Just to ensure I understood you correctly. You're basically saying to trade the Micro, or in your example the Emini Crude Oil, "blind"? Is that correct, watch the CL both in terms of Order flow, Charts, T&S, whatever your tools are but place your orders in the QM?
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I wouldn't agree with the 'blind' comment but yes I would agree with watch the CL (or ES) both in terms of Order flow, Charts, T&S, whatever your tools are but place your orders in the QM (or ES Micro)?. I would recommend the same for anybody trading any of the other Mini's or Micro's. (eg QM Natgas, MGC Gold, The Currency Micro's etc). Equity Index's (ES, NQ, RTY etc) are the only eMini's that I can think of that have more size and liquidity than the full size products. In all other products its the other way around.
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Thanks for the explanation! So for any product, watch the "big one" (volume-wise, leading contract for the product) but trade the smaller one since arbitrageurs will unequivocally let them "mimic" (for lack of a better word) the prize of the "big one". That's what i mean by 'blind'.
I can just hope that the brokers adjust commision fees for the micro contracts. At $7 per round trip I'd need a whooping ~1.5points just to break even
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I have this problem with ICE's Natural Gas Contracts. The NYMEX NG contract is 10,000 MMBtu and exchange fees are $1.50 for non-members. The ICE Henry Hub contract is only 2,500 MMBtu and clearing fees are $0.655, so on a similar size basis, ICE costs $2.62 versus $1.50 on NYMEX. On top of that my broker charges me the same commission for the ICE trade as they do the NYMEX trade making ICE even more expensive. I have been told there are clearers out there that charge less to clear ICE because of this, but I have never found them!
i don't think they have announced exchange fees yet but for some perspective
CL is 1,000 barrels and it's exchange fee is $1.50 versus QM 500 barrels and $1.20. So QM is 60% more expensive.
NG is 10,000 MMbtus and it's exchange fee is $1.50 versus QG 2500 MMBtus and $0.50. So QG is 33% more expensive.
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I'm personally very glad that this has been public. It has been hard biting my tongue for a while while this was being developed. I think this will save many traders from blowing up. I really have wanted a product for about 10 years and met with them 6 years ago to start the push for this. It will be worth it and I think it will be a successful product.
At the end of the day, my focus and effort is directed toward having as many traders get what they need in order to succeed in futures as possible.
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I've been following developments on this small exchange from the tastyworks folks, sounds like they are in the CFTC application phase, though there's not much info on it yet.
The smaller contracts sound interesting, no idea about what liquidity would be like, etc. Is anyone else following this or know about what's going on with it?
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For those of you concerned about cost/fees, I can't speak to that at the moment, but think of the 6E vs M6E contract. The 6E has $1.60 per side in exchange fees and you must add $0.02 for NFA before FCM and broker costs. The M6E which is 1/10th the value is at $0.16 plus $0.02 for NFA + broker/FCM costs. So I would expect the Micro-Indices to go down the same path.
Unfortunately, I know for a fact that FCM costs won't go down based on the product. So that is fixed. This means that as a proportion of the total cost, what your FCM takes (because it is a fixed large overhead business) would represent a larger proportion. This is to be expected and makes sense. Let me know if this needs to be explained. Brokers have a bit of leeway, but not much because they are also constrained by what the FCM has to get paid for backing your trades.
I hope that reduces the anxiety about in terms of cost.
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I've been thinking about this some more. I suspect the profile of a person trading the micro's is somebody who has a small account size and is probably paying higher clearing fees. While the exchange fees may be proportionally lower, paying the same clearing fee on a contract a 1/10th of the size will have a significant impact. If you look at the table below, eMini's even at high retail rates are less than double* the cost of trading the full size contract, but Micro's are over 5x the cost. Trading the Euro Micro, M6E, If your paying $1.50** in broker clearing fees then that will be $1.68 per side or $3.36 per round turn. With a tick size of 0.0001 or $1.25, that's equivalent to 2.688 ticks. In comparison a member with good clearing fees is probably paying about $1 per round turn to trade a full size, which is just 0.08 ticks!
* With the exception of QG which is worse due to the eMini being a 1/4 the size rather than 1/2.
** Not uncommon. $1.50 is Tradestation's base rate for less than 300 contarcts a month.
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The point of trading micros would only be to add more realism than Sim. You will never make money trading them, and if you are, it means you should be trading ES, *given a proper account size*. The benefit is to the new trader who thinks equity indexes looks easy, and quickly finds out what being taken to pound town feels like It hurts 10x less, and provides learning at smaller cost than the regular minis.
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One exception may be using them to swing trade the SPX instead of SPY options. You can place overnite stops and not have to deal with any of the option greeks. This in the case where you have a big enough account to day trade the ES but not swing trade it or you want to practice swing trading it before you engage.
