building your e-mini trading strategy - giuciao atspace org

1 IntesaTrade and PRESENT Building Your E-mini Trading Strategy Prepared and Presented by Daniel Gramza 2 Materials in this presentation are covered under current United States and international copyright laws. NO PORTION OF THIS PRESENTATION MAY BE REPRODUCED WITHOUT THE WRITTEN PERMISSION OF THE AUTHOR. Daniel Gramza is currently completing two books: Trading in the Eye of the Storm The Handbook of Japanese Candle Trading Strategies You can be notified when these books are available by contacting Daniel Gramza. Daniel M. Gramza All Charts Created on President Aspen Graphics Software Gramza Capital Management, Inc. Contact 2227 Forestview Road MIKE BRODROGI Evanston, Illinois 60201-2009 1 800 359 1121 Tel. (847) 475-4760 mbodrogi@aspenres.com Fax (847) 475-4780 e-mail dmgramza@worldnet.att.net CME, the globe logo and E-mini are trademarks of Chicago Mercantile Exchange, Inc. All other marks are the property of their respective owners. 3 Building Your E-mini Trading Strategy • Identify market you're going to trade • Determine your trading time frame • Select trading approach • Create trading strategy • Establish trading strategy parameters • Measure performance of trading strategy • Implement new trading strategy Gramza Capital Management, Inc. 4 Section 1: IDENTIFY MARKET YOU'RE GOING TO TRADE CME E-mini™ Futures OPTIONS on CME E-mini™ Futures CME eFX FUTURES Gramza Capital Management, Inc. 5 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 Nov-97 Feb-98 May-98 Aug-98 Nov-98 Feb-99 May-99 Aug-99 Nov-99 Feb-00 May-00 Aug-00 Nov-00 Feb-01 May-01 Aug-01 Nov-01 Feb-02 May-02 Aug-02 Nov-02 Feb-03 May-03 Aug-03 Nov-03 Feb-04 May-04 Aug-04 Nov-04 Feb-05 CME E-mini™ S&P 500 ® Futures Average Daily Volume Increasing Volume = Increasing Product Acceptance 6 CME E-mini NASDAQ-100 ® Futures Average Daily Volume 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 A u g - 9 9 O c t - 9 9 D e c - 9 9 F e b - 0 0 A p r - 0 0 J u n - 0 0 A u g - 0 0 O c t - 0 0 D e c - 0 0 F e b - 0 1 A p r - 0 1 J u n - 0 1 A u g - 0 1 O c t - 0 1 D e c - 0 1 F e b - 0 2 A p r - 0 2 J u n - 0 2 A u g - 0 2 O c t - 0 2 D e c - 0 2 F e b - 0 3 A p r - 0 3 J u n - 0 3 A u g - 0 3 O c t - 0 3 D e c - 0 3 F e b - 0 4 A p r - 0 4 J u n - 0 4 A u g - 0 4 O c t - 0 4 D e c - 0 4 F e b - 0 5 A p r - 0 5 Increasing Volume = Increasing Product Acceptance 7 OPTIONS on CME E-mini™ S&P 500 ® Futures Average Daily Volume 0 2000 4000 6000 8000 10000 12000 14000 Feb-03 Apr-03 Jun-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 4/30/2005 Increasing Volume = Increasing Product Acceptance 8 OPTIONS on CME E-mini™ S&P 500 ® Futures Month End Open Interest: 0 20000 40000 60000 80000 100000 120000 140000 160000 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 3/31/2005 4/30/2005 Increasing Open Interest = Increasing Product Commitment 9 CME and Growth of Electronic Trading 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 1,100,000 1,200,000 1,300,000 1,400,000 1,500,000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Average Daily Volume by Year Increasing Volume = Increasing Product Acceptance 10 Why Trade CME E-mini™ Futures? • Easy access • Virtually 24-hour trading • One central marketplace • Highly liquid • Tight bid/ask spreads • Leverage • No Margin Interest Charged • No Inventory Required for Short Position • No Short Position Interest Charged Gramza Capital Management, Inc. [...]... Inc 16 4 r- 0 5 5 t- 0 4 n -0 Ap Ja Oc 4 4 l- 0 r- 0 Ju 3 t- 0 3 n -0 Ap Ja Oc 3 3 l- 0 r- 0 Ju 2 t- 0 2 n -0 Ap Ja Oc 2 2 l- 0 r- 0 Ju 1 t- 0 1 n -0 Ap Ja Oc 1 1 l- 0 r- 0 Ju 0 t- 0 0 n -0 Ap Ja Oc 0 l- 0 r- 0 Ju Ap A V E R A G E D A IL Y V O L U M E CME eFX Futures Average Daily Volume Increasing Volume = Increasing Product Acceptance 300,000 250,000 200,000 150,000 100,000 50,000 0 17 TRADING CME... Gramza Capital Management, Inc 11 CME E-mini FUTURES Contract Specifications CME E-mini ® Ticker Symbol Contract Size* Minimum Price Fluctuation (Tick) Trading Hours Contract Months** Last Day of Trading Performance Bond Margin*** CME E-mini CME E-mini ® S&P 500 ES $50 x E-mini S&P 500 $55,000 25 futures index points = $12.50 NASDAQ-100 NQ $20 x E-mini NASDAQ-100 $30,000 50 futures index points =...Why Trade CME E-mini