Trading the S and P 500 E-Mini Futures Contracts – During Economic Announcements

Trading the S and P 500 E-Mini Futures Contracts – During Economic Announcements

10, 20, 30% (or more) return on investment… in a few seconds?! That was my reaction the first time I heard about announcement trading.

These economic announcements occur almost daily and cause a lot of price movement (profit opportunity) within a very short space of time. For example, a 5-point movement (possible 50% ROI) in a few seconds is not uncommon. Why not learn how to trade these announcements properly, instead of leaving this sort of money on the table? There is a lot of profit to be made by trading during announcements, if you have the right technique. The right technique can be learnt, like most attainable skills.

As with many things, it is only impossible until you know how. Many ‘seasoned traders’ have often told me that it’s not possible to trade announcements, because of slippage, fast price movement, volatility, etc. I might find their argument convincing, if I wasn’t actually successfully doing it myself. For me it was just a matter of being taught how to do it, by those who knew how to do it – simple.

I find that the S&P 500 E-mini futures market actually moves quite predictably to market announcements. It’s not about whether the data released is ‘good’ or ‘bad’ but rather how far off from consensus (expectations) the data is. The further off, the bigger the movement usually is. If data comes out worse than expected, the market usually drops, and if data comes in better than expected, the market usually rallies. It is really just that simple.

In order to trade these quick market movements you need a to-the-second news server, support and resistance levels (or ‘prediction points’), slippage-limiting tools in your trading software, the guidance of someone who already does it successfully (useful, if available), and the will to practice, practice, practice – you will eventually get it down to a fine art of success and consistency. A good real-time simulation trading platform is also required, which most good brokers will provide for free.

You will find that announcement trading can become a very powerful earning tool, to be used in conjunction with your other trading methods. I personally trade announcements as my primary profit-taking method, because of the ease and simplicity of it.

One last note on trading this method successfully: I prefer to use the ‘when in doubt, stay out’ approach. I only get into a trade if I’m as sure as I can be that it’s a high-probability trade. Some say nothing ventured, nothing gained. But it’s also true that nothing ventured, nothing lost. Trading is as much about capital preservation as it is about capital gains. This mentality works well for me. Last month (September 2010) for example, I only performed 12 trades, 10 of which I won, resulting in a total 107% net ROI. See my blog for trade details. And please feel free to contact me for further advice, or to discuss futures trading in general. I am always happy to help.