I've been quite successful scalping the E-Micros in the last year thanks to the heightened volatility.
While doing so i realized that i seem to know less about the product that i'm trading than i thought.
So here's what i'm wondering:
/ES futures track the index, right? So are they actually moving based on what the index components are doing or does the product trade like a stock through supply and demand with someone in the background making sure it stays on track?
I'm thinking of this example:
on average, the /ES has a volume of about 9k transactions per 5min.
So what if someone was to actually buy/sell 10k contracts at once?
Would that actually move the product (supply/demand)? Or would that person just not get filled and have to wait until there's enough buyers/sellers to fill those 10k contracts?
The reason why this is weird to me is because the product is a derivative, so its price is dependent on another product, right? So it can't be that one person 'moves the market' on that one 5min bar, right?
So will market makers step in and get that person filled?
Would be great to know.
Thanks in advance for you guys' answers.
Cheers
The following user says Thank You to Swissboy for this post:
Have you taken a look at a bid-ask/footprint chart while observing the ES? Or the DOM. Seeing those may help because then you can see how many contracts are actually trading back and forth at a level, or if stops are (presumably) being hit by aggressive orders. John Grady has a video explaining the DOM which might put this into perspective (see around 9 minutes in, in the video "Order flow basics - What is the DOM? Why is it useful? What do the numbers mean?"). But you can look at a 1 minute bid-ask/footprint chart and sometimes see big prints at a level that stand out amongst others. If I understand your question, it may depend if this huge buyer/seller is doing a market order or not. If it's a big market order, this big player can move the market on their own if they are buying/selling huge enough volumes. Like they will take out all the orders resting at 3000, 3000.25. 3000.50, etc. if it is a big enough order. But on the flipside, it could also play out that this big buyer or seller is just waiting at a certain price level, and buying up whatever comes to that level, via limit orders. Sometimes you'll see this when the market is moving up or down, but just can't past a certain level. In that case they aren't moving the market in the same way but still exerting an influence. Anyway not sure if I'm getting your question correctly but figured I'd reply with some info that may help.
The following user says Thank You to geistflow for this post:
Just curious, does the ES follow the S&P or does the S&P follow the ES? Who are the big ES traders that move the market? The S&P is individual stocks so seems the S&P moves independently and the ES kinda follows but may move up before the S&P moves up? …
The mechanics of price and how it moves is based on the aggression of the buyers or the sellers. Your Best Bid is the highest price someone is willing to pay and everything below that are bids at lower prices which makes up the buy side book and conversely your Best Offer/Ask is the lowest price someone is willing to sell and everything above that are offers at higher prices which makes up the sell side book. If you're an aggressive buyer you go to where the sellers are at and start taking out the offers thus moving price higher. And if you're an aggressive seller you go where the buyers are at and take out the bids thus moving prices lower... Size matters! Big orders can move markets usually indicative of institutional and/or program.
