By David Adams - The “big” money in emini trading is in the ES (S and P) contract and most traders relish the idea of cashing on the allure this contract holds. And it’s true, the ES contract commands a tremendous amount of participation, results in a huge number of contracts traded every day. For the average trader, slippage is not a real worry on the ES contract because of the overwhelming volume traded in this contract.
The YM contract, on the other hand, seems diminutive in volume stature when compared to the ES contract. And while you can easily trade 100 contracts at a time on the ES (which I personally never have), 100 contracts would stretch the liquidity of the YM contracts volume. One quick note, all of the open interest is not correctly reported on both contracts, as some firms use stealth type technology to conceal a portion of the volume they are trading.
Just the same, the ES is certainly the granddaddy of the emini contracts. As I have mentioned in other articles, the futures markets are a zero-sum game, which is to say that for every winner there is a corresponding loser. This contrasts to the NYSE where unmatched trades are covered by market makers who make sure there is a trading market in their respective stock regardless of the short or long volume.
Did I mention that some of the best traders in the world trade the ES, and they are, in essence, your opponents in the emini trading game? Further, there has been, in recent years, rampant speculation by black box systems on the ES, which many blame for some of the irrational behavior the contract exhibits from time to time. I will leave conspiracy theories for you own judgment, but the ES can, at times, be a frustrating contract to trade.
The YM contract on the other hand, is a more genteel contract to trade. I have watched many traders fail miserably on the ES and switch to the YM with astounding results. In my opinion, the YM is an easier contract to trade as it more accurately reflects theh real market action occurring in the contract. It seems more unfettered by random and inexplicable price action you can often find on the ES. Though the market may seem a bit thin, at times, I have never had serious slippage issues trading ten contracts, and have heard similar comments from fellow traders.
So if the ES has been a problem to trade, try switching to the YM for a while and see if your results don’t improve.