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There probably will be liquidity enough, although there will probably be relatively less and so one would expect more slippage, etc. But probably the benefit of trading the micros would be to just be in a live market with some real money at stake, but not much. You won't get rich but you will get some experience, and may make a little (and only lose a little. )
The method of trading the micro by using the larger-size mini chart for decision-making, but actually executing on the micro, seems to work well for traders of other micros.
This may be a huge deal for traders who have never had the sudden and abrupt learning experience of getting their heads bashed in by ES. They'll get some of the same with micros, but it will cause less harm, and you've got to get it sometime in order to be at all realistic in your view of trading.
Also, note that the other minis (YM, NQ, and whatever they're calling Russell nowadays ) will also be micronized. The tick values of those are all going to 50 cents, from $5.00 (ES is going to $1.25 from $12.50). So there will be a bunch of alternatives, depending on the market you like.
Yes. Trading SPY can give you unexpected and unwelcome (and sudden) side effects, like being right about the trend, and still lose out due to option premium decay. It's much better to just sidestep all that.
Altogether, a good change.
Bob.
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@MiniP the volatility will be the same as any discrepancy would be an arbitrage opportunity and hence stripped clean in an instant. Sans arb, the micro contract will be nearly 100% retail. It will offer participation to people that would otherwise not trade the mini due to margin requirements or funding issues. I dont think the volume will be significant enough to benefit the mini in that the absence of the smallest retail participants wont have an impact. Liquidity will be a forced march as any misprice will be scraped off the table...likely by algos that are already written and tested.
If new people can participate and gain an opportunity through the new product, that would be great. If the fees generated move the needle, CME will get what they want. My view would be the micro will have little impact.
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There is no exchange-set intraday margin on anything. It is up to your broker. There are brokers who have offered, as I recall, $300 ES intraday margins. (They are fishing for inexperienced optimists, but that's another story.) Generally, brokers seem to like the $500 number, but they don't have to.
The exchange only sets "overnight" margins, which apply if you are holding after the close.
Probably the micro margins will be significantly lower both for intraday and overnight. I didn't see if the exchange has set the overnight yet (they may have). Brokers haven't weighed in yet either for intraday as far I can tell.
Bob.
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Hmm I'm gonna have to look into this, if the debut date is in may and march is half over seems like brokers would want to start advertising. This just seems very forexish to me.
I have no idea what margin req is for a one lot ES. Last time I had a margin call was Mid Sept 2001 when the Fed did that intraday surprise rate cut.
No offense to anyone, but if one of your questions for a broker is what is your minimum margin intraday or over nite on a one lot you should not be trading futures. Unless the answer you are seeking is a high number because you like your deposit well protected...but in that case you know not to ask.
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Was asking out of curiosity not necessity. Cause I can see these being pushed like forex "trade today for $50 dollars down " but it will be added liquidity oh well.
Hmmm...we may have NADEX to thank for this rather sudden new CME micro product launch. In January, NADEX added weekly expiring "touch bracket" products for the stock indexes. These were designed to mimic the futures pricing within a bracketed price range. I have been following them and they seem to be trading with a decent spread/liquidity. Guess CME decided there was some business there.
The new CME micros may prove to be popular. Aside from aspiring futures traders, these contracts are small enough to appeal to the retail investing crowd. Why mess with the long/short etfs when you can trade these instead and get:
- 24/5 market access
- No PTD rules
- Avoid those pesky wash sale calculations
- Take advantage of the 60/40 capital gains rate
Expect the big brokerage houses like Schwab and TDA will begin to market these to their customers in the coming months.
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The forthcoming new Small Exchange might be another reason. Tastyworks is offering to pay the $100 fee for new accounts ( I took advantage of it). I am not sure how this will compare to NADEX or the Micros but glad to see more possibilities for small trader:
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Very interesting, and great to see more options becoming available to prospective futures traders. I trade M6E... as someone who started out a couple years ago knowing absolutely nothing, and having blown three live accounts, I'm pretty pleased to say I've only burnt about $6K in the process of learning a metric shit tonne
That does not include FIO elite membership, which has been invaluable of course
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I think I have a slightly different perspective...
As a trader of CFDs, I view the wider spread, slippage, commissions etc. as an asset, not a liability.
My plan is to "graduate" to regular E-minis, which are more efficient, but have larger size. When I get there and my monkey brain starts pinging due to the larger size, I can always tell myself I was able to obtain a positive expectancy with instruments which were harder to get that with.
Maybe I'm nuts, but we'll see. Mean time, wining and losing dinner and a movie is a lot less stressful than betting the farm, and I can dial in my risk finely. If I want to trade 37/100ths of a contract, I can.
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I think you are right. This new exchange seems to have lots of notable backers. Website is pretty vague on the details though. Found some additional info on CQG.
