Micro E-Mini Trading Strategy (Backtest And Futures Example)
Last Updated on May 27, 2023
With more retail traders picking interest in futures trading, the CME Group decided to launch micro e-mini futures to make futures accessible to more retail traders with low capital. Those contracts are the smaller versions of the popular e-mini futures and, as such, have correspondingly lower margin requirements, making them affordable to more retail traders. Want to know how to trade micro e-mini futures trading strategy?
Launched in 2019 by the CME Group, the micro E-mini futures are 1/10th the size of the older E-mini futures. Trading on the CME Globex electronic platform, micro e-mini futures are mostly financially settled and were created to make futures more accessible to traders using smaller amounts of capital. With a micro E-mini futures strategy, you can take positions on the direction of the available instrument, either for speculation, portfolio diversification, or hedging purposes.
In this post, we answer some questions about how to trade the micro e-mini futures trading strategy. To avoid trading blindly, we recommend making a backtest of all your trading ideas. We show you an example of such a backtest.
What are Micro E-mini futures?
The micro E-mini futures are futures contracts of various instruments that are 1/10th the size of the E-mini futures. They were launched in 2019 by the CME Group, and they trade on the CME Globex electronic platform. Initially, micro e-mini futures were created for the four major indexes — S&P 500, Dow, Nasdaq 100, and Russel 2000 — but they have been created for other products, such as bitcoin, copper, crude oil, Treasury yield, and FX futures.
The CME Group launched them because regular E-minis had become prohibitively expensive for many traders, effectively excluding them from the liquid futures market. The smaller Micro contracts also provide traders with greater flexibility and allow them to be more precise in risk management.
With micro contracts, traders can take positions in any of the available instruments with one-tenth of the margin requirement for the e-mini contracts. For example, while the traditional E-mini S&P 500 futures contract represents $50 times the price of the S&P 500 Index, the Micro E-mini S&P 500 represents only $5 times the price of the S&P 500 Index.
Also, micro e-mini futures are mostly financially settled, even for commodities that are deliverable because the small retail traders that trade it usually do not intend to make or take delivery of the asset, and the big players that want the physical asset usually trade the bigger contract sizes, not the micro contracts
What is a Micro E-mini futures strategy?
A micro E-mini futures strategy is a method or technique for trading micro e-mini futures contracts. It is employed by traders with small trading capital and often includes technical and fundamental analyses for market timing, position sizing, and risk management.
If you intend to trade micro futures profitably, you must have a solid trading strategy with precise entry and exit signals, as well as risk management techniques. You can use a micro e-mini futures strategy to speculate on different assets, diversify your portfolio, or even hedge risks.
Micro E-mini futures strategy backtest
A backtest with strict trading rules, settings, statistics, and historical performance is coming soon.
What is the seasonality of Micro E-mini futures?
In the financial markets, seasonality is a concept that describes the tendency of an asset’s price to move in a fairly predictable pattern during certain times of the year. Periods can refer to months or seasons (winter, spring, summer, and fall) of the year.
As with the e-mini futures, the seasonality in micro contracts depends on the asset involved. Different assets have different seasonal patterns. For example, Treasury note futures tend to perform better in the second half of the year than in the first five months.
What moves the Micro E-mini — What affects the Micro E-mini the most?
Micro E-mini futures refer to the contract size, and not a specific asset. Different assets are affected by different factors, and for each asset, the same factors affect both the micro and the e-mini contracts. For example, Treasury micro e-mini contracts are affected by factors like interest rate changes, inflation, the state of the economy, and sociopolitical events. Those same factors would affect the Treasury micro contracts because it is the same underlying assets.
How are Micro E-mini futures traded?
Micro e-mini futures are traded like their e-mini counterparts on the CME Globex electronic platform. For example, just like the e-mini S&P 500 futures, the micro e-mini S&P 500 futures are traded from Sunday to Fridays, from 6:00 p.m. to 5:00 p.m. ET (5:00 p.m. to 4:00 p.m. CT) the next day, with a one-hour break at the end of each day.
The contract specification and termination of trading vary with the asset involved. For example, the micro e-mini S&P 500 comes in quarterly contracts (Mar, Jun, Sep, & Dec) listed for 5 consecutive quarters. One contract unit is the current value of the index multiplied by $5. The price quotation is in USD and cents per index point. The contract is financially settled, and trading terminates at 9:30 a.m. ET on the 3rd Friday of the contract month.
How do you start trading Micro E-mini futures?
You will register on the CME Globex platform, but you still need a futures broker that would grant you access to the exchange clearinghouse and help clear your trades. So, the first thing to start trading this contract is to register with a futures broker and fund your account. Since futures contracts are leveraged instruments, you need not have the full dollar worth of the contract before you can trade it — you deposit the initial margin or a little more than that.
If you don’t want to go through the challenges of trading futures, you can trade CFDs that track the micro e-mini futures contracts. With a CFD contract, you are in an agreement with the CFD broker to exchange the price difference between the opening and closing of a trade. CFD brokers, like IG, may offer micro futures CFDs.
What is the Micro E-mini trading at?
It depends on the asset involved. For example, the E-mini S&P 500 futures were trading at $4020.25, as of November 30, 2022. See the chart here on the CME platform chart. The chart was gotten from TradingView.
Please note that the price changes from time to time, so what is quoted here may not be the price it is trading now you are reading this post. You can click on any of the links to get the real-time price on the CME platform or directly from TradingView.
What’s Micro E-mini futures hour?
