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Who are we trading against? Why is the book so thin?


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Who are we trading against? Why is the book so thin?

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  #1 (permalink)
 anubis 
Montevideo Uruguay
 
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Looking at how thin the book is compared to years ago, around ~100 limits per tick, who is placing this limits?

I mean, most are market makers, but how many? Does a market making firm place 1 order per tick? 10?

Most days feels like the E-minis are being traded by a few market makers and a few thousands retail traders, the days institutions are trading it are very easy to distinguish and do not happen very often.

Why got the book so thin? I've seen screenshots from 2017 with ~1k limit orders per tick, has the e-mini reached a point of efficiency where is not worth trading anymore?

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  #2 (permalink)
SunTrader
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As long as it moves price action determines my trades, not the book or the market makers (how many, what they are doing etc).

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 awesomizer 
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Iíve read elsewhere in this forum people asking the same question and some commenting on how they think a lot of large firms went under when the market crashed at the start of the pandemic and that is a big reason the liquidity is not like it used to be. I personally think some of it also went to micros but not much. Who knows really.

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 wowleva 
Brooklyn NY
 
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Considering the volume on /es is almost the same as 9 years ago, I think it has something to do with the fact that 1% move in 2012 was ~12 points and now its ~40 points. But honestly I have no idea just the first thing that popped into my head.

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  #5 (permalink)
 TWDsje   is a Vendor
 
 
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The higher the ES gets the thinner the liquidity will end up being. Indexes will still tend to move in percentage moves. So the higher the ES gets, the more ticks it will trade per day on average. Which means the liquidity gets spread out more.

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 MiniP 
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awesomizer View Post
Iíve read elsewhere in this forum people asking the same question and some commenting on how they think a lot of large firms went under when the market crashed at the start of the pandemic and that is a big reason the liquidity is not like it used to be. I personally think some of it also went to micros but not much. Who knows really.

Micros are going to suck the minis dry in the next 5 years, look at MNQ almost 3 times NQ, MES about 400k behind ES and M2k about 10k above RTY at the moment. Micros are going to continue to grow. I trade more Micros then minis now, commission sucks a bit but my w/l has gone up about 15%.

off topic my bad,

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  #7 (permalink)
 FuManChou 
Saint Paul, Minnesota, United States
 
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Perhaps there are more algos trading than ever before that fills the orders at market?

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  #8 (permalink)
 snax 
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MiniP View Post
Micros are going to suck the minis dry in the next 5 years, look at MNQ almost 3 times NQ, MES about 400k behind ES and M2k about 10k above RTY at the moment. Micros are going to continue to grow. I trade more Micros then minis now, commission sucks a bit but my w/l has gone up about 15%.

off topic my bad,

-P

Wouldn't this become unwieldy pretty quickly, ie. 3 ES = 30 MES? Not to mention the commission issue?

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  #9 (permalink)
 SBtrader82 
Rovigo (ITALY)
 
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MiniP View Post
Micros are going to suck the minis dry in the next 5 years, look at MNQ almost 3 times NQ, MES about 400k behind ES and M2k about 10k above RTY at the moment. Micros are going to continue to grow. I trade more Micros then minis now, commission sucks a bit but my w/l has gone up about 15%.

off topic my bad,

-P

That's definitely true... I was studying liquidity some weeks ago and I couldn't believe my eyes, MNQ is more liquid than NQ!! that's crazy.

Another factor that dries up liquidity are ETFs, a lot of money has moved from futures to ETF and this creates problems.
Many traders can trade SPY instead of ES, or NQQ instead of /NQ.
Finally what about TopStep, Oneup and all the rest of the funding firms? I think they are also eating the liquidity, many people starting out in trading prefer to start with one of those companies and until they reach the funded phase their orders do not go to the markets.

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  #10 (permalink)
sloth
Denver, CO
 
 
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When I started trading the @SP was the granddaddy of all futures contracts. They traded on the floor of the CME. As the stock market continued to rise it forced a lot of retail traders out of the market as they couldn't afford the margin. In 1998 the CME introduced the Emini's. People were skeptical. They were going to trade electronically on Globex which was only a handful of years old. What you guys are describing is a similar transition from ES to the micros. IF the stock market continues to compound at levels similar to recent years then the ES will fade away much like the big SP. Maybe 1.2k contracts vs. 1.5M for the ES there on a typical day?
However if there is a major correction and stocks lose a significant portion of their value then the ES and NQ will remain as the preferred trading vehicles for stock index futures traders. Ten years ago three points was a wide stop in the ES and 5 for the NQ. Times have changed.

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