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System built on 6E but Trading on M6E
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System built on 6E but Trading on M6E

  #1 (permalink)
Elite Member
seoul, Korea
 
Futures Experience: Intermediate
Platform: Multicharts
Broker/Data: CQG, DTN IQfeed
Favorite Futures: YM 6E
 
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System built on 6E but Trading on M6E

I built an automated system on 6E but am considering executing on M6E due to lower risk. I have a smaller account and I have never brought a system live before. I was wondering if anyone had any thoughts about the discrepancy between pricing, 6E may print some price but M6E may not. Would that be a major factor? this system took into account full tick slippage in 6E and full commissions/ margin, so i am guessing it would perform fine in M6E. Also what about using 6E for calculation and set up and then just execute the order in M6E?

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  #2 (permalink)
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  #3 (permalink)
Elite Member
Tampa, FL
 
Futures Experience: Beginner
Platform: NinjaTrader, Sierra Chart
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Favorite Futures: 6E, M6E, 6J
 
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treydog999 View Post
I built an automated system on 6E but am considering executing on M6E due to lower risk. I have a smaller account and I have never brought a system live before. I was wondering if anyone had any thoughts about the discrepancy between pricing, 6E may print some price but M6E may not. Would that be a major factor? this system took into account full tick slippage in 6E and full commissions/ margin, so i am guessing it would perform fine in M6E. Also what about using 6E for calculation and set up and then just execute the order in M6E?

I trade the M6E and I can tell you that unless your system is a swing trade system, you will get killed unless you factor in 3-4 tick slippage each way on your tests ran on the 6E. Limit orders do not get filled very easily and the spread is usually 1 tick wider. You can overcome these things if you are trading a discretionary method, but it would be difficult with a bot. Have you ran the strategy on SIM for an extended period of time?

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  #4 (permalink)
Market Wizard
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treydog999 View Post
I built an automated system on 6E but am considering executing on M6E due to lower risk. I have a smaller account and I have never brought a system live before. I was wondering if anyone had any thoughts about the discrepancy between pricing, 6E may print some price but M6E may not. Would that be a major factor? this system took into account full tick slippage in 6E and full commissions/ margin, so i am guessing it would perform fine in M6E. Also what about using 6E for calculation and set up and then just execute the order in M6E?

Why don't you keep the signals based on 6E, and then just execute the trades with the M6E? Then your signals would match any testing you did on 6E. Your slippage and commissions would not match backtest, though. But, this scenario is better than getting signals from illiquid M6E.

The problems you face with the smaller contract:

1) Volume is a lot less, so that means limit orders will be tougher to fill, and stop orders will slip more.

2) Commissions, percentage wise, will be a bigger portion of your profits, since they do not scale down.

3) The bid ask spread at any time will likely be greater than 6E, so plan on paying more in slippage.
Example: If you trade E7, the mini Euro (half size), 60-70% of the time the spread is the same as the 6E (1 tick). But, the rest of the time, the spread is double (2 ticks). Depending on your strategy, you may turn a profitable one into unprofitable with the extra spread. With M6E, the spread might be 3 or 4 times as large as the regular contract.


Honestly, though, your best bet is probably to wait until you get enough capital to trade the 6E, or at a minimum the E7. Otherwise, your risk of ruin is much higher, and you may blow out before you ever have a chance to see if your system works.

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  #5 (permalink)
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Xav1029 View Post
I trade the M6E and I can tell you that unless your system is a swing trade system, you will get killed unless you factor in 3-4 tick slippage each way on your tests ran on the 6E. Limit orders do not get filled very easily and the spread is usually 1 tick wider. You can overcome these things if you are trading a discretionary method, but it would be difficult with a bot. Have you ran the strategy on SIM for an extended period of time?

I have ran the strategy on sim for 3 months on 6E. And it has continued to be profitable, I use mostly limit orders but i still took into account 2 ticks of slippage per RT. This is a swing trading system that holds trades for days usually, usually going for 100+ ticks


kevinkdog View Post
Why don't you keep the signals based on 6E, and then just execute the trades with the M6E? Then your signals would match any testing you did on 6E.

