One of the beauties of trading the e-mini futures is the sheer number of different styles being traded
. Each investor or trader is in the market for their own specific reasons and those affect how price action behaves. A key skill for any trader looking to profit in these markets is understanding who else in the market at any given time. Knowing and recognizing the emotions and psychological pressures that various participants are going to be under allows traders to identify areas where they can put pressure on the opposition and thereby increase their own trading profits.
So what are the possible calls to action a trader can make inside the markets?
1. Entering a New Position
This is the most basic of market behaviour. Traders initiate new positions when they think they have identified a market that is either under or overvalued. They want to capitalize on that miscalculation of fair value price by other participants. They enter the market in the hopes of getting a few ticks of profit by waiting for the market to prove their bias correct. Initiating new positions can be done by both buying and selling (shorting) into it.
2. Taking Profits
Once a trader is in a position they look for an area to take profits. Throughout the course of the E-mini trading day this series of initiating new positions and taking profits happens hundreds of thousands of times over. The experienced trader can use simple candlestick charts to identify who is doing what. Individuals can take profits by selling if long or buying (covering) if short.
3. Stops Being Hit
When a trade doesn't go the way a trader planned it goes against them and this is when the third type of participation occurs. Stops are in place to control risk and protect profit. When a stop is hit it triggers a market order to exit the position immediately for the best price. Contracts are bought and sold because a position went against the trader.
Price action on the e-minis is unlike any other financial market. Stops and covering are a major part of why price moves and the patterns that makes up an intraday chart. Knowing who is looking to operate at which levels can allow a smart trader to fully optimize the opportunities that present themselves.