Home Business What Indicators To Use For The Valuation Of S&P 500 Futures?

What Indicators To Use For The Valuation Of S&P 500 Futures?

by Tracy Finke

Why trade in futures? Money is a survival imperative for humans as it helps purchase necessities. However, hard work at the office alone is not enough to have a peaceful life.

It would help if you contributed a specific portion of your earnings to investments that can increase your wealth. Speaking of investments, did you ever give a thought to trading? If not, it is time for you to learn and consider the benefits of futures contracts.

  • Liquid markets
  • Low execution costs and commissions
  • Faster money for speculators
  • Great for hedging and diversification
  • These contracts are paper investments
  • Short selling is a breeze

Liquid markets:

Source: financialexpress.com

Trading in futures contracts takes place daily, which is why the futures are liquid. The orders related to the market can be quickly placed due to the sellers’ and buyers’ all-time future market presence. Fats like E-mini S&P 500 are very liquid compared to the rest types. This indicates that there won’t be a drastic change in the prices, especially for contracts nearing maturity.

In short, a considerable portion can be smoothly cleared without any adverse impact linked to price. Another fact is that several future markets allow trading even after traditional hours. Stock index futures allow a trader to experience extended trading at midnight. Also, a few future markets encourage trading at any time, be it day or night read more on TradingWolf.

Low execution costs and commissions:

Commissions for future trades are lower when compared to other investment tools and are charged post-closing of a position. A trader may have to pay as low as 0.5 Percentage of the contract value. However, it is dependent on the service level of the broker. An online trading entity’s $5 per trade can be the lowest commission, whereas a full-service broker could charge $50 per side.

Faster money for speculators:

Source: cnbc.com

A good decision-making investor can make money faster due to the increased exposure compared to regular stocks. Another reason is that prices of futures in the market move faster in comparison to spot or cash markets. A point to be noted is that just as quick wins, the futures can also quickly attract losses. Do not worry; utilize the stop-loss orders to minimize the risks of such unattractive results.

Great for hedging and diversification:

Different risks can be managed by tools like futures. Most companies dealing with foreign trade utilize futures for the management of interest rate risk and foreign exchange risk. The risk management of the latter is done by locking the interest rate based on the anticipation of a drop in rates, while the former is made by price lock of commodities like crops, metal, and oil.

Derivatives and futures are known to improve the efficiency of the underlying market as they can lower the unpredictable costs of buying an asset. In simple words, it is a sensible decision to invest in S&P 500 Mini futures than choosing the replication of the index by buying every stock.

These contracts are paper investments:

Source: cnbc.com

The commodity/stock being traded is seldom delivered or exchanged. There is an exception; the good gets delivered on the expiration date when an individual tries to hedge due to a price rise. Trading in futures is usually considered speculative as the investors are more interested in making money than accepting the delivery of a stock or commodity. This signifies that it is not mandatory to hold shares to track. Futures need not necessarily be stored in a computer like shares whose profits must be distributed to their stakeholders by a company.

Short selling is a breeze:

A trader can avail short exposure on a unit through selling a futures contract, which is legal and can be applied to all types of contracts related to futures. On the other hand, an individual does not have the freedom to short sell stocks because different markets have different regulations. A margin account is essential to short sell stocks, which requires you to request the broker to lend stock whose owner is different. In simple words, if borrowing can be a stressful job, it is not possible to short sell stocks.

If you are an individual ready to invest in E-mini S&P 500 futures, here are the mini sp trading indicators to use for valuation:-

It is essential to use technical indicators to analyze the ES to discover trade opportunities through measuring volatility, volume, and price action. Market moves can be decided based on the technical analysis that provides insights.

Bollinger Bands:

The three lines of band-help measure volatility depending on the movements of the price of a futures contract. Widening and tightening of the lower and upper bands are generally used to signal potential market movements.

Exponential Moving Average:

Source: currency.com

This method, referred to as EMA, helps identify trend direction and potential sell/buy signals. The average 100 days being less than a 50-day EMA is a sign of a bullish trend and vice versa.


The word MACD stands for Moving Average Convergence Divergence. It is one of the most used technical indicators. This tool is often chosen for preparing an analysis report on changes in the market over time. This method is known to rely on three EMA’s for obtaining the results post the measurement of price momentum and plays an essential role in helping the investor to make a potential sell/buy.

Bottom line

From the above, it is evident that investing in future contracts is more beneficial than stocks because of the advantages mentioned above. Bollinger Bands, Exponential Moving Average and MACD, the three trade indicators, have been briefly explained for the benefit of a trader. Being said that, it is your responsibility to consider your financial goals before entering the stock market.