All about investment

Waldemar Puszkarz, Ph.D.

It is not very difficult to design a viable winning trading system for emini futures markets. Eminis, just as most other futures markets, tend to be pretty technical in nature and so elements of technical analysis can be successfully employed here to design a profitable trading system.

Trading systems can be roughly divided into two large categories: counter-trend systems and trend-following systems, although it is possible to combine the elements of both to produce a more complex system that handles more trading situations.

In some markets, such as emini futures for S&P 500, counter-trend systems can be profitable, in other markets it makes more sense to focus only on trend-following systems. Trend-following systems should work reasonably well in most emini markets, although some are more suitable for this approach than others.

In this age of electronic trading, most emini traders are involved in daytrading, taking positions for several minutes to several hours, always closing them before the end of a daytrading session, that usually is not far away to the closing time for the major US stock exchanges.

Any sound trend-following mechanical trading system that operates as a daytrading system should rest on the following three pillars:

1. it is selective (it trades at most twice a day, but not necessarily every day),
2. it cuts losses relatively short (a suitable stop-loss that is a function of the market's volatility should be chosen by testing),
3. it lest profits run.

While the last two conditions are quite obvious and are used routinely in the design of trend-following systems, the first one is usually overlooked, yet it is as important, if not even more, as the other two, in this author opinion. It is, in fact, much easier to design a profitable trading system when this condition is taken into account. This is so simply because there are really not so many good daytrading opportunities every day that could be easy to first identify and then to exploit profitably. On the other hand, when this condition is taken into consideration, it is relatively easy to find one or two good trading opportunities per day frequently enough to design a working profitable trading system.

You can find more information about eminis and how to trade them, including some simple free trading system on the author's website at: http://www.eminimethods.com