According to the press release, Small Exchange will initially offer "five cash-settled contracts based on proprietary indices in equities, interest rates, metals, energy, and foreign exchange." The FX offering sounds like a new Dollar Index. That will be cool. Not sure what proprietary indexes in metals and energy would look like. Guess they will be a blend of the individual commodities in the sector, like they do with the DB commodity indexes. Interesting idea but will Futures traders be interested? The Bloomberg Commodity Index on CME has never gained much of a following. Personally, I'd rather just trade the individual commodities.
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It is precisely for the same reason that Mirco FX and for that matter all the other Micros did not work: low leverage and no liquidity.
The large institutions create liquidity for the retail traders through hedging or speculation.
This was always the case, and I do not see it change for the foreseeable futures.
I am sorry, but I just do not see the large institutions trading on $5 lots, and liquidity between small retail players may not sustain such a venture. This leverage of $5 per point may allow some swing traders and long term plays, but this is not enough for day trading.
The CME is not the only exchange that tries to earn retail, the CBOE tried it with Bitcoin which is canceled after the March contract, the FANG contract by ICE (non-event).
Meantime, this entire infrastructure of quotes, servers, and ad promos will only add additional cost that may be reflected in your data fees and our professional fees.
I would like to remain optimistic and hope that this contract does have the liquidity it needs, and it does provide the training wheel for small traders.
Having said all the above, I recognize that there are small traders that the typical leverage could be too high for their account, and it is hard to sustain drawdowns.
This is why I started creating relationships with Spot FX operators, who do allow small accounts and have sufficient liquidity for day traders. Narrow spreads, no cost of quotes and as mentioned have adequate liquidity. For larger Spot FX traders, we can provide interbank spreads and commissions based trading as well. As we go forward, it was necessary for Optimus to provide FX because many people want to start out in leveraged capital markets but do not have the capital to start out in Futures.
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I got a PM about this tread but decided to post it here. Just so people know, if someone is quoted, they are notified. Anyway…
Ninja allows connection to FXCM. In the US, CFDs are not permitted, in the EU you are allowed to trade with FXCM UK, which has a fairly high margin rate and no daytrading reduction. In other parts of the world you can trade with FXCM Australia, which has much lower margin rates. For me, I’m glad I’m in the EU; I can trade on the NT platform, but can’t cut myself to shreds. Well, at least not without a lot of determined stupidity.
If you are trading with Sierra Charts, you can use LMAX, which is better IMO because they offer firm liquidity without “last look”. Before trading CFDs, be sure you understand the concept of last look well. It basically means market makers don’t need to take your limit orders even if the market goes past where you put them, or can wait until the market has gone so far to accept them that essentially you get a crappy fill.
Lastly, if you form an offshore corporation and trade through it, some brokers will look at the corporate address instead of the address of the owner of the corporation to determine CFD eligibility and margins. [Read the last sentence again slowly.]
YMMV, and brokers are free to change their rules at any time, but for those with limited capital, this might be a creative way to get started. In fact, I think it would be a good idea for a separate thread, but I’ve got enough on my plate already.
-Bob
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Slightly off-topic and this may be a silly question but I don't want to make assumptions that I haven't verified. "Last look", the way I understand it, is isolated to spot forex, and not an issue in futures markets because of the exchange over-sight, is this actually true?
Well, I've got a lot of code invested in NT, which is paid for. Sierra is subscription only.
FXCM has smaller contract sizes, but LMAX has firm liquidity. The topic could turn into a thread of it's own, but briefly, have a look here:
and if you're a glutton for punishment, here:
Anyway, as with everything else in this biz, find what works for you. I only share my perspective so people are more informed. If you make money another way, good on ya.
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They'll usually let you get by with 5K if you sound like you are serious. But I'm not looking at account size, but rather risk per trade. That is what you need to keep small if you are starting out.
I am really hoping these provide a way to maintain live-trading if/when I need to step back from the major contracts to figure out a problem or work on a strategy. I've always treated sim as the real thing but there's no substitute for live-trading. This would bridge that "emotional-gap" tremendously at least for me.
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As long as you keep the number of contracts low and not start trading 50 micros because you now have the ability to scale in/out. The mind has an amazing ability to trick itself.
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Thanks, you kind of blew my mind there. You make a great point and one that I hadn't considered. Testing one of my flaky automated strategies against the e-micros would provide a great live test, with very low risk.
~vmodus
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Updating previous chart
and another chart. The costs are so high in relationship to tick size I wonder how successful this will be. For the 3 contracts with the super small $0.50 tick size, you'll need 6.88 ticks profit to cover the commission at Tradestation on their standard commission schedule.
Previous deleted post incorrectly had Full Size ($2.40) and not eMini ($1.18 Commissions).
