This article on Micro Nasdaq Futures is the opinion of Optimus Futures.
Did you know that technology stocks significantly outperformed the rest of the market in the last decade?
A few stats before we start:
Over the last 5 years, the S&P 500 returned 104.36% In the last decade, 290.10%.
The Nasdaq 100 returned during that same time period 215.92% and 612.19%.
(Past performance is not indicative of future results)
While you could go out and buy the Nasdaq 100 ETFs or individual stocks, there are more capital-efficient ways, in our opinion, to trade and invest in big tech.
A way that uses leverage but on a smaller, more flexible scale for retail traders.
Micro E-Mini Nasdaq 100 Futures.
In this article, we’ll cover what you need to know about Micro E-mini Nasdaq 100 Futures including some strategies along with a step-by-step guide to get you started.
What Are Micro E-mini Nasdaq-100 Futures?
The Nasdaq 100 index is often referred to as the ‘tech’ index because it’s largely made up of big-cap technology companies.
Take a look at the top 10 stocks (9 companies because Google has two types of share classes) that make up the Nasdaq 100:
Like the S&P 500, the Nasdaq 100 is a market capitalization-weighted index. That means larger companies influence the index more than smaller ones.
In this case, Apple, Microsoft, Amazon, and Google account for 37.24% of the index’s total weighting.
Micro Emini Nasdaq-100 Futures are futures contracts tied to the value of the Nasdaq 100 index.
Like regular futures contracts, micro contracts offer significant leverage, allowing traders to deploy capital effectively.
However, each micro contract controls 1/10th the notional value of a regular contract, making them flexible for retail traders.
Why Trade Micro E-mini Nasdaq-100 Futures?
Micro E-mini Nasdaq-100 Futures create significant benefits over ETFs and individual stocks, including:
- Leverage: Using leverage allows a trader to put down less money to control more assets letting them deploy capital more economically.
- Smaller Size: Normal Nasdaq-100 E-Mini contracts cover $5 per tick or $20 per $1 move in the index. Micro contracts use the same capital leverage ratio but with $0.50 per tick or $2 per $1 move in the index. Traders with smaller accounts can use these to better optimize their positions.
- Liquidity: Micro E-mini Nasdaq-100 Futures contracts maintain tight spreads during the pit session and fairly narrow spreads during the overnight session.
- Bi-Directional: Stocks can easily be bought but are harder to short. Trading futures is the same simple process in both directions.
What Drives Micro Nasdaq Futures Prices Movement & Volatility?
Nasdaq Futures, whether regular or micro, are driven by a unique set of influences.
You see, the Nasdaq 100 is narrower than the S&P 500 but broader than the Dow Jones Industrials. Threading the needle like this means that sometimes broader market pictures drive price change and sometimes it’s more company and sector-specific.
For example. Across the board, market selloffs tend to send all stocks lower. When Covid hit, virtually every stock cratered at the same time.
However, changes in semiconductor supply chains are more likely to create volatility in the Nasdaq 100 than in the S&P 500 due to its weight.
Micro E-mini Nasdaq-100 Futures Contract Specs
Here are some of the basic specifications you need to be aware of for the E-mini Nasdaq-100 Futures:
- Symbol: MNQ
- Trading Hours: 6:00 PM EST Sunday – 5:00 PM EST Friday with a break every day from 5:00 – 6:00 PM
- Tick Size: 0.25 index points
- Tick Value: $0.50 per tick
- Expirations: Quarterly March, June, September, & December. Expirations are listed out for 5 consecutive quarters.
- Settlement Type: Cash
Trading Strategies for the Micro Nasdaq Futures Market
Do a quick Google search for trading strategies, and you’ll find thousands of pages.
While our list isn’t exhaustive by any means, we wanted to give three of our best ideas to help get the juices flowing.
Support & Resistance Levels
Support and resistance trading looks for areas where price will likely halt its current trend, sometimes reversing entirely.
Using support and resistance levels is like identifying traffic lights on a road. Sometimes they’re green, other times yellow, and sometimes red. As you approach, there’s no guarantee that you’ll need to stop. But the odds are better there than in a long stretch of the open road.
You can see how this works in a chart of the Micro E-Mini Nasdaq-100 Futures. The yellow circles identify important levels where price pivoted and then changed direction. When price approached that spot again, as shown in the blue circles, it had trouble breaking through.
If you want confirmation or an additional source, you can access dynamic support and resistance levels through the Optimus News platform (free for customers). Optimus News’ Dynamic Support and Resistance Levels is able to automatically draw support and resistance for any instrument (levels prices based on spot prices and not futures prices). Levels are generated four times a day which allows our customers to have real-time, up-to-date analysis on price movements. Here is a quick overview in this video.
Mean Reversion
Mean reversion strategies are like rubber bands. When the price moves too far, you set up a trade in the opposite direction, assuming it will move back towards the moving averages.
