 Welcome traders to today's introductory session to trading the Micro E-mini S&P 500 futures. My name is Patrick Munnally and I will be walking you through this topic today. Before we get going, just some housekeeping here. Can you first of all just confirm that you can see the welcome screen and you can hear my audio feed loud and clear. Could you just type a Y into the chat box so that I know we're ready to get going. Good stuff, okay. Just in terms of questions, any questions you might have, if you could just make a note of the questions that come up during the presentation and at the end I'll open up a Q&A session which will allow you to post those questions either to type them into the chat or I can unmute your microphone if you have one and you can speak to me directly. Okay, so like I said, welcome to today's introductory session to the E-mini and Micro S&P contracts. In today's session I'll be introducing you to the instrument structure and advantages along with highlighting some unique market mechanics that enhance the trading information for this product. I will also introduce you to my core strategy for trading E-minis and demonstrate how you can consistently use my pre-market analysis to read consistent returns. But before we jump into that, let me just briefly introduce myself for those who are joining me for the first time today. Like I said, my name is Patrick Munley and after I graduated from King's College London, I joined a city PLC consulting firm. I ultimately left with some colleagues and went on to successfully co-found and exit a consulting startup which was focused on C-suite executive search for technology businesses. Having a front row seat, the dot com bubble, witnessing people make and lose a fortune in the markets, sometimes quite literally overnight, I decided to explore my curiosity for markets with some capital to play with and some time on my hands. I started day trading the S&P 500 or probably more appropriately day gambling. After some early beginner's luck, I racked up some pretty solid gains. However, as it's often the case, my beginner's luck ran out and as the market phase changed, I began to average down giving back all my gains and ultimately experiencing a significant six-figure financial hit. To say this was a gut-wrenching, sobering experience is an understatement. I had to stand back and figure out if it was feasible for me to make a living from the markets. So I decided to get serious about trading and sought out as a mentor with an excellent trading track record. Working with my mentor for a period of 18 months to two years, it was a time during which I upped not just my technical gain, developing a strategy that crucially suited my personality, extensively back and forward testing strategies, all of which were underpinned by a rigorous risk management approach. But most importantly during the period of mentorship, I significantly developed my mental gain. And probably the most important watershed shift I made was from being a highly goal-orientated individual focused on financial gains to becoming purely process-orientated. So what does that actually mean? Well, it means I had to stop focusing on what I could make from the markets and start focusing solely on managing my mindset to allow me to consistently execute my trading strategy, oftentimes in the face of negative feedback from the markets in the form of losing trades. But once you become process-orientated and have a professional trading mindset and you understand the true nature of trading being a numbers game in which you're simply playing the probabilities, you lose the emotional investment and that hellish emotional rollercoaster of living and dying by the outcomes of individual trades. I'm no longer concerned with the outcome of individual trades or even a string of trades. My focus is on the next 100 trades because I know if I focus on excellence and execution, my edge will demonstrate itself over an extended series of outcomes. My multi-strategy approach has delivered profitable annual returns since 2008. From 2013, I've also been managing investor capital through a managed account service, delivering annual positive returns. I'm currently responsible for managing a multi-million dollar portfolio. Since 2010, I've also mentored hundreds of private traders of all experience levels from complete novices to former CME floor traders in developing the technical and mental skills to reap consistent returns from the markets. In addition to my fund management and mentoring, I'm also a resident market expert exclusively providing market and trading analysis to TICML. My other passion project, I guess, is leading trader education for a premier trading education brand called FXcareerswap.com, offering development and, more importantly, funding to retail trading towns. At FXcareerswap, we don't just work on developing retail traders' market and trading strategy knowledge. More importantly, we also work on mindset development through a structured programme that culminates in managing the firm's capital at zero personal financial risk on a profit share basis. OK, so that gives you a flavour of where I'm coming from, so let's jump into today's material. The E-Mini or ES or MINI is a futures contract that tracks the S&P 500 market index. It is traded on the Chicago Mercantile Exchange, the CME, via their Globlex Electronic Trading Platform. Trading is 23.5 hours a day, five days a week using the contract symbol ES. E-Mini contracts are available on a wide range of US stock market indices, commodities and forex currencies. However, when traders refer to the E-Mini or the E-Minis or the Spooze, they are generally referring to the most