How To Use Renko Charts To Trade E-Mini S&P 500 Futures

The e-mini S&P 500 futures contracts are one of the most popular futures trading instruments. With small capital, the e-mini S&P 500 futures allow you to control a significant amount in the S&P 500. Besides the capital requirements, another added benefit of trading E-mini S&P 500 futures contract is that because the instrument tracks nearly 500 stocks in the US, it can be used as a general gauge of the markets.

Many futures traders will know that the E-mini S&P 500 futures can be technical in trading, meaning that technical analysis will find trading the E-mini S&P 500 futures quite easy as compared to trading stocks.

In this article we take a look at how you can trade the E-mini S&P 500 futures using Renko charts. But before we go into the details, there are a few fundamental ground rules to follow and something which every trader should understand.

E-mini S&P500 futures contract specifications

It goes without saying that using a fixed Renko box size is the most ideal way to start trading with Renko charts. This ensures that whether you look at the charts today, or one week later, the trend lines and horizontal support/resistance levels that you draw remain the same.

To use the right Renko box size to trade E-mini S&P500 futures you first need to look at the tick size. We know that a 0.25 box size is equal to $12.50. Therefore, for a 1 point (1 point = 0.25 ticks x 4) Renko box size for E-mini S&P500 futures, it is equivalent to $50, or $100 if you use a 2 point (0.25 x 8).

The base time frame (the time frame from which the Renko charts are generated) also plays a role. For example, you could look at a 1-minute base chart which is the closest you can get to a tick chart, or use a more general 5, 15-minute or 1 hour time frame of the base chart.

There is no right setting and it all comes down to your capital and trade management. For example, a trader with just $1000 capital will need to put up $400 in margin. This leaves trader with a balance of $600 to cover the maintenance margin. If the trader trades 1 contract which requires $400 margin, then the remaining $600 in balance is equal to 48 points or 192 ticks.

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I/We do not have any positions in the above mentioned instrument.

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