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Micro E-mini Dow Jones Futures Trading Strategy | Contract Specifications

Last Updated on 11 September, 2023 by Samuelsson

Less capital intensive than the E-mini Dow Jones futures marketsthe Micro E-mini Dow Jones futures make it easier for traders with little capital to participate in the Dow Jones futures. The contract offers a low-cost entry point for traders looking to gain exposure in U.S. blue-chip stocks.

With over 11.25 million contracts traded in the first 30 days of trading, the micro e-mini futures seemed to have gained popularity right from the start. With the popularity of the Dow Jones Index, the Micro E-mini Dow Jones Futures are one of the most-traded among e-minis.

Micro E-mini Dow Jones Futures Contract Specifications

The E-mini Dow Jones Industrial Average (DJIA) futures contract is a cash-settled futures contract based on the Dow Jones Industrial Average (DJIA), and is one of the most popular and liquid futures contracts traded on the CME Globex exchange. The E-mini Dow Jones Industrial Average (DJIA) futures contract is a great way to gain exposure to the US stock market and diversify your portfolio.

Product Name: E-mini Dow Jones Industrial Average (DJIA) Futures

Exchange: CME Globex

Trading Hours: Sunday to Friday 5:00 p.m. to 4:00 p.m. Central Time (CT), with a 45-minute break each day beginning at 4:00 p.m. CT

Contract Size: One E-mini Dow Jones Industrial Average (DJIA) futures contract is equal to 5 Dow Jones Industrial Average (DJIA) index points.

Price Quote: U.S. dollars and cents per index point

Tick Size: 0.25 index points

Minimum Price Movement: $12.50 per contract

Contract Months: Serial months plus the nearest two March, June, September, and December cycle months

Last Trading Day: Trading terminates on the business day prior to the third Friday of the contract month

Final Settlement: P.M. settlement price of the Dow Jones Industrial Average (DJIA) on the third Friday of the contract month

Position Limits: 5,000 contracts per account

Margin Requirements: Initial – $2,450 per contract, Maintenance – $2,450 per contract

Daily Price Limit: N/A

Delivery: Cash settlement

Settlement Method: The settlement price is based on the P.M. settlement price of the Dow Jones Industrial Average (DJIA) on the third Friday of the contract month.

Termination of Trading: Trading terminates on the business day prior to the third Friday of the contract month.

Trading Fees: See the CME Group Fee Schedule for fees.

Micro E-mini Dow Jones Futures Contract Specifications

What is the Dow Jones Index?

The Dow Jones Index, often called the Dow Jones Industrial Average (DJIA) or simply the Dow, is a  U.S. stock market index. It measures the performance of 30 blue-chip companies listed on the New York Stock Exchange (NYSE) and the NASDAQ. Being a price-weighted index, component stocks with higher share prices are given a greater weighting.

It is the second-oldest U.S. market index after the Dow Jones Transportation Average and, certainly, one of the most-watched indexes in the world. The DJIA was first calculated in May 1896 by Charles Dow and Edward Jones, and the index was named after them.

The index is presently calculated and maintained by S&P Dow Jones Indices LLB. Despite the DJIA’s popularity, investors only see it as an index of blue-chip companies in the US and not a true broad market index.

Micro E-mini Dow Jones Trading Strategies

Trading Strategy
 Trading Strategy

Many of those who choose to trade the micro futures contracts, do so because they lack the capital that’s required to trade the bigger contracts. 

Some of the best trading strategy types that work well in market indexes and equities, are mean reversion strategies. These are trading strategies that attempt to catch pullbacks in the market, and profit from the reversal of the short term trend that tends to follow. 

Trading Strategies

Breakout trading strategies also tend to do quite well in these markets, if the right setups are used. 

If you like to get inspiration for your own trading strategies, we really recommend that you take a closer look at our edge membership. As a member you get new, fresh edges delivered right to your inbox each month!

1. Momentum Trading: Momentum trading is a strategy that involves buying assets that show signs of increasing in value and selling assets that appear to be losing value. This strategy can be applied to the Micro E-mini Dow Jones by monitoring the index for any significant price movements. If the index increases in value, traders can buy Micro E-mini Dow Jones futures contracts to take advantage of the momentum. Conversely, if the index drops in value, traders can sell the contracts to capitalize on the downward momentum.