important one, the futures contract that tracks the S&P 500 stock market index. The E-Mini futures were originally launched in September 1997 to attract non-professional investors into trading index futures. Previously, the only game in town had been the large S&P contracts, but it had become too expensive for the little guys of trade. So, the CME created the E-Mini contract, which was one-fifth of the size of the large S&P futures contract and required only one-fifth of the margin to trade. The E-Mini became a huge success, not only with non-professional traders, but also with professionals too. The micro E-Mini futures contract is the same as the regular S&P 500 E-Mini contract, in every respect, except it's one-tenth of the size. That is, each one-point move in the S&P 500 index is worth $5 per micro E-Mini contract compared to the $50 for the E-Mini or the S. Obviously, the margin to trade the micro contract is also one-tenth of the size. Let's think about some of the benefits of this product. It's equally easy to go long or short. You can either buy or sell the current E-Mini contract and there is no up-tick rule. We have 24-hour trading, which makes the E-Mini attractive to traders around the world. Overnight moves in related equity markets, like the DAX or the FTSE, can be played with one trading vehicle. The electronic trading platform means your orders are entered instantaneously and when executed, you are notified instantaneously. Changing and cancelling orders is trivial. No phone call required to brokers anymore. It's a level playing field because the Globex electronic trading platform means that large and small traders have equal access to the market and trades are executed in the order they are received, unlike the days of old when the pit-traded futures were equity, all the back-room gains are gone. It's a tight bid and our spread because there's so much volume trading through the E-Mini. The difference between the bid and our price is only ever one tick or 0.25 index points, which is the minimum price movement. Like I say, there's a large depth of market. Again, the E-Mini market is so liquid. There is plenty of volume either side of the last traded price for large orders to be filled with minimum slippage. It's volatile, yes, but not unmanagable. The E-Mini is active every day, which gives the trader plenty of opportunity to trade. Remember, a slippy market is impossible to day trade, but the E-Mini volatility is also manageable, except maybe around major announcements like the FOMC or the long farm payrolls data. Low brokerage rates mean that broker commissions for trading the E-Mini continue to fall. This excludes exchange clearing and regulatory fees. When you factor those in, your round-trick in and out brokerage commission is very attractive. Low margin requirements mean that to open a trading position with TIT mill, you only require $1,000 to open a micro account. Remember, these are the absolute minimums. You should be trading with more capital behind your position. There is a more attractive tax rate than trading forex or stocks. An income trading from the E-Mini futures is taxed as a capital gain. You also benefit from no trade-by-trade accounting, which is another advantage of the tax treatment of the E-Mini futures is that the tax reporting requirements are minimal. In particular, no trade-by-trade accounting, only the net profit for the full year is needed. That gives us a sense of the product and its advantages. Now we understand the instrument and the trading venue. I want to demonstrate some of the unique aspects of this instrument. The fact that the E-Mini is a derivative of the S&P 500 allows us to access some unique information commonly referred to as market internals. Market internals are often compared to the instrument dashboard on a car, giving indication of the performance and alerting the driver to any issues occurring under the hood. Let's take a look more closely at what market internals are and how we can incorporate them into a consistent trading strategy. Firstly, volume. As unique features of trading the exchange-traded derivative, as opposed to a contract for difference or forex volume data, which is at best incomplete, there is no central forex exchange and the banks who dominate forex trading don't share volume data in real time. However, we get a true reflection of the actual volume, which is shared directly by the CME, available to all market participants in real time. I use volume as a tool to confirm breakouts and opportunities to fade the market. A spikes in volume will often be accompanied by intraday profit taking. Next tool I use is the NYSE tick index. This gives us the relationship of stocks up ticking versus down ticking. Tick is an extremely useful tool for intraday trading. For example, if there are 3,000 stocks trading on the NYSE and 1,500 trades higher from their previous price and 500 trade lower, then the last price the tick will read will be plus 1,000. But I guess you're thinking, well, what happened to the other 1,000 stocks? Well, it might be that they traded at an unchanged price from their last tick. When using the tick, we are looking for extremes to enter or exit a trade. Tick readings of plus 1,000 or minus 1,000 are considered very strong and we typically trade between 1,000 most of the time on the NYSE. Tick readings within the 400 level plus 400 or minus 400 more often than not indicate sharp and we want to ignore them. On a range day, we can look to fade tick extremes. I apply a moving average to make it easier for me to see the trend of the tick, or what I refer to as the tick distribution. When we get a high tick and a high in price at the exact