| Beginning Traders Start Here.TM | EMINI DAY TRADING |
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EMINI S&P
Volatility is the source of potential profit, as well as potential loss, for the Emini day trader and measuring
it is done with reference to the Daily Range Value calculated by multiplying the day's high-low range of a particular E-mini® S&P 500® futures
contract by the point value for the contract. For the Emini S&P 500 futures, the point value is $50, the contract's multiplier.
The result is the theoretical maximum profit or loss for one Emini contract
possible during the day. For example, a day's trading range of 22.50 points represents a Daily Range Value
of $1125, the per-contract maximum that could be earned (or lost) by buying an Emini S&P 500 futures at one price extreme and selling at the other.
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Apart from showing profit potential, the histogram is also useful in quantizing the expected frequency of "spectacular days" and the opposite, "down days"
in the Emini S&P 500 futures market.
Spectacular days - when the Daily Range Value surpasses $3500 - occur with more likelihood than one might expect
so any trading plan should at least provide the opportunity for the day trader to stay in the market and capture these
large price swings.
The number of down days, when trading is too quiet to generate much if any opportunity, depends in part on the criteria for initiating a trade as detailed in the trading plan. For example, a day trading plan that requires a predetermined movement away from a local high or low prior to establishing a trade will require a sustained price movement to trigger a trade. Depending upon the size of the requisite movement, days having a Daily Range Value below $500 may not often represent a profit opportunity and, based on the histogram, this may occur one in every five trading days. As another example, a trader who plans to capture only the relatively large movements in the Emini S&P 500, say beyond a $2500 Daily Range Value, should realize that such movements have in the recent past occurred only about 7% of the time.
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