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I wonder if small-exchange (assuming they get cftc approval) will have an edge by introducing lower fees to its members. Only speculating but I would think there would have to be some automated market-making partnership for liquidity on all these micros to get them to really take off, in general. seems like they would only be a tiny drop in a huge bucket so I don't see why they wouldn't do it.
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I suspect that they have a group of designated participants that will NOT pay fees if they meet certain market making requirements. Even if they don't remember these are NON-MEMBER rates. The non-member rate for eMicro EUR:USD is 16c and the member rate is only 4c. Plus members don't pay NFA fees, and the type of company who would do this probably has clearing rates of 10c or under. ie their all in cost is probably about 15c side. Very different to Joe Smith paying $1.72 per side through Tradestation.
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We can get you started on FX with $250 on IG Markets.
It is not on our site yet, but we will add it shortly for the US markets.
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The cost on these would be a problem, for scalping intraday, if you cannot be profitable on a 1 tick capture. Even so, I can see them being useful for swing trades.
As well, it is possible one might trade the mini and hedge with the micros to reduce the exposure.
One such method is to hold a net long (or short) exposure in the micros and then trade only short (or long) against them in eminis. If you can hold say 3 net long then your trade exposure will be 70% of the full size (carry exposure 30%). If you cannot hold that many, you could open them on at start of day and then trade against them all day and close them at end of day or you might have to find some opportunistic swing entries. There are various pros and cons with this trading style. One pro is that many traders will find ability to generate greater profits as facilitates non bias trading. The downside is strong trends against your net exposure and that you locked into trading one side, against primary bias.
The other method that might work is to trade the mini contracts but instead of taking a full stop loss, rather to hedge with a percentage of the micros to reduce your delta at preset levels if the trade doesn't work. The downside is that if the market starts to move in your favor then you will only gain back at a percentage of what you would have gained. You could also scale out at profit targets using the micros, to lock in profits, which might work better for some styles.
If you use the stop loss method, let's imagine for ES you set your first hedge at -2 points, if you capture target without incurring 2 points risk you capture 100% of the target. But, let's say you want to give every chance to capture your trade and you take a total of 8 points risk, this would be $400 on 1 ES. At -2 points, you hedge with 5 micros and now you lose $25*6=-$150+-$100=-$250 vs -$400. What if the trade eventually works out and market eventually goes in your favor 8 points from your entry, you would now be $50*8=+$400-$25*10=-250=+$150. Your R is lowered but probability of profitability is increase. This is assuming you never remove the hedge. Let's imagine you capture the 8 points before your hedges trigger effect, in that case you win $400 vs $250 total risk on the trade. Of course, you could just close your ES trade and open the micro position at 50% size, results would be the same in theory but perhaps some benefit to the mental tracking.
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It's not the exchange fees that will kill, its the brokerage. Even if the exchange fees were 1/10th (they are actually 1/5.9) your still paying brokerage at the same rate. Let me copy the analysis for you on the previous page of this thread.
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I have never traded any of the existing micros, in currencies, but my impression after following several traders who have is that the major point is not to make money (yes, that does seem strange), because (a) transaction costs are high, which has gotten a lot of discussion here, and (b) liquidity is fairly low, so slippage can be a problem.
Of course, you can trade profitably, but you will be giving up a lot due to these factors, and it's not really a good way to make much.
Well, why would anyone trade something if not to make money??? I think the general feeling is that you're trading with something real, not a simulation, and you do have the real-life pressures of money on the line, so it's a better way to learn than pure, riskless sim -- but with a smaller money commitment you can trade with, so you can keep the losses down.
In other words, don't trade this if you expect to clean up. You don't have much chance of that, plus, if you're already a profitable trader, you're probably going to stay with the full contracts anyway. If you think of it as a way to get into real cash trading with less financial risk, it might work out for you.
Naturally, anyone trading these will want to be profitable, but the experience of real money trading may be the greatest benefit for many. Note that it will also be a good way to lose money fast, if you're just attracted to the idea of small margin requirements. But that's something to learn about, too.
Perhaps someone who does or has traded the currency micros can add something about this.
Bob.
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Ya took the words right out of my mouth. This is exactly why I trade the micros...and indeed it has been a fine learning experience.. and indeed, I have lost money doing it... but it is literally a small fraction of the amount to be lost trading the full size. And I know that if I can actually make money on the micros, the only thing holding me back from doing it on the others is... me.
I look at the micros as training wheels on my trading bike No question being live and having a dog in the hunt changes things.. but why on earth would I want to spend any more on tuition than necessary when I can get the same basic education at a considerable discount? Provided one can prove themselves in this environment, one can graduate upward from there.