same time, this could indicate the high of the day when a high tick prints without a simultaneous high in price, we can continue to make new highs until the new high tick is reached. And obviously the reverse is true for the low tick followed by new lows. The next tool I use is the advanced decline line or AD line for short. It's the second most important of the internals. This indicator tells us the net sum of advancing stocks minus declining stocks. There are roughly 3,000 stocks listed on the New York Stock Exchange and 3,000 on the NASDAQ. An AD line reading of plus 1,500 is very bullish and a reading of over 2,000 is extremely bullish. On the flip side, readings of minus 1,500 and below are very bearish and readings below 2,000 are extremely bearish. These extreme readings are indicative of trending days where once the market continues to trend all the way into the clothes, we look to the AD line in conjunction with the breath ratio to confirm these trend days. For example, a day with 2,500 advancing stocks and only 500 declining stocks will yield a net positive of plus 2,000 which is, as I say, an extremely bullish reading. It will take a large catalyst to shift the market direction with a reading this bullish. If on the open, you continue to see the advanced decline line moving so it moves plus 500, plus 700, plus 900, this is a sign of market strength. If, however, the market is moving higher but the AD line is moving lower, a divergence has occurred and could be a sign that the market is about to reverse. Last but by no means least, the breath volume ratio composed of volume flowing into up stocks versus volume flowing into down stocks. The breath volume ratio is expressed as up volume minus down volume. This reading is important in relation to where it has been especially where we are now compared to where the day opens. So, for example, if at 10 a.m. we have 10 million shares moving up and 5 million shares moving down, the resulting breath ratio will be 2 to 1 positive. Twice as much volume is flowing into up stocks as down stocks. If at 10.30 a.m. the market has sold off but we have a breath ratio of 3 to 1 positive, this is a signal that the markets are actually becoming stronger and it's time to look to buy into pullbacks for a long setup. So, now we understand the market internals and the unique insight they provide. I want to briefly walk you through my strategy. By understanding the market context in which we are trading, I'm looking to execute two types of trades. Firstly, mean reversion in ranging environments and then momentum trades in trending environments always underpinned by the market internals. Every day, I plot pivotal support and resistance action areas that are derived from multi-time frame market auction theory and volume profile analysis. This allows me to avoid engaging the market in areas of heavy rotation or shop. Support and resistance action areas have three purposes. They can act as entry levels in mean reversion setups, which is the majority of the time. In directional or trending environments, the action areas act to confirm momentum breaks and lastly, they can be used as targets for trades. I also note additional key data from the prior day price action. These levels are often important to define the buyers for the day. The previous volume point of control, the highest volume price from the previous day. This is where buyers and sellers perceive the price to be fair value for that session. I confirm the current market context. This lets us identify the dominant side of the market in the overnight session referred to as the globe X session, and then on a one to three day time horizon, a one to three week time horizon, and a one to three month time horizon. There are times when neither side is dominant and it's important to assess how the cash session develops. I also highlight quantitative probability plays based on where the cash or regular trading hours session opens in relation to the prior days, either above or below or within the range. These give key levels and the probability of price testing these levels over an extended data set. This can prove useful for trade entry, exit, and trade management. Lastly, I note volatility or range analysis as this helps to inform the current market context. Is the market in balance in relation to current volatility? Equally, we can confirm the market out of balance and this can inform buyers for the trading session ahead. It also helps to inform trade execution and trade management. What I want to do now is take you through a few examples of how the combination of the action areas, market internals, and data deliver an edge in the market. Let's pull up an example day here. Like I say, the sport resistance levels are provided in advance of the cash session opening. You have these before the New York Stock Exchange opens at 2.30 UK time. On this day, what I also provide is a short video in which I highlight the high probability setups I'm looking at. From this day, I highlighted that because of the market context we were bearish on the overnight session, neutral on the daytime frame. What I was looking for here was a test and reversal from the initial resistance. The markets opened up here. We traded into the initial resistance zone. Note that we had negative internals. As we traded up into that resistance zone, the market under the hood was rolling over. We had a negative tick distribution. We had a negative advance decline line and we had a negative breath. This was an opportunity to get short into the resistance zone. Our target is the GlobeX session lows. GlobeX session is highlighted by this blue line here. We traded down into that area for an 