S&P 400 E-mini Trading Systems
Typically, the S&P 400 e-mini futures trading system comprises a specific set of rules that determine entry and exit points for the S&P 400 e-minis. It generally also incorporates various technical analysis indicators that provide feedback about a market (strength and direction of a trend).
Rules for an S&P 400 E-mini Trading System
A complete trading system should go well beyond simple signal generation. It ought to incorporate decision-making procedures (where to buy and sell) and include risk management calculations. A complete trading system should also include auto-trading capabilities based on the signals it generates. Finally, a good trading system must operate objectively, ideally removing the emotional factor from the trading process.
Using a volume-based system to trade the S&P 400 e-mini futures as an example, the following simple rules could apply:
- Establish the critical VMA (volume moving average) levels that precede index reversals in a majority of cases;
- During a decline on the index, buy when the VMA exceeds the critical level (as defined in step 1) and then VMA starts to move lower.
- During an advance on the index, go short when the VMA exceeds the critical level (as defined in step 1) and VMA then starts to move lower.
These rules are very basic; depending on the specific trading application, they may have to be adjusted. For instance, when trading with volume-based indicators, you may have to define separate critical VMA levels for downtrends and for uptrends. In addition, it is good practice to incorporate additional rules into a trading system. This may include programming trade exit points and including a stop-loss policy.
©HGH Associated Press
5/14/2006
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