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To put it another way... if you're just starting out and learning, you WILL LOSE MONEY, period. Why put up any more of your hard earned cash than necessary to get through that process we all have to go through? Other than psychologically speaking, trading the micros is more difficult simply because of commissions vs tick value and slippage. If you can trade well in the micros, you should kill it in the full size contracts.
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People are way too focused on the commissions. Who's trading ES for a tick? That's just not a viable strategy on an instrument that can sweep 4-8 ticks.
I'm sure I'll make a mistake in the math, but let's just say for the sake of argument that you do 2x risk/reward. So like risk 8 ticks to make 16. If your round turn was $1.50 then you'd need to hit about a 38% winrate to break even. If you were doing 1.5x so more like risk 8 to make 12 then your winrate needs to be 46%. Now of course when you catch a runner you'll probably catch much more than that. It's quite possible in ES to get your average win vs average loss to 3:1 and then you'd only need a 28.75% winrate to break even.
Sure it the end it's going to be a larger % of your profits taken in commissions. However, it's not going to be the commissions that prevents you from being successful. And once you've learned and built up your account you move up to the regular ES contract.
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Here is something that I don't think has been mentioned in this thread yet.
I have been doing some research into how the past futures traders went about their business and it sounds like there was a higher rate of success, because you were working directly for a mentor and you didn't trade at first, you were working your a#$ off making sure the company or person you worked for could trade smoothly as I understand it, whatever that took. When you finally did get to trade you had a competent understanding of the market for the product(s) you were going to trade. I'm sure this isn't true for everyone but it sounds like it was more common on the floor.
This is totally missing piece of the puzzle for me. I would love that opportunity, but here we are. There has to be a way to get a feel for real live trading conditions without getting your teeth kicked in financially for the smallest margins of error.
There is a bit of psychological "impulsiveness/fear/hesitation/greed/hope" that I find myself trying to overcome when I go live that isn't present in sim and I can't learn to master by reading a book or watching a video. I have to do the thing I'm trying to get good at, which is trading futures, and I need to be able to meaningully develop my skills under realistic conditions without getting crushed to death.
Sorry for this rant, I realize many of you here are well beyond this stage in your careers, its just a current frustration of mine.
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Yeah, but most starters will NOT do well ... and will loose for a while. They'd loose 10 times more in the mini, so starting with Micros does make sense ...
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Total cost on the currency micros for retail is high relative to their big brothers... through Amp, I pay $2.06/RT (which includes commissions, fees, etc...) I suspect these will be similar. Not a huge amount, but enough to where you will have to cover a few ticks (instrument dependent) before you can break even.
My point exactly. They are a great way to cut your teeth trading real, live money without necessitating a huge account. A $5K account is very comfortable for trading these.
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I will add that I am very interested to see how the liquidity is with these new instruments. I can tell you first hand that I hardly ever get any slippage in M6E EUR/USD, but the same cannot be said for the other pairs.
I've been trading B6E GBP/USD for a short amount of time now and there can be significant slippage/spreads (2-10+ ticks) even during the busy hours of the Euro and New York sessions. I almost always enter with limit orders.
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I'm the one doing a lot of the commission analysis, and I agree if your using this purely as an education tool, don't worry about it. But for anybody trying to actively trade with a small account size, these are not your answer!
I agree with your calculation, but think your $1.50 round turn assumption is way to low and your math only applies to the larger ES micro. The numbers for the other contracts are far worse.
So everybody else can see the calculation let's do some Algebra.
Define
R = Risk Amount
P = Winning Percentage
C = Round Turn Commission
K = Risk/Reward.
Theoretical Expected Payout is
(P * K * R) - ((1-P) * R) - C
which is positive when
R(PK - 1 + P) > C
With Tradestation commissions C is 6.88 ticks for the 50c tick contracts. So with risk/reward of 2, and a risk of 8 ticks we get
So with Tradestation commissions, the small 50c tick contracts, 8 tick risk, R/R 2:1 you need a 62% Win Rate.
Similarly with R/R 1.5:1 you need a 74.4% Win Rate.
Floor traders also had an informational advantage you will never be able to match. For many learning to trade was more learning how to use that advantage and not to trade. That's why the majority of floor traders could not make the transition to screen based trading.
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Commission can be huge for a day trader. The fact that you're trying to capture 3,4,5,6,7+ ticks on trades isn't relevant as what your average profit per contract per trade is which is usually going to be less than 2 ticks for scalpers.
Yes, I agree it less relevant for big day/swing trades. But, one of the primary benefits of the E-mini futures is that they can be used to day trade for non PDT accounts. If the micro's don't have that same quality, I think they will be less useful.
Although, I have given some ideas already here for small accounts. I have few other ideas. I am personally curious how they will compare with the NADEX binaries too because that's another option for small traders. I have always felt binaries are very interesting properties. I do not have my analysis handy but I believe you have to take around a 52.5%-55% win ratio to for 1/1 strike break even on those. Most technical based methods will not yield over 52.5%-55% win ratio.
