Beginning Traders Start Here.TM EMINI DAY TRADING
Day Trading E-mini S&P 500 futures

EMINI S&P
PROFIT POTENTIAL

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.

From June 2008 to June 2010, the Daily Range Value of the Emini S&P 500 futures fluctuated between a minimum of just $125 and a maximum of $5775 with the average being $1169 per contract. The histogram (at right) is more revealing: about half of the days had a range value of over $1000 per contract with 12% of the days exceeding $2000.

No Emini day trader can or should expect to buy at the low and sell at the high. For that reason, the Daily Range Value represents a maximum theoretical measure. In practice, though, a day trader can strive to capture some percentage of the Daily Range Value as target performance for their trading plan. If, for example, a trader could capture just half of the price movement, then based on the histogram, one out of every two trading days in the Emini S&P 500 futures would still provide the trader with the potential to earn $500 or more.

Frequency of various Daily Range Values: June 2008 to June 2010
Show me the Money. A quick glance at the histogram above shows why the Emini S&P 500 is so popular among day traders: there is plenty of profit potential, more so than with most other futures contracts. There are even very active days that provide the potential to earn thousands of dollars over just one trading day.

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.

The following trademarks and service marks are owned by Chicago Mercantile Exchange Inc.: CHICAGO MERCANTILE EXCHANGE®, CME E-mini®, CME®, E-mini® and Globex®. The following are trademarks of The McGraw-Hill Companies: S&P®, S&P 500®.

© 2010. World Link Futures, Inc. All rights reserved.
Futures trading involves substantial risk and is not for everyone. Only risk capital should be used.
Keywords: Emini trading, Emini S&P, Emini profit, Emini S&P profit
Abstract: By looking at the daily range value, the potential profit of day trading the Emini S&P can be determined.

Day Trading E-mini S&P 500 Basics | About Electronic Trading | E-mini S&P 500 Sample Trades | Day Trading as a Business | Managing the Risks of E-mini Trading | The E-mini Day Trading Plan | Fine Tuning the E-mini Plan | Measuring E-mini Profit Potential | The Psychology of E-mini Day Trading | Real-Time E-mini Demo Account