I'm sure there are traders out there who trade only a single product, and the vast majority of those traders are using the /ES because its incredibly liquid, captures a broad perspective of the markets, and did I mention liquidity? Most traders are going to have 1-3 contracts that make up the vast majority of trades they make, but stray into other contracts when either obvious setups come into play or their bread and butter isn't moving in a way that they can trade with confidence. There's no reason at all why you can't trade ES and NQ exclusively, and many reasons *to* do that. If you can find a winning strategy, you can scale it up to almost any level (talking retail levels) and have no problem getting filled on the spot. That said, you might want to consider the fact that the ES spread is 2.5x that of the NQ, meaning you're down more the moment you place your order. That's the main reason I've been favoring the NQ over ES, because if I want to scalp or trade overnight and decide to get out of the position quickly, you're on the hook for more with the ES. Other than that, there's no reason you can't stick to a single contract, but many would suggest dipping your toes in other waters from time to time to stay well rounded and aware of what other markets are doing.
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I would say that the dollar value of the ES tick ($12.50) can be a factor, due to the size of the spread and slippage, compared to NQ (tick value = $5.00) and YM (also $5.00).
The main thing may be to be familiar with how the contracts act and move. NQ will move more strongly than ES, which spends a little more time in ranges and is thought to be very slow by some....
The best idea might be to watch them, and YM, and see if they appeal to you, in terms of volatility, typical ranges and types of action, etc. Also, compare with other contracts to get an idea of what is out there.
Last edited by bobwest; July 27th, 2014 at 01:00 PM.
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I'd always considered the ES to be the hardest market you could possibly trade, and don't understand why so many retail traders( especially those starting out) are involved in it? Many will disagree, but I almost consider it a scam when "guru's" are trying to promote the ES to new traders. Everyone is also quick to mention the liquidity, but if you're a retail trader then liquidity is hardly issue( especially if your just starting out). All the liquidity in the ES does for you is create move efficiency, which makes it harder to get an edge. I'd be surprised if there were many retail traders who have exclusively traded the ES/NQ on a long term basis and come out on top, you're basically coin flipping with perhaps a small edge if you're exceptionally good- so you need a big account to begin with...
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A lot of that may well be right, since really, ES is where the huge traders go, and it's because they do need the liquidity.
On the whole, I think a person should look over the available markets, note their characteristics, see if they can get a handle on them, and try them out (sim first, just not sim forever.) Experience is the only way to know how you will do with any of them. And, of course, don't listen to any gurus -- if they knew anything real, they would use it, not sell it.
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Personally I started by just sticking with ES. However there's one problem, when you're looking at a session with just a 5 point range life gets very difficult - you have to enter on limit orders, and sometimes it's just way too tough to get a good move out of it.
I opened the door to both NQ and YM and find that it's the best decision I've made (TF has too much leverage, about 2.8 times of ES per contract). This way I look at three indices, and yes they mostly move together, but I find that one of them will offer a slightly better technical picture than the other. For example if I want to short I'll look for the weaker contract. If I see one has a better risk point I'll take that one. And when the range gets very narrow, it's way easier entering on NQ and YM than ES. Just my 2 c's.
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I have looked how trading was affected by both, and compared a year of simulated trades. First both ES+NQ, and next 2* NQ contracts, since both would be aproximately equivalent on margin need, ROI. I found it better to just trade 2*NQ instead of NQ+ES, drawdown was not effected, and NQ yielded somewhat better yield.
I would be interested in how others view this.
I think NQ is also scaleble, I donít see why you canít trade 50-60 contracts, when entering at different levels. ( I absolutely donít trade this size and donít know from practise, so correct me if wrong)
Like Fattails once demonstrated in a very good analysis, it is good to compare the impact of transaction costs. But you can only compare this when you know the appropiate SL/TP parameters.
One of my worst enemies are my own false assumptions