One other possibility for micro accounts is to consider the feasibility to scalp the weekly or nearest ES CME call and put options. The delta for the nearest option is I believe going to be around $12-$20 per point. This is something I want to evaluate when I get time. If anyone is trading this already, send me a PM. You could also try a non-margin options account and scalp/day trade ETF/stock options, though you can't recycle buying power. I think it would be interesting to do a comprehensive cost analysis for the CME micro, mini, NADEX, and CME options on futures products to see how they compare in terms of spreads and commish.
Another route for small accounts, is to figure out the amount a risk amount that makes you slightly uncomfortable, and then wait to find a high confidence trade worth risking that amount. The catch to make this work is you have to make sure you don't skew your win ratio negative when doing this over your baseline (changing the way you take losses), and your confidence in your trades has to really match the reality.
I've already put in my view that the likely main benefit of the new stock index micro contracts is simply to let new traders trade some real money, in relatively small amounts, instead of staying in the riskless world of sim trading.
I think that some of the comments are oriented toward the idea of trading these things as a serious trading vehicle instead of a learning tool. There's nothing wrong with this, actually, since it lets you establish a baseline to evaluate the contract on a theoretical basis. I pretty much agree with @SMCJB's analysis on that score: you're going to need a very good win rate to overcome your transaction costs.
Can you get that rate? Leaving aside everyone's more or less unconscious assumption that they are really master traders just having a brief rough stretch ( ), if you take a look at a chart of some of the currency micros and compare them to the full contracts, those guys (micros) jump all over the place. They sort of redefine "slippage." Common advice is to use the full contract for your charting, because it may give you a better picture, and execute on a micro contract chart. (Not everyone does it this way, but the point is that the micro action is inherently harder to trade.)
For instance:
The reason, of course, is liquidity. Now, probably an S&P-based micro will have more and bigger players, and algos too (yeah, I think algos add liquidity, simply because they add volume. Don't hate on me in comments for this . I'll decline to enter that argument, since it never gets resolved anyway.) We don't yet know the liquidity/volume characteristics of the stock index micros, but we can expect them to be less than the ES, for instance.
All this is still a bit academic and theoretical now. I can imagine a future scenario where the index micros have a ton of participation, contrary to my current assumptions. Might they be a handy way to hedge index options (not only futures options, but SPY for instance)? Who the hell knows? Who knows how the various players will respond to them?
So we're spinning out truly imaginary scenarios without the actual relevant knowledge and experience. But going just on the existing micros -- and realizing it's definitely apples to oranges -- I'm still thinking of these things as more a tool for traders to get their feet wet, not as major trading vehicles.
I could certainly be completely wrong. It wouldn't be the first time.
Bob.
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As I said, the lower efficiency of CFDs and soon to be Micros have advantages.
If a trader can generate a reasonable track record with smaller but less efficient contracts, then stepping up to the plate with full E-minis should be less stressful. When the monkey comes scratching due to the larger size, the trader can take comfort in the fact that they've already made money in a venue that is harder to trade.
Longer term trades with wider stops become possible too.
Looking at the other responses, I think we are all pretty much on the same page.
I'm guessing liquidity will not be much of an issue. I could be wrong, [as is the perennial case in this business] but M6E has enough. M6B, etc. don't but I think there will be enough interest in these new instruments that market makers will step in. And if there's enough competition commissions shouldn't be too bad either. We'll see!
-Other Bob
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I just pulled up M6A, M6B, M6E, MCD and MJY to take a look and compared them to the fullsize 6A 6B 6E 6C and 6J. The Micro's are tick for tick with the fill size with the only differences being where the ticks sizes are different.
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Implementing of a simple trading strategy with real money, documentation and fixed ratio money management
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Today I start my first public trading journal. I hope everything is going the way I think.
For about 3 years I trade Future. …
I think the mini/micros can be used well for systematic trading, i.e. automated or discretionary positions rather than scalps, and should/could help improve a small trader's style. I see (and choose to use) YM in a similar vein.
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YM may be a good example, a smaller contract that is similar to ES but (I think) less prone to being range-bound (perhaps due to the big players being more in ES and keeping ranges tighter, or perhaps I'm just wrong.... or perhaps both. )
There may be a similarity in any case to a more micro type contract, just from the smaller size aspect of it vs. ES.
Bob.
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Correct. Typo.
For illustration this was 9am Central today. As you can see the only difference in quotes between Full Size and Micro are due to the tick sizes. (M6E bid)
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Just a question. What margin should be for an emicro es when the emini is at about $400-500 pre contract? And what tick size should it be? $6.25 per tick or less? Thanx
Not sure what the commission will be but the round turn commission would have to be low enough to profit off a tick. I'm guessing the exchange fees will be lowered for e-micros to attract order flow.
