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For those futures swing traders out there, which contract do you use to trade (eg. next expiry contract)? And by swing traders, I mean potentially holding something for days to months. I want to avoid roll costs as much as possible, but don't want to miss any movements that happen on the shorter expiry contracts.
Or are my fears not valid - should I just aim to buy/short a contract that is 6 months out and it won't make much of a difference?
For example, I have a /YM position that will be expiring in Sept, but I may want to continue to hold for a while. Do I just need to suck it up and learn to roll, but if so, have you found there is a "sweet spot" in terms of how far out a contract should be bought/sold for swing trading purposes? Maybe buy/roll every 6months?
My preferred trading method is intraday, though I swing through some longer trades. You style of trading sounds more like position than swing, but definition is not too important.
Since you mentioned YM, your best bet is to trade the nearest contract month and then rollover as volume on the December contract increases to near or greater than the September contracts. The reasoning is that there is better liquidity (more buyers and sellers) on the near contract, especially if you need to close your position early.
There are several methods for rollover, some of which are more expensive (think: slippage) than others. You can do automatic rollover with your broker (you would have to contact them, though this is the most expensive. You can do rollover yourself, which involved exiting your Sept contract and entering the Dec contract. There may be slippage involved, so you may want to do it when the market is quieter (ie. don't do it at 9:32 ET on a Monday ).
There are some good videos on YouTube regarding rollover, you may want to check out.
Makes a lot of sense - I was just checking volumes of nearest /MES vs Dec contract and it's pretty wide. It will be interesting going forward as to whether my concerns of needing to roll will even be realized due to being stopped out, lack of continued trend, etc.
You are welcome. I forgot to mention one thing that I learned last year, which is an exception to the 'always use the closest contract' rule. Eurodollar is one contract that you can trade future contracts with high liquidity. If you use a continuous contract in Eurodollar, there is actually less price action on the current contract. For example, you may find trading December's contract to be desirable, due to the price action available. Take a look at the Eurodollar volume in various contract months (as of this morning):
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