Which contract should a beginner trade?

[Lopen 10]

I am interested in learning how to trade the eminis. I do like the leverage futures provide unlike stocks.

 

My questions is: for a beginner emini trader, what contract should I start with?

[ES 10]

Some good action in the ES, S&P 500 emini. Thats what I began with and still do till this day. Others may think differently though.

[Soultrader 12]

I recommend the YM or mini-sized dow futures. The ES is also good but you may need to use a wider stop compared to the YM. I think its traders preference.

 

Obviously the ES is more liquid. Its like the YM on speed.

 

I personally find the NQ to be useless. I wrote an article before for a different forum on "Why the NQ sucks"

[Lopen 10]

How about the Russell? Is it any good?

[ES 10]

  Lopen said:

How about the Russell? Is it any good?

 

No clue. I don't trade it.

[hanz 10]

ym u need 2 tick to b in profit while es u only need 1 tick

 

what's the recommended starting account for newbie?

[Nick1984 10]

Personall I found that stock trading was good for learning before starting in futures because of the leverage effect of futures u can blow up your account faster in futures than in stocks where u can trade off your own equity.

 

That being said the YM is a bit more beginner friendly. I've only started on the YM for about 2 months. The Russel is based on micro cap stocks which I don't like but thats a personal thing.

 

The ES seems to be the big boys league and there is a lot more liquidity than on the YM but I think you are also open to a lot more automated systems there as well.

 

Question to anyone who actually trades the ES on a regular basis: What is you definition of a big player on the ES in terms of number of contracts traded on any one position? On the YM you look for the 10+ contracts but what about on the ES? 30+?

[torero 10]

It's best to start with YM. ER2 is very volatile. ES has too many pros in there, it's good if you trade large lots.

[TinGull 10]

Soul...this is the one time I've got to disagree with ya. I've been trading NQ the past few days now and I wish I started out on this one. It's a great contract for beginners because the tick value is the same as YM but the range is less, so the risk ends up being less. You can find great setups that could use a 2 point stop on the NQ based on what the market tells you, and that equates to 8 YM points. Is the reward going to be smaller? Absolutely! BUT it gets your feet wet with real money without having to risk AS much. This is a contract I've been testing a new strategy on and instead of risking play money and not getting that emotional thing that we all love...I'm risking real capital and seeing how my emotions play into the strategy. So far, so great

 

I vote for NQ or YM, with preference to NQ.

[MrPaul 10]

Well as far as tick value is concerned these contracts may not be the lowest ( $10/tick Gold, 12.50/tick Corn) but Gold and Grains move fairly slow and give you lots of time to analyze then make a move. I know that the fast movements of the indices were tough for me when I first started.

[walterw 10]

  TinGull said:

Soul...this is the one time I've got to disagree with ya. I've been trading NQ the past few days now and I wish I started out on this one. It's a great contract for beginners because the tick value is the same as YM but the range is less, so the risk ends up being less. You can find great setups that could use a 2 point stop on the NQ based on what the market tells you, and that equates to 8 YM points. Is the reward going to be smaller? Absolutely! BUT it gets your feet wet with real money without having to risk AS much. This is a contract I've been testing a new strategy on and instead of risking play money and not getting that emotional thing that we all love...I'm risking real capital and seeing how my emotions play into the strategy. So far, so great

 

I vote for NQ or YM, with preference to NQ.

 

Hi Tin ¡¡ are you planning to share some charts with us ? , would love to see those NQ charts... cheers Walter.

[Guest cooter]

  MrPaul said:

Well as far as tick value is concerned these contracts may not be the lowest ( $10/tick Gold, 12.50/tick Corn) but Gold and Grains move fairly slow and give you lots of time to analyze then make a move. I know that the fast movements of the indices were tough for me when I first started.

 

Newbies should not be trading anything they know nothing about.

 

The grains (corn, wheat, soybeans) have lock-limit days that can leave you unwittingly stuck short or long in a position with no way out. 20 /c move from the previous settlement price (close) is the limit for corn, 30 cents for wheat, and 50 cents for soybeans.

 

Lots of profit potential, but very volatile, so I'm not sure what you've been looking at lately, since the grains have been on fire of late.

 

If you want SLOOOOOOOOOOOOOOOW, then I suggest you trade the Treasury complex instead.

 

30 year bonds has the largest tick value of futures ($31.25/tick), but moves comparatively slow to other - with the exception of economic news and reports, when all hell breaks loose.

 

Or try the benchmark 10 year notes ($15.625/tick) - either way there's plenty of liquidity in both contracts, with over a million of the 10 year notes traded each day (same volume as the e-mini S&P).

[brownsfan019 17]

  Nick1984 said:

Question to anyone who actually trades the ES on a regular basis: What is you definition of a big player on the ES in terms of number of contracts traded on any one position? On the YM you look for the 10+ contracts but what about on the ES? 30+?

 

Nick - I would say big is at least 100. And that's probably a very low number to start with. Just my opinion. It's all relative.

[brownsfan019 17]

I agree with Cooter - any newbies need to be careful when trading contracts that can lock down. That's a dangerous proposition if you don't understand fully what's going on.

 

I would consider the 'best' US indexes to trade as:

1) ES

2) NQ

3) ER2

4) YM

 

ES is the most liquid and I think you don't see as many volatile swings since it's an efficient market.

NQ is a nice market and I'd go to that in a heartbeat if the ES wasn't available.

ER2 at times is on crack. When you are right, feels great. Not so great when you are getting beat up.

YM is just slow and low liquidity. If you want to pop a 30 or 50 lot trade, good luck on the YM w/o some nice slippage and/or getting on someone's radar screen. Drop 50 on the ES and no one bats an eye.