2. Trend Trading: Trend trading is a strategy that involves following the predominant direction of the market. Traders can use technical analysis to identify trends in the Micro E-mini Dow Jones index, such as support and resistance levels, moving averages, and other indicators. If the index is trending in an upward direction, traders can buy Micro E-mini Dow Jones futures contracts. Conversely, if the index is trending in a downward direction, traders can sell the contracts to capitalize on the downward trend.

3. Contrarian Trading: Contrarian trading is a strategy that involves taking a position opposite of the majority of the market. Traders can use market sentiment analysis to identify when the majority of the market is buying or selling the Micro E-mini Dow Jones index. If the majority of the market is buying the index, traders can take a contrarian approach and sell the contracts to capitalize on the expected downward movement. Conversely, if the majority of the market is selling the index, traders can take a contrarian approach and buy the contracts to capitalize on the expected upward movement.

What are Micro E-mini Dow Jones futures?

The Micro E-mini Dow Jones futures are a type of electronically traded Dow Jones Index futures whose value is one-tenth of the E-mini Dow Jones futures. As with the E-mini Dow Jones futures, they are equity index futures in which the underlying asset is the Dow Jones Index.

Launched on May 6, 2019, on the Chicago Merantile Exchange Globex platform, the Micro E-mini Dow Jones futures were created to offer small traders exposure to the Dow Jones Index futures at a much lower cost than the already existing e-mini futures contracts. The contracts are financially settled.

Micro contracts are also leveraged, so a trader only needs to deposit a portion of the total worth of the contract, known as the margin, to be able to trade the contract. The margin required to maintain one contract of the Micro E-mini Dow Jones futures is just $550.

The contract is marked to market, so at the end of every trading day, the clearinghouse of the exchange credit/debit the traders’ accounts with the profits or losses made on that day. Traders whose accounts are falling below the maintenance margin are required to top up their accounts to be able to keep their contracts.

All that is needed to trade the contract is to create an account with the exchange through a futures broker and deposit the required margin. Be cautious about futures trading though — while you can easily make money, you can also lose more than you invested.

Micro E-mini Dow Jones futures Seasonality

The micro E-mini Dow Jones futures are a popular futures contract with a high level of liquidity. The contract is traded on the CME Globex electronic trading platform. The micro E-mini Dow Jones futures offer exposure to the Dow Jones Industrial Average (DJIA), and provide traders with a way to gain exposure to the U.S. equity market.

The micro E-mini Dow Jones futures contract has a seasonal trading pattern. During the months of May to October, the contract tends to have a bullish bias. During these months, the contract tends to be more volatile and the prices tend to increase. This is due to the fact that this is the period of time when the U.S. stock market has historically performed the best.

The months of November to April tend to have a bearish bias for the micro E-mini Dow Jones futures. During these months, the contract tends to be less volatile and the prices tend to decline. This is due to the fact that this is the period of time when the U.S. stock market has historically performed the worst.

It is important to note that the seasonal trading pattern for the micro E-mini Dow Jones futures is not a guarantee of future performance. While the contract may have a historical seasonal trading pattern, this does not guarantee that the contract will continue to follow the same pattern in the future. Traders should always use caution when trading the micro E-mini Dow Jones futures contract, and should always use proper risk management when trading the contract.

Overall, the micro E-mini Dow Jones futures contract has a distinct seasonality. During the months of May to October, the contract tends to have a bullish bias, while during the months of November to April, the contract tends to have a bearish bias. Traders should keep this seasonality in mind when trading the contract and use proper risk management techniques.

Why trade Micro E-mini Dow Jones futures

Why trade Micro E-mini Dow Jones futures
 Why trade Micro E-mini Dow Jones futures

The reasons for trading the Micro E-mini Dow Jones futures are many, and they include the following:

Hedging: Individual investors can use the Micro E-mini Dow Jones futures to hedge their exposure in the U.S. stock market, especially for blue-chip stocks.