The problems you face with the smaller contract:

1) Volume is a lot less, so that means limit orders will be tougher to fill, and stop orders will slip more.

2) Commissions, percentage wise, will be a bigger portion of your profits, since they do not scale down.

3) The bid ask spread at any time will likely be greater than 6E, so plan on paying more in slippage.
Example: If you trade E7, the mini Euro (half size), 60-70% of the time the spread is the same as the 6E (1 tick). But, the rest of the time, the spread is double (2 ticks). Depending on your strategy, you may turn a profitable one into unprofitable with the extra spread. With M6E, the spread might be 3 or 4 times as large as the regular contract.


Honestly, though, your best bet is probably to wait until you get enough capital to trade the 6E, or at a minimum the 7E. Otherwise, your risk of ruin is much higher, and you may blow out before you ever have a chance to see if your system works.

From What i saw on a thread on futures.io (formerly BMT) that the 7E the liquidity is lower than M6E. I am very much considering using 6E for my set up and M6E for execution, I think I might sim that for the next few weeks.

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  #6 (permalink)
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treydog999 View Post
I have ran the strategy on sim for 3 months on 6E. And it has continued to be profitable, I use mostly limit orders but i still took into account 2 ticks of slippage per RT. This is a swing trading system that holds trades for days usually, usually going for 100+ ticks



From What i saw on a thread on futures.io (formerly BMT) that the 7E the liquidity is lower than M6E. I am very much considering using 6E for my set up and M6E for execution, I think I might sim that for the next few weeks.

I've never traded M6E, so I can't disagree with the other thread.

What you could do is take your strategy in sim, and when it fires a signal in 6E, also record and simultaneously print the bid/ask in 6E, M6E and E7. That way you could see what the actual spreads were at the exact time of your particular signals. If you get 50 or 100 measurements, you'll have a good idea of what these other contracts will cost you in slippage.

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  #7 (permalink)
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treydog999 View Post
I have ran the strategy on sim for 3 months on 6E. And it has continued to be profitable, I use mostly limit orders but i still took into account 2 ticks of slippage per RT. This is a swing trading system that holds trades for days usually, usually going for 100+ ticks



From What i saw on a thread on futures.io (formerly BMT) that the 7E the liquidity is lower than M6E. I am very much considering using 6E for my set up and M6E for execution, I think I might sim that for the next few weeks.

Since it is a swing strategy, you should be OK. However, BE CAREFUL. I have seen a difference of up to 20 ticks in price between the 6E and M6E when the markets reopen in the afternoons. If all your signals come from 6E only, and you enter with market orders you should do alright.

London Calling
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  #8 (permalink)
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Xav1029 View Post
Since it is a swing strategy, you should be OK. However, BE CAREFUL. I have seen a difference of up to 20 ticks in price between the 6E and M6E when the markets reopen in the afternoons. If all your signals come from 6E only, and you enter with market orders you should do alright.

Treydog -

With Xav's excellent observation in mind, you might want to have your strategy check the bid/ask prices of 6E and M6E or E7 when a signal is generated. If they are far apart, just delay sending the order until they get close. This could minimize any terrible fills due to bad liquidity.

Of course, if you stay away from overnight trading, you'd avoid the above scenario too.


Last edited by kevinkdog; November 30th, 2012 at 02:35 PM. Reason: clarified which prices to check
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  #9 (permalink)
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Why would someone want to trade M6E? The spread is like 4 ticks, with a good forex broker you would only pay between 1~2 pips, this is a huge different which really adds up and could make or break your system.

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  #10 (permalink)
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MarpleTrading View Post
Why would someone want to trade M6E? The spread is like 4 ticks, with a good forex broker you would only pay between 1~2 pips, this is a huge different which really adds up and could make or break your system.

I trade it everyday and can tell you the spread is 1-2 ticks 90% of the time. He is swing trading it so the spread and commissions should not affect his system too much. 1 extra tick vs 6E with targets of 100+ ticks is only 1%

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