[Nick1984 10]

Brown, slowly your advocation for the ES has made me very curious! Once I master all my setups I'm gonna try the ES cause now I got a curious itch I need to scratch!

[Guest cooter]

  brownsfan019 said:

YM is just slow and low liquidity. If you want to pop a 30 or 50 lot trade, good luck on the YM w/o some nice slippage and/or getting on someone's radar screen. Drop 50 on the ES and no one bats an eye.

 

If you can trade the YM at $5/tick, then you should be able to trade the NQ at $5/tick with more size, IMHO. Keep it simple. Once you've mastered the transition from YM to NQ, then move up to the ES (at $12.50/tick).

 

Just my two ticks worth....

[brownsfan019 17]

Cooter has a good idea there - if you want to get your feet wet, the YM could be a good place to start and then go to the NQ and finally the ES.

 

Nick - I've always liked trading the ES if nothing else b/c size is not an issue. I like the fact that trading a 50 lot does not mean much to those looking for 'red flags' or the infamous 'stop hunting'. And I like the 12.50/tick. With that, I can make ONE tick and cover all commissions and still make money. Just one tick. It doesn't sound like much, but when you need to exit a trade at +1 tick, you at least made money on the trade. With the NQ/YM, you'll need 2-3 ticks to do the same thing. Just something that works better for me.

[Nick1984 10]

So once u got your strategy down pat the ES sounds like a much more efficient market for scalpers. If you can cover your positions with a 1 tick gain you could drop 30-50 lots on and go for +5 to +10 and make a healthy living off that. Not bad.

 

I like cooters idea it sounds very reasonable.

[brownsfan019 17]

Nick - Here's how I would view the ES in terms of scalping:

 

+ Able to drop a decent amount of contracts with no problem.

+ If you can do it right, 12.50/tick will work for you.

 

- To exit a position, it's safe to assume the price must be traded through when using limit orders. Ex: if you are trying to take 2 ticks from your entry, you will actually need it to move +3 in your favor as the 'line' to get filled on the ES is rather large.

- If you thrive on more 'wild' spikes (like ER2), you won't see them on the ES nearly as often. Again, if you need those type of moves, the ES will be hard to trade. If you don't want some wild spikes, like myself, then the ES is a more 'smooth' market in comparison.

 

I'd suggest testing your ideas out on a simulator, but you need to find one that is realistic to how the ES actually trades. There's too many that assume you get filled if your exit price is just touched. Not so in real-time.

[Guest cooter]

  brownsfan019 said:

 

I'd suggest testing your ideas out on a simulator, but you need to find one that is realistic to how the ES actually trades. There's too many that assume you get filled if your exit price is just touched. Not so in real-time.

 

Unfortunately, the OpenECry OEC Trader simulator is one of those that is so "loose" that it triggers limit orders as if they were "market if touched" orders.

 

Pretty poor and shoddy implementation, IMHO. It suckers newbies into thinking that real world trading would match this performance - which, of course , it won't.

 

I did like the Transact AT simulator (same as Infffinnity) since they actually recognized this limitation and made certain that it either trades thru the level on the sim or sits in the queue for a period of time.

 

Your real-world expectations and experience may vary either way.

[wsam29 10]

Start with a market that suits YOUR personality.

 

They all act differently.

 

Sit, watch and feel how each market moves. They are like women, no one are the same. Learn their behaviors and slowly trade 1 or 2 lots at a time. The tick value should be irrelevant because once you start adding contracts, they start to go up.

 

This is part of the learning curve.

[wsam29 10]

  wsam29 said:

Start with a market that suits YOUR personality.

 

They all act differently.

 

Sit, watch and feel how each market moves. They are like women, no one are the same. Learn their behaviors and slowly trade 1 or 2 lots at a time. The tick value should be irrelevant because once you start adding contracts, they start to go up.

 

This is part of the learning curve.

 

Forgot to mention, don't just limit yourself to the stock index futures.

 

There are plenty of electronic markets now, not like when I first started. September 1998.

 

The electronic meats has fairly low volume, but you can use the pit data and enter limit orders on the electronic side and hope to get filled. From what I understand the NYBOT products now are also electronic as well.

 

Coffee and cocoa, they spike and jump and come crashing down, really crazy market, technicals don't really work in that market. I've only traded cocoa a fee times.

 

OJ, sugar, they are slow, not really day trading products, but once they move, they can trend for a long time. I still remember buying 5 OJ contracts around 65.00 right before the hurricane. Well lets just say, OJ at the time was near or at its lifetime low, all one had to do was hold it and let the market do the work. *sigh* Those are once in a lifetime type trades that make trader's famous if they make a killing.

 

Sugar at one time was around 3 cents a pound.

 

Just don't limit yourself to the popular products.

 

Just remember, you're also trading against other people and well, lets just say, the moment you enter the trading arena, you are trading against seasoned veterans right off the bat and they will not feel bad about taking your money. Heck I've put a few of their kids through school for sure.

[brownsfan019 17]

winfred gives some additional options; however, I would suggest any new trader stick to the ES, YM, NQ or ER2. The reasons are for what Winfred quoted - other markets have much lower volume, which can lead to wild spikes, lock downs, etc. You are not going to see lock downs in the main US equity index products. The last thing a new trader's account can withstand is a huge loss in a low volume product.

 

Don't make the mistake of thinking that just b/c it's electronic, all things are equal. There's a reason why the US indexes are some of the most heavily traded futures contracts daily.

[rock 10]

YM

reasons already stated by posters

[The Bear 10]

  rock said:

YM

reasons already stated by posters

 

I say you start with YM - one of the other benefits is the data feed is still free. If you start paying data fees, that's just more money you are going to have to make just to break even.