Bollinger Bands are a great tool for this type of trade. They create a two standard deviation price range based on a set number of periods and price (most people use closing prints and 20 periods). Using these bands as boundaries (light blue lines below), traders position themselves in the opposite direction.
You can see how this might play out in a chart of the micro Nasdaq futures below.
Footprint Trading
One of the newest analytical methods of the futures markets, footprint trading combines volume and price to create a distribution profile based on a selected time aggregation period. Typically, it gives a price range where 70% of the volume occurred.
What’s cool is how this marries support and resistance along with mean reversion trading.
The idea is that futures markets will shy away from the extremes of the heavy volume zones, with their main focus at the area with the most volume known as the ‘point of control.’
Here’s what a basic profile looks like with a heatmap aggregating 30-minute periods over one day.
You might analyze this as follows.
The range created in the Nasdaq E-Micro Futures contract is 14,540 – 14,570, with a point of control (POC) at 14,557.50.
Any of these lines can act as support or resistance when revisited.
Now, let’s see how that might play out in a longer timeframe.
This chart shows how various points of control (white lines) and value area boundaries (blue lines) acted as support and resistance.
By using prudent risk management tools, you don’t need to get the trade to work every time, just enough times with big enough rewards to outweigh the losses.
What Margin Is Required to Trade the Nasdaq Micro Futures?
Optimus Futures offers day trading margins on MNQ for as little as $50. However, the initial margin (the amount of capital necessary to enter the trade) and the maintenance margin (the amount of capital necessary to hold onto the trade) changes based on the clearing firm you choose.
That’s why Optimus Futures offers traders an opportunity to select the right combination of data feed and executions along with their clearing firm. (Aggressive Day Trading Margins Increase Risk and Reward Substantially).
How do I trade Micro E-mini Nasdaq futures at Optimus Futures?
Micro Nasdaq index futures are available on the Optimus Flow trading platform from Optimus Futures and our selection of 3rd party apps.
The Optimus Flow platform allows users to customize their layout with an intuitive feel and window snap features. Traders can also select from default layouts.
Within the default layout, you’ll gain access to:
- Watchlists to keep track of your favorite symbols
- In-depth charting with a host of customizable indicators
- Depth of market (DOM)
- Trade blotter
- Account information.
To get going, we’ll work through basic tabs you can access at the top left of your platform.
Start by entering the symbol search box on any of your analytical tools. We’ll use the watchlist for this example.
We want to go with the front-month for most traders, which is the most active and current.
What’s really neat is that users can place trades directly in the chart, DOM, or order entry window.
Let’s walk through a step by step on how you would analyze and place a theoretical order.
Charting – Select the Cht icon from the top left to open up a chart screen. Enter a symbol such as MNQ to bring up the front month chart for the Micro Nasdaq. The platform will default to the most active contract. You can customize the chart as desired.
Analyzing: Add studies such as moving averages, Fibonacci retracement levels, Bollinger Bands, or others. Feel free to use other tools to support your analysis, like Footprint (TPO) charts.
Placing Orders: Using the Order Entry screen, which is accessed through the OE icon, you can place a basic order using the symbol, order type, time in force, side, quantity, price, and even add in a comment.
Hotkey trading is also available from both the chart and DOM of Optimus Flow.
To utilize hotkey trading, simply activate the “hotkey trading” button on the top right of your chart or DOM and click on your pre-programmed hotkeys on your keyboard to swiftly enter orders with one click.
Ready To Start Trading Micro Nasdaq Futures?
You don’t have to go full bore out of the gate.
In fact, we encourage you to get a feel for things first.
That’s why you can open a free Optimus Flow paper trading account and begin trading Micro Nasdaq Futures with live market data.
Optimus Flow is our completely free trading platform and also includes a fully integrated automated trading journal so you can analyze and learn from your trading history.
Want to learn even more about Micro Futures and all they have to offer?
Click here to read more about these products.
Trading futures and options involve substantial risk of loss and are not suitable for all investors. Past performance is not necessarily indicative of future results. You should use ONLY risk capital when trading Futures. Please consider if Futures trading is suitable for your financial situation.
CME Micro contracts generally have a value and margin requirement that is one-tenth (10%) of the corresponding regular contract. The cost of trading Micro contracts is higher than regular contracts when measured as a percentage. Commission rates are not always one-tenth of the rate for regular contracts. Exchange and NFA fees are not proportionately reduced. Frequent trading of Micro contracts further compounds the cost disparity. Futures transactions are leveraged, and a relatively small market movement will have a proportionately larger impact on deposited funds. This may result in frequent and substantial margin calls or account deficits that the owner is required to cover by depositing additional funds. If you fail to meet any margin requirement, your position may be liquidated, and you will be responsible for any resulting loss.