Futures? KEY BENCHMARK INDEXES CME E-mini S&P 500® futures Tracks large-capitalization U.S stocks CME E-mini NASDAQ-100® futures Tracks technology, telecom and biotechnology issues CME E-mini S&P MidCap 400™ futures Tracks mid-size U.S companies CME E-mini Russell 2000® futures Tracks small-capitalization U.S stocks CME E-mini Russell 1000® futures Tracks... $10.00 Nearly 24 hours, $4,000 $3,750 CME E-mini ® Russell 2000 S&P MidCap 400™ ER2 EMD $100 x E-mini $100 x E-mini Russell 2000 S&P MidCap 400 $56,000 $58,000 10 futures index 10 futures index points = $10.00 points = $10.00 Sunday afternoon through Friday afternoon H, M, U, Z 8:30 a.m third Friday of contract month $3,500 $3,500 CME E-mini Russell 1000® RS1 $100 x E-mini Russell 1000 $64,000 10 futures... and losses calculated? The CME E-Mini NASDAQ-100 futures contract is traded in 50 increments = a tick = $10.00 per contract or 1 full point = $20 1401.00 $10.00 1400.50 $20.00 $10.00 1400.00 Gramza Capital Management, Inc 14 E-mini FUTURES COMPARED TO SPDRS VALUE OF INVESTMENT $55,000 (Assume S&P 500 Index value = 1100, CME E-mini S&P 500 multiplier value = $50 Value of 1 E-mini S&P 500 futures contract... are E-Mini Currency profits and losses calculated? The CME E-Mini Euro Currency futures contract is 62,500 Euro and is traded in 0001 increments = a tick = $6.25 per contract or 1 full point = $625.00 1.3400 $6.25 1.3399 1.3302 $625.00 $6.25 1.3301 $6.25 1.3300 Gramza Capital Management, Inc 21 Section 2: DETERMINE YOUR TRADING TIME FRAME • Scalping • Micro day trading • Macro day trading • Swing trading. .. December 16, 2005 Trading may occur up to 8:30 a.m Chicago time on these dates 12 How are E-Mini S&P 500 profits and losses calculated? The CME E-Mini S&P 500 futures contract is traded in 25 increments = a tick = $12.50 per contract or 1 full point = $50 1301.00 $12.50 1300.75 $12.50 1300.50 $50.00 $12.50 1300.25 $12.50 1300.00 Gramza Capital Management, Inc 13 How are CME E-Mini NASDAQ-100 profits and... = $55,000) SPDRs CME E-mini S&P 500 Current Level $110 per share Quantity 1100.00 per contract $55,000/$110 per share = 500 shares 1 contract Min Tick Size $0.01 per share $12.50 per contract Tick Value $12.50 per contract 500 SHARES *.01= $5.00 Gramza Capital Management, Inc 15 E-mini FUTURES COMPARED TO SPDRS (Cont'd) COST TO ACQUIRE $55,000 S&P INVESTMENT SPDRs Margin CME E-mini S&P 500 50% = $27,500... Section 2: DETERMINE YOUR TRADING TIME FRAME • Scalping • Micro day trading • Macro day trading • Swing trading • Position trading Your trading time frame creates demands on: Available to trade Trading approach Trading technology Gramza Capital Management, Inc 22 Section 3: SELECT TRADING APPROACH • Fundamental Fundamental traders trade on the that other traders will react to the fundamental information... movement − Indirect analysis of price movement − Combination of direct and indirect analysis of price movement Gramza Capital Management, Inc 23 Section 4: CREATE YOUR TRADING STRATEGY Identify the tools that will create the foundation of your trading strategy • Trend Analysis • Japanese Candle Charts Gramza Capital Management, Inc 24 TREND ANALYSIS Gramza Capital Management, Inc 25 TREND ANALYSIS Higher . Inc. 5 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 Nov-97 Feb-98 May-98 Aug-98 Nov-98 Feb-99 May-99 Aug-99 Nov-99 Feb-00 May-00 Aug-00 Nov-00 Feb-01 May-01 Aug-01 Nov-01 Feb-02 May-02 Aug-02 Nov-02 Feb-03 May-03 Aug-03 Nov-03 Feb-04 May-04 Aug-04 Nov-04 Feb-05 CME E-mini S&P. Volume 0 50,000 100,000 150,000 200,000 250,000 300,000 A p r -0 0 J u l - 0 0 O c t - 0 0 J a n - 0 1 A p r -0 1 J u l - 0 1 O c t - 0 1 J a n -0 2 A p r - 0 2 J u l - 0 2 O c t - 0 2 J a n - 0 3 A p r -0 3 J u l - 0 3 O c t - 0 3 J a n -0 4 A p r -0 4 J u l - 0 4 O c t - 0 4 J a n -0 5 A p r -0 5 AVERAGE. Volume 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 A u g - 9 9 O c t - 9 9 D e c - 9 9 F e b - 0 0 A p r - 0 0 J u n - 0 0 A u g - 0 0 O c t - 0 0 D e c - 0 0 F e b - 0 1 A p r - 0 1 J u n - 0 1 A u g - 0 1 O c t - 0 1 D e c - 0 1 F e b - 0 2 A p r - 0 2 J u n - 0 2 A u g - 0 2 O c t - 0 2 D e c - 0 2 F e b - 0 3 A p r - 0 3 J u n - 0 3 A u g - 0 3 O c t - 0 3 D e c - 0 3 F e b - 0 4 A p r - 0 4 J u n - 0 4 A u g - 0 4 O c t - 0 4 D e c - 0 4 F e b - 0 5 A p r - 0 5 Increasing