The e-mini S&P500 futures contracts are one of the most popular futures trading instruments. With small capital, the e-mini S&P500 futures allow you to control a significant amount in the S&P500.
Besides the capital requirements, another added benefit of trading E-mini S&P500 futures contract is that because the instrument tracks nearly 500 stocks in the US, it can be used as a general gauge of the markets.
Many futures traders will know that the E-mini S&P500 futures can be technical in trading, meaning that technical analysis will find trading the E-mini S&P500 futures quite easy as compared to trading stocks.
In this article we take a look at how you can trade the E-mini S&P500 futures using Renko charts.
But before we go into the details, there are a few fundamental ground rules to follow and something which every trader should understand.
E-mini S&P500 futures contract specifications
The E-mini S&P500 futures is offered by CME group and anyone can trade these futures contracts with a futures broker. Depending on the broker of your choice and the leverage you can trade just one contract or multiple contracts as well.
The technical specifications for the E-mini S&P500 futures are as follows:
- Minimum Tick Size: 0.25 points (or 1 tick)
- Value of 1 tick: $12.50
- Margin requirements: $400 or depending on your broker
- Minimum spread: 1 tick (or $12.50)
- Commissions: Varying and depends on the futures broker you trade with
- Starting capital: You can trade with a starting capital of just $5000 or more.
E-mini S&P500 futures – Renko Chart configuration
It goes without saying that using a fixed Renko box size is the most ideal way to start trading with Renko charts.
This ensures that whether you look at the charts today, or one week later, the trend lines and horizontal support/resistance levels that you draw remain the same.
To use the right Renko box size to trade E-mini S&P500 futures you first need to look at the tick size. We know that a 0.25 box size is equal to $12.50.
Therefore, for a 1 point (1 point = 0.25 ticks x 4) Renko box size for E-mini S&P500 futures, it is equivalent to $50, or $100 if you use a 2 point (0.25 x 8).
The base time frame (the time frame from which the Renko charts are generated) also plays a role. For example, you could look at a 1-minute base chart which is the closest you can get to a tick chart, or use a more general 5, 15-minute or 1 hour time frame of the base chart.
There is no right setting and it all comes down to your capital and trade management.
For example, a trader with just $1000 capital will need to put up $400 in margin. This leaves trader with a balance of $600 to cover the maintenance margin. If the trader trades 1 contract which requires $400 margin, then the remaining $600 in balance is equal to 48 points or 192 ticks.
In this case, there is no point trading a 50 point Renko chart, but rather using a 1 point E-mini S&P500 futures renko chart instead.
You could also look at using a 0.25 Renko box size with a 5 or 1-minute close so you can day trade the E-mini S&P500 futures market.
The chart below shows a 0.25 Renko box size for E-mini S&P500 futures with 1-minute close. Notice that the chart has some good short term trends as well as moments of ranging price action.
Or you could also use a 1 point Renko box chart, which increases the box value to $50 as compared to the previous $12.50 value.
What box size you want to use for E-mini S&P500 futures depends on your trading capital and of course your strategy.
E-mini S&P500 futures – Renko Trading Strategies
There is no such as a thing as a trading strategy that is exclusive for the E-mini S&P500 futures market.
Mind you, that because the E-mini S&P500 futures is a hot market, you will find many misleading adverts and false trading systems that claim to have an exclusive trading strategy for trading the E-mini S&P500 futures contracts.
Price is price, whether it is the E-mini S&P500 futures, a stock or a forex currency pair.
The difference is in the box size, the tick value and of course periods of high liquidity when the instrument moves. So a word of caution that you should not fall prey to such marketing tricks that promise you the holy grail of E-mini S&P500 futures trading.
That said, here are some broad ways you can trade the E-mini S&P500 futures contracts.
Trading E-mini S&P500 futures Renko with chart patterns
As I said before, the E-mini S&P500 futures chart is a technical chart and it respects trend lines, support/resistance levels very well. Therefore, price action traders can apply chart patterns on the E-mini S&P500 futures Renko chart.
The next chart below shows some examples. Like the inverse head and shoulders pattern, rising wedge pattern that is currently forming, trend lines and many more.
The trick here is of course in finding the right entry and waiting for the right moment to enter and exit the trade.
Trading E-mini S&P500 futures Renko with indicators
You could also look at trading the S&P500 futures Renko chart with indicators such as moving averages or oscillators.
The Renko chart below shows the awesome oscillator applied to a 0.25 Renko box for the E-mini S&P500 futures with trade signals shown by using divergences on the chart.
Most common futures trading platforms
Ninjatrader, MT5 are two of the most commonly available charting and trading platforms for the futures markets.
For the rest whose trading platform does not support native or a modified version for Renko charts, you can make use of Tradingview.com charts. A pro Plus account will give you the option to use Renko charts on intraday time frame as well as a 10-minute delayed feed data for the CME futures.
You can read more about Tradingview Renko charts here.