I've tried trading ES on the Nadex platform. They offer a 1/5 version of ES in the form of bullspreads. It is regulated by the CFTC and legal in the US. Some huge issues with it is that they do not allow you to put stops or limits in, the bull spreads would charge you huge premium if you wanted to cap your risk, and there was a lot of slippage in prices that would mess you up.
I look at it as a way to build discipline, but it is very hard to build confidence when you have to stay at your screen making sure your risk target isn't tagged.
If there was another version of this I would definitely check it out, but I feel it would struggle with the same issue.
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Looks a bit like CFDs and ETFs - question would be if you can trade overnight and still afterhours.
Over all it is likely to be much pricier to trade 5 micros than one mini because of margin, spreads,
bad fills etc. With this a slight gain for a rookie is melting to zero or negative.
One has to think that volume flowing away from one instrument influences all dependent as well
as the original one: less volume finally in the mini means more volatility and stops set at the same
level are suddenly at higher risk!
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Interesting poll. Not what I expected. It is currently showing 30% would not trade a Micro-ES contract.
Can those of you who voted "no" please post a bullet list stating why not?
I have been pushing the CME to release a micro-index product for reasons others as well as Mike have discussed here. I have met with upper management, etc. I want to make sure all views on this product are covered at our next meeting.
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I actually voted yes, but that is only because there was no "Yes until you are more comfortable trading multiple contracts on an instrument that is bigger, but has a tighter spread, more liquidity and lower commissions" option.
One thing I hadn't considered that came from this thread was that a micro contract could be held longer, which might be an appeal to some traders who are OK with trading the ES, but only trade short timeframes. In that case the issues above would be less of an issue. Maybe some more experienced traders hadn't considered this either.
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I'm reminded of https://futures.io/elite-circle/4861-comparing-index-futures.html bmt thread by this discussion, courtesy of Fat Tails. I'm not 100% sure if that commentary is relevant to this, but if I'm on the right track here, then the new contract should have proportional tick value and lower commissions such that it does not severely impact expectancy of the trader in favor of the broker, dealers and/or the exchange. It would be unfortunate if it resembled mini spy options that leave all fees and commissions as their bigger brother and just offer smaller leverage, negatively impacting trading profitability.
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I voted 'yes', but I agree with the above comments.. No one would be interested if the fees and commissions are not reduced, if not correspondingly, then by a fair amount. I may be wrong but in retail spot forex, the spreads are relative to the size of the contracts.. so the spread for a 1 lot is 10x that for a mini-lot (0.1 lot), and 100x that for a micro-lot (0.01 lot).
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In the UK the spread betting platforms offer better features, flexibility and tax regimes.
For UK and Europeans the FDAX is a far better instrument than ES anyway (imho).
Otherwise concerns would be the sort of liquidity issues and traps that users of the micro M6E have experienced.
The following user says Thank You to ratfink for this post:
"Better" would be a matter of opinion, as you state--but a fact is that the DAX is a much more volatile index that has much higher exchange margins for that very reason. It is not comparable at all to the ES, and tends to behave more like crude oil from my (limited) observation of it.
FESX, the Euro Stoxx 50, is a much more similar instrument to ES than the DAX, and would be a much more suitable substitution for the ES than the DAX, IMO. But many European traders like to trade the ES, so it's kind of a moot point anyway, for someone looking for a micro sized product.
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