How to successfully trade the russell 2000 emini futures part 2
But, popularity as measured by volume does not always mean superiority of profit potential. Other e-mini markets exist for valid reasons… some darn good ones at that. ES futures are most liquid, most popular, and most churned by blackbox computer programs of all.
That fundamental truth is due to professional-level players working big orders with varied agendas which have absolutely nothing to do with accumulation or distribution patterns. In addition to that, numerous blackbox computer programs exist solely for the purpose of scalping sideways profit potential from ES markets versus something else.
In other words, a lot of big money positions trade inside the ES with absolutely no regard to direction. Matter of fact, these program types work to keep price action sideways by arbitraging price discrepancies between different symbols. Some retail traders develop strategies to take advantage of that predictable sideways behavior the ES has, to a degree, that no other e-mini index market does.
There are also periods of time where the ES is directional and trending, too. Overall it is the most congested e-mini symbol with the least amount of straightline price movement on a consistent basis, for the reasons described above amongst many others. Russell Futures By far the most dynamic e-mini index future of all is the Russell TF contract.
In other words, the TF contract is a leading indicator for all. More importantly, the TF futures contract is a highly tradable instrument itself. In the past from inception to September it traded on CME exchange.
Russell e-mini traders worried that the ER2 leaving its home base at CME in exchange for a different exchange would ruin the contract. It did result in lower volume traded, for a couple of reasons.
Part of that was the usual uncertainty that any change in life creates. That shifted many would-be TF traders into other symbols or sidelined cash until the dust settled. Now that the dust has settled, we learned that the TF futures are a bit more extreme on both ends of behavior than former ER2 was. When the TF is going directional, it is a straight arrow with nil pullbacks or counter moves. When TF is going sideways, it will roll through a wider hi-lo pattern now than it ever did before.
Whereas before the old ER2 was easily cross-margined in spreads that arbed price variances between the symbols, now the margins required are much higher for such spreads between ES or NQ and TF. That type of sideways throttling relationship no longer exists between them, because margins are fractional within CME products spread. Furthermore, when spreads within the CME were active and exchange went offline for trading access, it was no big deal.
But spreads open across two different exchanges where one of those may go offline exposes the other open leg of that trade to unlimited potential loss. Spread traders abhor risk, which is part of why they trade spreads instead of linear positions in the first place. For those reasons and more, e-mini spread traders pretty much leave the cross-exchange spread arbing alone.
Which is one major reason why the TF is considerably smoother and more directional than other e-minis… lack of sideways arb position pressures. TF futures are trading about half the overall volume that ER2 did before the change. The average daily volume in TF is roughly , contracts, whereas the ER2 did average somewhere around , to , contracts daily. When volume and open interest fall below certain zones, methodical price action turns spastic and erratic.
Questions on volume and open interest are something I get plenty of on a regular basis. Block orders to start or end a session will send the tape absolutely haywire in split seconds. That of course is due to big block orders being filled across several strikes which then dominos other resting stop orders that trigger others in tsunami fashion.
These violent whips happen in mere seconds, with absolutely no time to react for trade entry or management decisions when they go off.
One of many reasons to ALWAYS have resting stop-loss orders in place when trading e-mini futures, regardless of market or symbol. For example, a short trade at Said another way, price movement back and forth through a 2-tick spread can just as easily result in a market ticking back in your favor when stopped instead of pushing further for greater than expected loss.
The assumption is a stopped-out trade being one sided event. Keep in mind there are orders resting at every strike going the opposite of yours. If your buy stop at Two sides to every order on each strike. When trading less liquid instruments, slippage can go either way depending on which size is greater at the strike. If your trade happens to be within the bigger size collectively, your slippage if any will be negative.
If your trade happens to be within the smaller size collectively, your slippage if any will be favorable. Many times there will be no slippage in TF at all… positions entered or exited are filled on the mark. Of course there are reasonable size limits to how many TF contracts can be traded before persistent slippage becomes an issue. Someone trying to fill 20 contracts opened long or short on limit orders will experience numerous partial fills on profitable trades.
Losing trades will always fill complete orders because the market is moving against you. Heck, you can fill hundreds of contracts between entry and stop if the market is On the other hand, if the same scenario sees TF price action trade to Market orders to open will completely fill, with some degree of slippage involved.
What commonly happens with bigger orders will be for example Remember, there is never a problem getting complete fills in any market on all losing trades when price action moves against.
There is often a problem getting complete fills in the TF specifically when price action works out in favor of the trade. If trying to turn contract lot positions short for example at If the market is trading below there and expected fill happens with a price rise from below into the Therefore, if price action stalled out just below If price action rises through The net average fill would be If price action is trading above and falls thru your trigger on a breakdown sell, the entire position would fill as price action dropped in favor of momentum lower.
Staging orders across spread tick strikes to enter on pullbacks lessons the occurrence of partial fills, within reason.