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You guys should maybe read some of the last pages on thread and not just ask questions that have been answered multiple times - although margin hadn't specifically been answered recently. Also the tick on the S&P500 Micro is $1.25 and the other 3 Micro's is $0.50 and not $2.50.
Yeah, my bad on the tick size. Indeed it's $1.25, not $2.50
Curious to find out what the commission and exchange fees will be. Sent a message to several brokerages and no one seems to know yet. Most replied that it will probably be low enough to profit off a tick. We'll see.
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As I already said. If you look a couple of pages back you will get your answers. Exchange fees have been discussed in detail. Commission will be broker dependent, and there's little reason to think a brokers commission for these contracts will be different than any other contract. ie its going to be very very fee intensive to trade these contracts. But as I said, go back a few pages and you will see all the analysis on this
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Not really. From the brokers I contacted, a few believe the exchange fees will be different for these, notwithstanding the NFA fee, which is a penny.
Actually, there is reason to believe it. Otherwise, these contracts are DOA.
Yeah mate, looked a few pages back and there's just speculation, analysis on the speculation. Speculation based on the current state of affairs. Nothing concrete, nor official.
In any event, in a few weeks, we will see some actual official figures from the exchange and brokers. A few brokers have officially stated that the daytrade margins will be ~ $50.
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ROFLMAO
@DmanX your wrong on every single account - so wrong that your even wrong on what the NFA fee is! (They changed 15 months ago!) It's not speculation. Exchange fees are announced (20c for non-members +2c NFA fee ... https://www.cmegroup.com/company/clearing-fees.html), Margins are announced (10% of ES. Doh! ... https://www.cmegroup.com/education/frequently-asked-questions-micro-e-mini-equity-index-futures.html - but obviously these are overnight rates and brokers have discretion to charge lower day trade rates). The only thing not announced is what individual brokers will charge in addition to exchange fees to clear them - as this is obviously broker dependent and not CME mandated - which as discussed heavily in the previous pages will be the most important thing in determining your cost - but can be expected to be the same as any other contract. As such I believe the consensus opinion in this thread is that this will be an excellent way to learn without getting destroyed but that due to commissions these are not viable as a stand alone trading instrument.
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People may be underestimating the liquidity for these new micro products. If you look at the micros for the fx futures, they have a volume of generally 1/10 the larger mini. But even those minis do not have great volume. If micro index futures get 1/10 the volume of the index eminis, we are talking about daily volumes of about 100,000 contracts, which is not bad. However, it may go much higher then that for another reason. E-micro index futures will be a compelling alternative to index etfs for people who swing trade, primarily because of the ability to place an overnight stop. They will better reflect the 24 hour a day non-stop global economy. Thus, the emicros could siphon a significant amount of volume away from the index ETFs. If the index micros get enough volume, some brokers may start to be able to discount emicro trades at least to some degree to bring in the daytraders. But it may not happen initially.
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First things, first. Love the flamegun. Nice touch.
Anyway, here's the thing though... Micro S&P 500 will be the flagship of the micros for the CME. As such, they will want to attract business for them. Now if you look at the e-micro currencies, the exchange + NFA fee for them is $0.18 per side. That's about 11% of the fees charged on the e-mini currencies ($1.62).
Exchange + NFA fees for the eMicro index futures are going to be $0.22 per side.
As for commissions, they could be 25-75% less than the e-mini. In the link above, the e-Micro currencies are charged about 50% less commission than the e-mini ones.
But, like I've been told by a number of brokers, give it about 2 weeks before official numbers are in.
[Insert big, no... massive smilie here]
Cheers.
BTW wasn't wrong about the daytrade margin being $50. So much for...
And to be pedantic, it's 'you're'. <--- yep I feel dirty for doing it. But it's all about the points to even up the score. :-p
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This is getting old but I will admit good catch on the your/you're but I did acknowledge that Day Trade margins are dependent upon individual broker's.
If you follow your own link, you'll see that they charge the same clearing rate for the Gold and Currency Micro's as they do all other contracts. Most brokers that I know of are the same. So while exchange + NFA of micro may be about 11% of the larger size, exchange+NFA+clearing (ie "The All In Rate") is closer to 50% despite them being 10% of the size!
Hate to post/quote things for the 3rd time, but since @DmanX still hasn't paged back at all here goes.
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Just like any other asset class, you need to be selective of who you is your clearing. However, in the FX space you can choose good players like IG Markets (now in the US and we clear them), Oanda (trying to get on board now) and for those who are ECPs (10M+ in assets) you can trade with institutional rates through FC Stone and ADM (we clear both).
In FX you can trade with a small amount, notional trade contracts of $1000, and use that to potentially get used to the volatility of the markets.
