Pattern Trapper E-mini Discussion

Question - Can I use the S&P; Commentary to trade the E-Mini?

Answer - Yes . . . Absolutely!

It is often assumed that a separate data series is required to derive Pattern Signals and Support & Resistance levels for the trading of E-Mini contracts. This is an incorrect assumption. In fact, use of larger contract data is preferred - and for a number of reasons.

1) E-Mini trading is largely motivated by and driven off of the larger contract. It is much more likely that information derived from the large contract will have greater influence than that derived from the E-Mini.

2) The Pivot System of Support and Resistance (sometimes referred to as the "Pit" Pivot System) was originally developed and is extensively used by pit traders. Its effectiveness is largely due to their influence. E-Mini pit trading does not exist - hence, a separate set of numbers is not necessary.

3) The "fudge factor" involved in the appropriate use of Pivot System S&R; levels would normally negate any potential advantage in deriving a separate set of numbers. Their use does not involve exactitude. The Pattern Trapper methodology employs an interpretation of price behavior NEAR these levels, it is not necessary that the behavior occurs EXACTLY at these levels.

4) Any price discrepancies between the two contracts are largely due to differences in tick size or trade completion mechanics rather than any difference in underlying market beliefs.

As an example of the negligible price differences please refer to the chart of an average trading day depicted below. The yellow thick bars represent the large contract. The thin black bars represent the E-Mini. Although there are often some minor differences, there is nothing that would significantly alter Pattern Signals generation or Pivot System S&R; levels for the following day of trading.