Portfolio diversification: Small investors can use the contract to gain exposure to U.S. blue-chip stocks as it represents a diversified stock portfolio at a lower cost.

Speculation: The majority of the traders in the futures market are there for speculative reasons, and the Micro E-mini Dow Jones futures have good liquidity and volatility for speculative trading.

The benefits of Micro E-mini Dow Jones contracts over the mini version

Compared to the E-mini contracts, these are some of the benefits of trading the Micro E-mini Dow Jones contracts:

Capital efficiency: The maintenance margin required for carrying the Micro E-mini Dow Jones futures contract is $550 compared to the $5,500 required for the E-mini Dow Jones futures. In addition, the tick value for the micro contract is much lower.

Ease of diversification: The contracts are less capital intensive, so traders may have spare cash to trade other assets at the same time.

Emotional control: Emotional control is very important in trading and is often dependent on the amount at risk. The lower margins and tick size involved in micro contracts helps traders to manage their emotions better, especially when carrying overnight trades.

How does the Micro E-mini Dow Jones futures trade?

The Micro E-mini Dow Jones futures are offered on the Chicago Mercantile Exchange (CME) Group’s Globex electronic trading platform. Trading is open Sunday to Friday from 6:00 p.m. to 5:00 p.m ET the next day.

One contract of Dow Jones E-mini futures (MYM) settles for $0.50 times the current value of the Dow Jones Index. The minimum price fluctuation is 1.00 index point, which is equal to $0.50 per contract. There are quarterly contracts (March, June, September, and December) listed for four consecutive quarters.

At expiration, the contract is settled with cash. The last trading day is the third Friday of the contract month, and trading terminates at 9:30 a.m. ET.

Trading Strategies

The factors that affect Micro E-mini Dow Jones futures

Many factors can directly or indirectly affect the Micro E-mini Dow Jones futures:

Movement of the component stocks: Being a price-weighted index, the price movement of highly priced stocks tends to have more effects on the index than the lower-priced component stocks.

Trade policies: Changes in trade policies can affect stock prices, which, in turn, affects the index and the futures contract.

Political events: Geopolitical events, such as wars, elections, and referendums, can also affect stock prices and move the Dow Jones Index.

Interest rate changes: Changes in the Fed’s rates can have huge effects on stock prices and the value of the Dow.

Value of the U.S. dollars: A falling USD may drive stock prices up, causing the Dow to rise, while a rising USD can have the opposite effect on the Dow.

Conclusion

The Micro E-mini Dow Jones futures provide small traders with a cheap way to speculate on the direction of the DJIA. It also offers investors a way to hedge their exposure in blue-chip U.S. stocks. The contract can be traded on the CME’s Globex trading platform.

Here is our archive with articles about other tradeable futures markets.

Micro E-mini Dow Jones futures are a new product introduced by the Chicago Mercantile Exchange in 2019. These futures are a smaller, more affordable version of the popular E-mini Dow Jones Industrial Average futures contract. They offer the same exposure to the Dow Jones Industrial Average, at a lower cost and with smaller contract sizes.

The Micro E-mini Dow Jones futures contract is one-tenth the size of the E-mini Dow Jones contract, and it trades in increments of 0.25 index points. This makes it more affordable and accessible for individual traders, as well as for institutional investors with smaller trading accounts. The contract is also more liquid than the E-mini, with tighter bid/ask spreads and a lower margin requirement.

These contracts are ideal for investors who want exposure to the Dow Jones Industrial Average but don’t have the capital to purchase the larger E-mini contracts. They are also ideal for day traders and scalpers, who want to take advantage of the intra-day price movements of the index but don’t need the large positions of the E-mini.

The Micro E-mini Dow Jones futures are traded on the CME Globex electronic trading platform, and can be accessed through most major futures brokers. This makes them accessible to individual investors who have limited capital and trading experience.

The Micro E-mini Dow Jones futures offer investors a cost-effective and liquid way to access the Dow Jones Industrial Average. They are a great way for individual traders and investors to gain exposure to the index without the high costs associated with the larger E-mini contracts.

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