The micro e-mini S&P 500 futures are traded from Sundays to Fridays, from 6:00 p.m. to 5:00 p.m. ET (5:00 p.m. to 4:00 p.m. CT) the next day, with a one-hour break at the end of each day. For CME ClearPort, the schedule is Sunday – Friday, 6:00 pm – 5:15 pm ET the next day. There is a 45–minute break each day beginning at 5:15 pm.
Where can I find trading charts?
You can find the trading chart on any trading platform you are using to trade. If your platform does provide trading charts, you can get charts from a third-party platform, such as MultiCharts. A more common option is TradingView, which offers free access to charts of different instruments once you register. However, you have to subscribe to the Pro services if you want to connect it to your broker, assuming it is one of the brokers supported by the platform. You can also access the TradingView chart via the CME platform.
What are the trading symbols for Micro E-mini futures?
Here are the trading symbols of some of the micro e-mini futures:
- Micro e-mini S&P 500 futures: MES
- Micro e-mini Dow futures: MYM
- Micro e-mini Russell 2000 futures: M2K
- Micro e-mini Nasdaq 100 futures: MNQ
What is the specification for Micro E-mini futures contracts?
The contract specification depends on the asset. For the micro e-mini S&P 500 futures, one contract unit is equivalent to the current value of the index multiplied by $5. The price quotation is in U.S. dollars and cents per index point and the minimum fluctuation is 0.25 index points ($1.25 per contract) for outright trading and 0.05 index points ($0.25) for calendar spread.
It comes in quarterly contracts (Mar, Jun, Sep, & Dec) listed for 5 consecutive quarters. The contract is financially settled, and trading terminates at 9:30 a.m. ET on the 3rd Friday of the contract month
Why should you start trading Micro E-mini futures?
There are many reasons to trade the micro e-mini futures. Apart from the usual speculation, portfolio diversification, and hedging purposes for which futures are traded, micro contracts offer some special benefits, such as:
- Low capital requirement: Micro contracts are one-tenth the e-mini contracts, so the margin requirements are 1/10 of those of e-mini contracts. Thus, you can trade this future with only a few thousand dollars or even a few hundred, depending on the asset and available leverage.
- Flexible risk management: Micro contracts makes it possible for small investors to use futures to manage their risk exposure in the corresponding market.
What is the contract size?
The contract size of a micro e-mini futures is 1/10 of the corresponding e-mini contract. For example, one contract unit of micro e-mini S&P 500 futures is worth $5 x the index’s value. Given the current value of 4020.25 as of writing, the value of the contract in USD is $20,101.25.
What is the tick size?
The tick size of one contract of the micro e-mini S&P 500 futures is $1.25 for outright trading and $0.25 for Calendar Spread.
What is the minimum price fluctuation for Micro E-mini futures?
The minimum fluctuation of one contract of the micro e-mini S&P 500 futures is 0.25 index points for outright trading and 0.05 index points for Calendar Spread.
Are there any ETFs?
ETFs track the underlying assets, not the contract sizes. There are different ETFs for different assets. For the S&P 500 futures, the common ETFs are these:
- SPDR S&P 500 ETF (SPY)
- iShares Core S&P 500 ETF (IVV)
- Vanguard S&P 500 ETF (VOO)
What factors affect Micro E-mini prices?
It is the underlying asset’s price that is affected, not the contract type. Thus, what can affect a micro e-mini futures price will depend on the asset. For the micro e-mini S&P 500 futures, the factors that affect the prices include:
- Economic reports
- Movements of the component stocks in the index
- Interest rate changes
- Political events
What is the all-time high for Micro E-mini futures?
It depends on the underlying asset involved. For the S&P 500 futures, the all-time high of this contract is 4808.25, which it reached in January 2022, according to the TradingView chart for the asset.
What are the biggest risks in trading Micro E-mini futures?
When trading any type of futures, the biggest risk comes from adverse price movement, especially if you are highly leveraged. In any leveraged position, the losses are calculated using the actual value of the contract size traded, not the margin deposited. So, if you trade with a 20x leverage, a 1% adverse movement would lead to a 20% loss, and a 5% negative movement would result in a 100% loss in your account (wipe out your account).
What is the settlement method?
Micro e-mini futures are financially settled.
What is the settlement procedure?
The settlement procedure is by cash and is calculated based on the special opening quotes of the underlying asset on the day of the final settlement.
What is the block minimum for Micro E-mini futures?
It does not apply
What is the difference between Micro E-mini futures and the Forex instrument for Micro E-mini?
CFD trading differs from futures in that futures contracts have fixed expiration dates, but CFDs can be traded indefinitely.
Which forex instrument is the same as Micro E-mini futures
Micro E-mini CFDs
What are some important dates for this market?
It depends on the asset involved. But generally, e-mini futures were first introduced in 1997, while micro e-mini futures were first introduced in 2019.
What is the highest Micro E-mini has ever been — its all-time high?
It depends on the underlying asset involved. For the S&P 500 futures, the highest level it has ever traded was 4808.25, which happened in January 2022, according to the TradingView chart for the asset.
What is the lowest Micro E-mini has ever been — its all-time low?
It depends on the underlying asset involved. For the S&P 500 futures, the highest level it has ever traded was 665.75, which happened in March 2009, according to the TradingView chart for the asset.
If you are a retail trader with a small trading capital, micro e-mini futures offer you a way into the futures markets. But you need to know how to trade Micro E-Mini futures strategy.