18.5 point trade to the downside. Another session where we opened up, this session we were bearish and neutral to bearish on the near term time frames, but we were bullish on the longer term time frames. Price action at the open here I highlighted was very strong, responsive buying, strong volume in the bid. The trade here was to play the breakout of the resistance and notice we had these positive internals. That was telling us that the underlying activity in the market was bid and we got the trade through the resistance zone, primary resistance zone up into the secondary resistance zone for a 10 point target. Next set up here we were looking bearish on both the GlobeX and the near term bias was bearish as well. The primary support which was the high probability trade that I highlighted in the pre-market analysis. We had negative internals, negative tick distribution. We actually traded down for a 28 point profit there into the third support zone as highlighted in the pre-market analysis. Another session here. Primary trade here was to play because we were bearish to neutral in the near term time frames. The weak market internals into primary resistance set short positions which was the trade that we got and we eventually traded down into the target zone for a 16 point profit and again based on these negative market internals as we traded into that resistance zone. Another set up here we were bearish and looking for a pullback to fade primary resistance. We traded into that area, we had negative internals and so that was our signal to get short traded down, there was actually 30 to 40 points of profit opportunity with that set up. So let's now, I'll just jump into the actual today's chart and you can see this was yesterday's set up, the primary high probability trade. I highlighted in the pre-market video was to play for a break of primary resistance based on bullish internals. So we traded up into the primary resistance, internals improving, tick distribution getting positive and so the trade was long through the resistance zone up into secondary resistance. That was a 10 point trading opportunity there. This was Tuesday, the set up we were looking for here. Again primary high probability play highlighted in the pre-market analysis was to go long through 41.91 based on broad market strength. So we had really positive internals here and we got the break through 41.91 and the target was secondary resistance up to 42.14 and that gave 23 points of profit as per the pre-market trade plan. Now I won't keep going back over and over these examples because I'm not a big fan of hindsight, hindsight trading so to speak. So what I'd like to do actually now is show you what the set up I'm looking at for today's cash session. So once I finish this webinar I'll be recording a separate video which I put into our futures group. I'll tell you a little bit more about that in a minute but what I'm looking for today, based on the current set up, we're bullish on all our time frames. So what the trade I will be looking for today will be a break of 42.5050 which is primary resistance and I'll initially be targeting a move up to 42.58. If I don't get an exhaustion signal there so when I refer to exhaustion that's a high tick of day with a high price coming at the same time and a potential volume spike, I'll hold the trade there to take us through 42.60 and then I'll be watching for a move up into 42.76. Now equally if we fail below the 42.25 then I'll be watching for exhaustion signals on the long side into this support zone here at 42.16 to set long positions. Again the initial target then will be the globe X lows which would be 42.31. Through there then I will target the globe X session high which is currently 42.48. And again I managed the trades by keeping an eye on the internals making sure that we're not getting any exhaustion signals so that new high in price for the day and a new high tick and a volume spike as long as I don't get that I'm happy to hold the trades and run them to the profit targets. So that's what I'm looking at for today's session. The only time I would consider getting short this market because of the bullish context that we've got will be on a break of the 42.02. If we trade through there and we have very weak market internals so negative breadth, negative AD line and a negative tick distribution all heading to the downside then I'll be looking to be short through the 42.02 and my initial target on that downside trade will be 41.87. So those are the trades that I'm looking at the three high probability plays I see developing for today's cash session. Like I say, I record a pre-market video I'm going to show you now the tick mill futures group where I highlight the setups for the day ahead you get a recording every day before the cash session opens I also provide other trading information for each session I update the trades as they develop in real time in the strategy group and you can get a two week free trial to the strategy group simply by registering an account with tick mill that you don't need to fund it during the trial period so you can get two weeks of seeing my trade analysis on a daily basis seeing how the market plays out versus my pre-market analysis and you can get I also post additional information from major investment banks giving you further market context every day so that you're constantly getting a feed of institutional insights along with my pre-market analysis so that you can then go away and execute these trades on your own so I strongly suggest that for all of you here today that you take advantage of the two week free trial what I'm actually going to do is I'm going to post the link for that into