks, enabling you to focus more on a single chart, rather than 6 or 10 different charts.
Index Trading through Emini futures contracts is for everyone who wants to apply extreme focus, multiple positions and strategies in the markets without having to monitor a whole stock portfolio. The major indices fully reflect the underlying trading momentum of all the key stocks listed.
For example the Emini SP 500 index is fully reflective not only of the S&P cash index but of the whole US stock market and the US economy.
Here’s some reasons people favour Emini trading over other investing strategies…
• Higher liquidity, fewer gaps.
• Can implement simple and complex trading ideas on something that actually represents their favourite stocks, without losing focus.
• Trading margin requirement is fixed on trading Index futures, that is not the case with stock futures, where this margin changes as the price of the stock does, hence complicating your money management plan.
• Safety from single stock bad news and inside trading scandals, this can never happen with the whole Index, never has.
• Compliance with technical analysis, with single stocks, even the most liquid stocks it very hard to identify major tops and bottoms.
The Emini SP 500 Futures Contract Wins Out
Trading a major stock index futures contract, such as the Emini SP 500 offers unique volatility and large magnitude moves that are enormously profitable, technical traders who trade this Index futures contract make a fortune. More sophisticated traders use options or options and futures combined, depending on the volatility and price expectations.
Yes Index Trading through Emini futures is risky, just like any other kind of trading, but Index trading has one big advantage. It adheres to the good old clever advice of economics, that is Diversification. When you do index trading, you are automatically diversifying your money over a wide spectrum of stocks and their underlying technical status, which in turn reflects their real world status.
Believe it or not, most investors out there may trade or not trade the Emini SP500 futures contract, but they all do technical analysis on it, because it carries a lot of weight, and serves as a leading indicator for the US markets.
Even long term investors involved in long stock and hedging techniques also watch the Emini SP500 futures contract, and there’s even an advanced indicator which has to do with the spread between the long dated and the near dated contracts of the Emini SP500 futures, and there’s a way that can help identify large market moves 30 -40 days before they start!
There’s no doubt that this contract does carry a lot of weight because it contains a lot of information, and its technical levels (support and resistance) are watched by 1,000s of institutional traders. It is easy to see why Index Trading through Emini futures is so popular.
