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Trading mini euro ( E7) or micro euro (M6E) currency futures ???
Yes, you're right, the bid/ask spread can change 100 times without ever leading to a trade. What your BetterRenko chart showed was that M6E can't be plotted on a low time frame (like 4 pips), because, like you said, it doesn't trade on every price. What the bid/ask analysis shows is that, if you choose to trade the M6E at the best bid or best ask price, you can expect on average to experience a slippage cost of 2.30 ticks. Both are related but not the same; one has to do with price action (more trades giving a 'cleaner' chart) while the other has to do with the trading cost.
I doubt that the conclusion of the analysis is that there is an 'negligible' slippage during the most active time. Honestly, I don't know what the conclusion is, since that's related to your trading method. If you trade on a 4 or 5 pip chart, the slippage will probably take away all your profitability (if not more). If you trader for a longer time frame, like a 15 to 20 pip chart, the slippage is probably acceptable, since it's a lesser percentage of the overall move you're aiming for.
Conclusion:
Trade M6E if you have a small account (under $25k), and/or you are not already consistently (months/years) profitable.
In other words, if you are a beginner - M6E is great.
If you have small account - M6E is great.
If you are an experienced trader - M6E is not great.
If you have a large account - M6E is not great.
Yes, you clearly are paying a price for the convenience of less risk, in terms of the spread. There is a cost associated with everything, nothing is free in trading.
thats an interesting spread analysis and fits with my observation. But it doesnt tell the whole story. At times on Friday ( after the employment news, so in good liquid conditons) I observed price difference of up to 6 or 7 ticks between m6e and 6e as m6e was static while 6e moves. Then there will be a sudden move on m6e to close that difference.
So although it appears to be a marginally more fluid/tradeable instrument than E7...it is unacceptable for my purposes on a low timeframe with stops less than 20 pips. I have concluded that I would be as well or better off using the spot forex Euro through a good MT4 broker because spreads are less than 2 pips and there is no commisssion.
Its quite feasible ( but clumsy) to use NT for charting and MT4 for execution.
Woke up and couldn't go back to sleep and somehow started thinking about this thread and so decided to put a trade on the M6E just to see how I would fill. Put a stop limit with the stop at 1.2725 with the limit at 1.2724, and actually filled at 1.2725. It surprised me, but I've never really used stop limits, so not sure if that is normal or not. Target was at 1.2705 and price went down and bounced off 1.2705, but my target still filled. Only put on 1 trade, but seems like BM is right, as long as market isn't moving too fast, maybe because of the low volume they need the orders so it is likely that your limits will be filled against everyone else's markets.
The issue is your stop: the market making and the bid/ask spread activity can simply skip your stop and you will never know where/when you will be filled while that bid/ask are are moving along the path with no fills, unless you supervise your own stops and decide eventually to manually hit/lift the market to close your position.
I wanted to reinforce that this contract is totally fine to trade if you're trading during the Euro's busy times at the CME. The 6E contract itself always runs about 3 or 4 ticks of spread between the real liquidity during busy times - the DOM always has double digit bid/offer inside this range and triple digit bid/offer outside it. The M6E behaves the same with single digit and double digit bid/offer respectively.
If you TRY to get a poor fill (i.e., you use market orders), you can make your fill worse with the M6E than you can with the 6E but if you're using limit orders and are just slightly disciplined and patient, you can get essentially the same fills as you would in the 6E most of the time. You may pay 3 or 4 ticks ($3-4) over the course of 6 trades using the M6E as opposed to the 6E - small price to pay if you want to daytrade with reasonable leverage and your account size is less than $25k.
Just wanted to encourage beginners to use this contract if you have less than $25k - you absolutely do not need to have 20+ tick targets or anything like that to be profitable. Any strategy a retail trader would be using on the 6E can be traded profitably on the M6E and you will save yourself a lot of pain during the learning curve.
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
I gave it a try as well with LIMIT and STOP LIMIT orders and it seems that they get filled regardless the advertised volume is low. This instrument gives me a possibility to actually learn to manage the trade (up to 3 different targets).
The disadvantage is that SL can be easily skipped and filled at much worse price (if LAST is used). I have to watch very carefully for the spikes. Watching the BID / ASK or using either bid or ask as bar data helps.
I wish it would lag - that would be easy money - as it always catches up. All you would have to do is get in on the lag, & out when it's caught up. Talk about an edge . . !
In reality, I've never seen a lag at all. Ever. The last price lags, just because there are fewer transactions than in the 6E. All secondary contracts behave this way. That doesn't mean that you can get in at the last price & make your easy-lag-money. Nope, sorry, you will find that the actual price at which you can get in/out of the market (the Bid/Ask) will be where the 6E is. At all times.
Why does any other price matter? I only want to know what I can get in or out at.
If you must trade on stops, then just set your platform to execute your order when the bid/ask price reaches your level - versus the last price.
This is very easy to do, and does not require code on most platforms.
Once that issue is out of the way, M6E trading is identical to that of the 6E, except that you only have 1/10th of the risk and 1 or 2 ticks more spread.
I personally use 6E, E7, and M6E interchangeably - with no concerns other than how large of a bet-size I am going to need in order to execute the idea I'm looking at.
Sometimes you need more room, and having different contract sizes allows you to have it.
I wish all contracts had these sizes - it's kind of a luxury, really.
P.S.: Regarding spread, remember that you're dropping $12.50 in spread (minimum) per 6E contract - even though it is "tighter." Yet your total gross dollar spread in M6E will probably be $2.50-$3.75 per each - even though it is "wider." Does that make the M6E spread "untradeable?"
"The business model for forex trading is to burn the customer and then find another one," said Larry Harris, a USC professor and the former chief economist at the Securities and Exchange Commission.
"Your dealer is your trading partner, which is a direct conflict of interest."
Gain ended up making an average of $2,913 from every active trader it had last year, even though the average customer account contained only $3,000, according to the company's financial data.
FXCM made $2,641 for every active trader, while the average customer had $3,658.
Keep in mind that the firms mentioned in this article are amongst the most reputable in the business. It only goes downhill from there (waay downhill).
MT4 has been proven over & over to have dealer plug-ins, so that your counterparty (broker) can manipulate the data to enhance their profitability.
At least with currency futures, it's YOU losing your own money in an open market on a regulated exchange.
The playing field is never level, but in futures, it's the least slanted against you.