the chat and so you can actually request access here we go can you also see that link that I've just posted in the chat there for the futures group you just type a Y in the chat box if you can confirm that you can see that link it should be there for you all and all you do is request access and I will add you to the group and you'll get two weeks of my pre-market trade analysis I tend to deliver the analysis before 2pm UK time so you have plenty of time to review the information and set up for the trading session ahead like I say cash session begins at 230 UK time so that gives you plenty of time to set your trade levels versus my analysis OK well that concludes my presentation today I hope that's given you an overview of the contract the advantages of trading this contract using these market internals and also you can see how you can consistently reap profits once you understand how these internals work and you familiarise yourself with them so at this point I will open the floor up for any questions so if you want to type the question into the chat box or you want to unmute your mic I'm happy to do that we also have a Q&A box I think as well if you want to type your question in there so I can cover these off if you have any equally if you don't have a question if you type an N into the chat box so that I know we're all on the same page here and I can wrap this session up yeah I do give advice on trade management Tim let me just show you here so when I'm in a position I update the trading information through like you can see here yesterday so I update the trades update how I'm managing my position I also give in this volatility data I also suggest how you should use your how you should use stops based on volatility so if we're trading up into a reversion trade so if I'm looking to get short this resistance zone 42 4245 to 4250 I suggest a five point stop given the current market volatility beyond 4255 stop equally if I'm playing a continuation so if I'm looking to get long through the resistance based on the current market context then I use something called a continuation stop and that again is based on current market volatility and it's statistically driven and that's currently 7.5 points so I certainly do give trading parameters I'm very specific about the levels that I'm looking to to enter and exit trades and I also suggest how you manage your stops and then when in terms of the actual trade management like I said what I'm looking for to exit my positions or more often than not I'm either going to let them trade to the target or if I get an exhaustion signal that suggests that there's a potential for a reversal against my current position I will just cut the trade with whatever profits I have at the time that we get an exhaustion signal but like I say I do update the positions in the strategy group so you can always see pretty much how I am managing my trades so that makes sense team well I guess this is the beauty of it really it seems like there are a lot of indicators but really what all you're doing is if we're above the zero line for each indicator so for the tick, the advanced client line and breath if the moving average is above the zero line that suggests that we're in a strong market environment if it's below the zero line that suggests we're in a weak market environment so for example if today we get down into this support zone that I just talked about 42.02 level what I'd be looking for if I'm going to sell the break there what I want to see is the tick distribution to the tick moving average trending down I want to see the advanced decline moving average trending down and below zero and I want to see the breath trending down and below zero does that make sense it's more of a confirmation than it is that you need to you need to be watching every iteration it's really a confirmation that you're getting from these internals that allow you to play these trades with confidence so once you've watched these for a few sessions and you get familiar with the actual distribution then really there isn't a huge like all the great trading strategies they're pretty much principled upon this is a very simple premises and what we're simply doing here is we're using the internals to guide as to whether we want to play a momentum trade or a version trade this additional information here just helps in terms of where we are so for example today we're opening within range we're opening within the prior days range currently we are anyway and so what does that mean 73% chance that we test the midpoint so the midpoint is running here this is an automatic indicator that attracts the midpoint so high probability that if we open within yesterday's range we're going to test the midpoint before extending higher and so you can use that information because if we test the midpoint and then we break the prior high that can give you an opportunity to get in on the long side in advance of breaking the resistance I'd be looking to add to my position so this information again once you familiar with it and once you understand are we opening within the prior days range are we opening above it or are we opening below it then it's very simple to use that information the most important information really is this market context because that gives you the setup for the day the high probability setup for the day and then you're just looking for the internals to confirm that good stuff okay if there aren't any other questions I'll wrap this one up here and I really do encourage you all to request access to the Facebook strategy group the link is in the chat and I hope to see you all in there okay thanks very much for your time everyone and I hope this helps