Starting in e-mini futures trading - ES or YM or perhaps something else?
E-mini futures contracts have become a trading instrument of choice for many traders, especially day traders. The field that barely existed only 10 years ago is now booming with new traders joining the older ones every day. With many brokers, their numbers growing as well, dedicated primarily to serving this class of traders, this trend is likely to continue.
E-mini futures are smaller contracts of more established pit-traded futures. Their smaller size means that their margins are smaller too, which obviously appeals to many retail traders, folks who can spend only a few thousands or so dollars for this business. This is what the mini aspect of these contracts is about. Moreover, unlike their grown-up brethren, e-mini futures have always been traded electronically, which is what "e" in their name stands for. Because of that, they can be relatively easy to trade over the Internet.
A decade or so ago, there was basically only one e-mini futures contract that one could consider for trading. It was ES, the e-mini futures contract for Standard&Poor 500. The pit contract for this futures market has been around for much longer and had been well established by then, probably better than a futures contract for any other US stock index market. It was this popularity of the pit contract that made many traders consider its e-mini version. That's how the trading volume of ES started to grow and today is the biggest among the futures for US stock index markets.
Many new e-mini traders start their careers with this contract convinced that its dominant volume will help them in trading.
But is it really the best e-mini futures contract to launch your trading career with? Are there other e-mini contracts that can be more appropriate for the beginner to this field?
The answer to the first question is: that depends. Before I will elaborate on it, let me first tackle the second question in greater detail.
There are quite a few other emini futures contracts among US stock index futures that attract some attention among day traders. One of such contracts is the emini contract for the Dow Jones futures, whose symbol is YM. Its ticks are smaller, only $5 per tick, compared to $12.5 for ES. There are also contracts such as NQ or TF, both of which have smaller ticks than ES.
It is because of this smaller tick size that YM can be a better trading vehicle for new traders. The smaller the size the finer your entry can be, which in turn means that you are more likely to squeeze out profits, at least tickwise, not necessarily dollarwise. This and the fact that fills seem to be better, easier to get, than in a very competitive ES, are the main reasons why YM can be a better choice for the first emini market to try your luck in. The same is pretty much true about TF, the emini futures for the Russell 2000 index. It too can be used as your first e-mini futures contract, its tick size of $10 being only a bit smaller than that of ES, but with pretty good fills, nevertheless.
On the other hand, ES is more dynamic than YM, so you may find out that squeezing out only 3 ES ticks ($37.5) is easier than 5 YM ticks ($25) and for this reason ES can be better than YM, although hardly better than TF.
To summarize, while ES is still the most popular contract among e-mini futures traders, including the beginners, which guarantees good smooth trading due to the dominant trading volume of this market, it also makes sense to start your e-mini trading with YM or TF.