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ES Mini/Micros Move Tick For Tick But different DOMSs
No broker has explained why the ES micro and mini futures move virtually tick by tick even though
the order books for each contract (DOM's) are different.
I get that the HFT and the arb robots make sure their is convergence to 1-2 tick, but is this the only reason why the micro and mini prices move together?
What is the purpose of showing resting limit orders that are different pertaining to each contract
if they move in tandem anyway? Of course if thee was no order books there wouldn't be business but why do they move almost exactly for different size?
Of course a big trader could move the micros hugely if it wasn't bought back in line with the mini
but I just don't understand why two contract with different DOMS move tick for tick.
Please enlighten me, it would be much appreciated.
Thanks for your reply so, the size of resting orders doesn't really make any difference? So the arb/HFT black boxes bring them in line, regardless of size traded? Any divergence between them is quickly absorbed and put back into line - so what would happen hypothetically if the micros DOM was ultra thin and the mini thick? Are you saying the boxes scale up and down and any arbitrage (if any) would be very short-lived?
Its a wired one, interesting fact that all the brokers I've asked this have just ignored me.
I am definitely no HFT expert, however, the micro contract is smaller by a factor of 10 so it would take a very large micro order to get out of line. I also believe the Emini leads the micro and the micro follows, but this dynamic happens in milliseconds timeframe so the human eye would not see the Emini leading. All my opinion and I could be wrong.
Thanks again for your comments, makes a lot of sense.
I think many people just take it for granted that this is what happens, but for an order flow trader
its a little unsettling seeing that the liquidity is somewhat irrelevant as the mini leads the subsequent price action, market orders hitting bids or lifting offers in the micros isn't really moving the market in the way the order book player expects it to.
I used to trade and watch the MES using the limit orderbook for entry clues and quickly realized the orderbook is almost useless for the MES. I started looking at and trading the ES orderbook a few months ago and haven't looked back.
Spot on my friend. Yep me too was just curious, reading order flow whether footprint, DOM, heatmap I found nothing useful with the micro, why I've been trading mini.
The micro lure traders though, because of the limited risk profile as opposed to the mini, but if your a short-scalper of which I am then if I cant use the order book to refine my entries then - nada.