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How to Trade S&P 500 Futures

Open Account
Traders can take positions on the direction of the S&P 500 index.
This tactic is attractive for a couple reasons: For one, extended trading hours let traders respond to world events when other exchanges are closed. Secondly, high trade volume creates liquidity and reduces cost spreads.

For traders looking to have diversified participation in the equities markets, futures contracts on the S&P 500 index1 present excellent opportunities. Specifically, the E-mini contract is a good place to start.

Here’s what it takes to begin trading S&P futures.

Here’s a basic overview of how to get started

Learn more about trading futures at TradeStation

Develop and Test a Strategy for Trading S&P Futures

Before you get started, you’ll want to decide on a personal trading strategy. To establish this, you can start following trends, interpreting candlestick patterns, or identifying breakthroughs of resistance and support levels. Whatever it is, your strategy should include a set of rules with clearly outlined steps.

Having a defined strategy, preferably written down, will allow you to focus on analyzing market data rather than being swayed by hunches.

Fortunately, you can try out your trading strategies before putting real money on the table.

Start out by setting up a simulated trading account with TradeStation in order to test out your strategy on live market data. You can do this to gauge if your winning trades outnumber losing trades. If your trading strategy isn’t going according to plan, make adjustments and continue trials. This process will help you learn how to trade S&P 500 futures.

Another option is to use TradeStation’s back-testing analysis to try out your strategies using historical data. You can use the results from back-testing to tweak your strategy and then switch to live testing on paper.

Get 50% off futures brokerage fees.

$0.25 to $0.75 per contract per side*

  • Free market data (CME Globex Value Bundle)
  • Special day-trading margin rates
  • Access to over 350 futures and futures option products
  • Powerful futures trading and analysis platform
Learn More

How to Trade S&P E-Mini Futures

The E-mini is attractive because its contract value is one-fifth the value for the “full” S&P contract. Therefore, the amount of capital and margin deposit required to get started trading E-minis is substantially lower.
The official symbol for the E-mini2 is “ES,” and it’s traded on the Chicago Mercantile Exchange (CME). The expiration months are March, June, September, and December. The full trading symbol would include a letter showing the expiration month and a single digit for the year: For example, the symbol for the December contract would be ESZ1.
Each tick represents 0.25 points with a value of $12.50. Therefore, a full point would have 4 ticks with a value of $50 per point. This means if the S&P index moves from 4,400 to 4,410, the futures contract would gain $500 in value ($50 per point, times 10 points). The converse is also true. If the index drops 10 points, the futures contract would decline by $500 in value. The notional value of an E-mini contract is $50 per point. For example, if the S&P index is at 4,400, the notional value of the E-mini would be $220,000.
E-minis trade 24/7, five days a week from Sunday through Friday. As a result, prices of E-mini contracts can react to news events when other exchanges are closed.

Futures Trading Demystified:
Your Futures Questions Answered

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to get answers to the most asked futures questions.

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Margin Requirements and Risk Management

The CME sets the initial margin requirements for futures contracts and can change them from time to time based on volatility and other factors. The initial margin for E-minis ranges from 5% to 7% of the contract’s notional value. The maintenance margin runs about 10% less than the initial required margin, and margins for day trading are around 25% of the initial margin.

Be aware that if your account value drops below the maintenance margin level, you will need to bring your account value back up to the initial margin required.

One risk with E-mini contracts is that in the event of a sudden market downturn, you could lose all of your margin deposit or even more. One solution you might consider is using stop-orders to protect your positions and limit your losses.

To do this, decide how much you’re willing to risk on each trade. Suppose, for example, you have $20,000 in your account, and you’re willing to risk losing 1% per trade. That would mean your maximum loss would be $200. If you bought 4 contracts at 4,300, you would want to set a stop-order at 4,299. In this case, a one-point downtick would give you a loss of $50 per contract, or a $200 total loss.

This is just an example, but the idea is to plan ahead and protect your account from unexpected and excessive losses.

TradeStation offers a variety of tools and products for futures trading, including trading ES futures.

Download TradeStation’s ebook, Futures Trading Demystified: Your Futures Questions Answered, to learn the ins and outs of futures trading.

Futures Trading Demystified: Your Futures Questions Answered

In Futures Trading Demystified, get answers to the most commonly asked futures questions. Get your free guide to learn:

FutureseBook
  • How futures trading works
  • Why traders choose futures
  • Answers to frequently asked futures questions
  • And much more

Sources

  1. CME Group. “Trading the S&P 500“
  2. CME Group. “E-mini S&P 500“
  3. CME Group. “E-mini S&P 500-Contract“

Important Information: This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy.

Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: www.tradestation.com/important-information.
Futures offered through TradeStation Securities Inc. TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.

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Get 50% off futures brokerage fees.

$0.25 to $0.75 per contract per side*

  • Free market data (CME Globex Value Bundle)
  • Special day-trading margin rates
  • Access to over 350 futures and futures option products
  • Powerful futures trading and analysis platform
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Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures or cryptocurrencies); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options. Before trading any asset class, customers must read the relevant risk disclosure statements on our Other Information page. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.

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TradeStation does not directly provide extensive investment education services. However, useful investment and trading educational presentations and materials can be found on TradeStation’s affiliate’s site, YouCanTrade.com, which is owned by You Can Trade, Inc., an investment education media company.

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