We had numerous requests over the years for Forex, but I avoided proceeding with spot FX because I was not happy with the terms for the customers, but now I believe the terms are appropriate for the customers along with the technology and execution.
BTW, I did reach out to the CME and asked why they decided on such a small notional value on the micros when all other micros lack liquidity, and all I got was "read the PDF brochure."
Matt Z
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I probably should't comment here, because I have no personal familiarity with spot fx.
With that said, I think that spot fx is often a decent alternative to the zero-risk, generally worthless pure sim trading that we all are too-familiar with -- and also an alternative to the the higher-risk, tear-your-head-off highly leveraged futures trading that we're also all too-familiar with .
Small-contract futures trading looks like it will fit the bill too, and at least if they are exchange-traded, you won't be trading against your broker when you think you're not. Yes, I know this can happen with fx. (https://en.wikipedia.org/wiki/FXCM .)
Basically, while sim has its place, aspiring traders need to get beyond it and risk some real money, however small, in order to experience the stresses of real trading. Anything that helps this is a good thing. That means that both small-money spot fx and small-contract index futures can fill in the gap, which I think is the value they may have for many traders.
Bob.
-----------------
Edit: this is particularly for brand-new traders, who think sim is reality. It's not, somehow....
There are experienced traders who can use sim productively, because they are aware of the reality of risk and are just trying out strategies.
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If the micro eminis could provide liquidity, it could serve as a good solution. This is what I am curious about most, what liquidity will it have.
I agree with your point that traders sooner than later should have skin in the game to experience what real trading is like and to improve their method in real time. But, it is not the size of the contract that is their obstacle in my opinion:
1) It's going through the motions while their position is fluctuations in the market place. It's a pure mind and psychology challenge.
2) The feeling they are never ready. I have spoken to people who spent years in front of the screen (without trading) thinking that they are missing an element that would make them successful if they paper traded a little more or explored more angles. KISS is not what they do.
So the reason I added FX is that many are capable of trading real funds, but their risk capital is small. I hope that over time as they build their net worth, they could potentially afford to trade with adequate capital.
As you mentioned, the paper traders who build new methods while trading real capital, have a completely different angle on paper trading.
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Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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A bit off-topic, but, anyone who has $500 margin on an emini should call your broker and immediately have them raise it to something sensible like $2000 at a minimum, at least for your own protection in case you accidentally put the wrong quantity in an order.
Eminis are currently trading 2900. With a $50 per point value, this means that a single contract controls $145000. With a $500 intraday margin, you are trading at 290:1 leverage. This is dangerous, and not much different than OTC forex dealers who offer similar levels of leverage. If you actually maximize $500 margin per contract, you *will* blow up. It *will* happen (not saying that you do emini83, just speaking in general terms).
There's a *reason* that CME outright margin on the ES is $6000. That's 25:1 leverage, an already low 4% of the contract value. I personally trade 1 emini per $10000. Doing so means an 8 tick loser yields a 1% loss. Do you really want to lose more than 1% on a single trade, especially given that 8 ticks is quite small? Trading at $500 margin means you can hold 20 ES with per $10000, which means that a single 8 tick loser (not a hard feat to accomplish really) yields a *20% loss* !!
I'm passionate about this, because I have traded overleveraged before, and it's a fool's errand. Even if you win on any given trade, you still lose in the long run -- it's a probabilistic certainty (see "risk of ruin"). I have blown up, damaged myself emotionally, and had to claw my way back to sanity. Please, please, be sensible and stay closer to the guidelines that the exchange sets -- it's for your own protection.
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I think you have some valid points. But, the lower margin is actually useful when you have multiple working orders. Many brokers require margin for any open order. So, if you have a position open then you get -$500, stop -$500, and not sure if the limits also require margin but that's another $500 (if they do). But with just the stop, that is $1,000 or double what it appears. At any rate, if you open a trade with $150 stop then your effective leverage is going to be more then they are giving you on that trade, at least.
If you have an edge with a 3 point stop on the ES and have a 10k account, and you want to risk 3% per trade, you could even place 2 contracts on that trade. Now on the other hand, if you want to place a swing day trade that needs $500 risk then that's 5% risk even with 10k account and you either have to take more then 3% risk or skip the trade. This is why most small futures accounts will either go to zero or gain at least 100% because the "gearing" makes it almost inevitable.
As an aside, it is not the leverage that makes futures so difficult to trade-- it is the lack of granularity. People confuse this all the time and think high leverage is what causes traders difficulty. Leverage is not the problem. It is the lack of granularity.
It hurts 10x less, and provides learning at smaller cost than the regular minis.
)
. I'll decline to enter that argument, since it never gets resolved anyway.) We don't yet know the liquidity/volume characteristics of the stock index micros, but we can expect them to be less than the ES, for instance.
