More Trading the TF Tips - 5 Points
I've put out a few words on the sp500 futures or ES emini futures and everything remains the same with respect to the contract itself, but there are differences in execution. Trading the TF or Russell futures is a little bit different in the sense that with the difference in trading volume you can find yourself having trouble moving around larger trades. This of course can easily change in the future as the Russell contract gains more popularity in my opinion, but for now this is where we stand.
I'll do a quick reference of the trading volumes for the last 5 days of each contract at this point today. First we'll start with the ES then TF. ES Monday: 1,889,522 Tuesday: 917,534 Wednesday: 1,888,277 Thursday: 2,446,910 Friday: 1,528,635 Average: 1,734,176 TF Monday: 148,987 Tuesday: 121,733 Wednesday: 133,986 Thursday: 158,677 Friday: 142,639 Average: 141,204 Important: This is not a set up but it's important to understand this in terms of your own trading and strategy development
When I think of this I break it down into regular trading hours volume though I'm aware that this number is made up of all 24 hours of data. Simply take the 7 hours of a regular trading day and divide the volume(average volume in this case for understanding) by those 7 hours. After this divide that by 60 minutes so as to get a rough average of the amount of contracts per minute. Remember that these contracts do not come in any structure to my knowledge and you can have any number of trades in terms of single minute volume. Now I'll do the math and we can discuss what this means.
: (141,204/7) / 60 = 336
(1,734,176 / 7) / 60 = 4128
Now what we see is a large difference in the amount of contracts you can expect in terms of placing a trade per minute. For you to put on 10 contracts when trading the TF you'll in theory be 2.97% of a single 1 minute bars volume which can be tough to fill when others are trying to enter at the same time. We can Compare this with .24% when trading the ES. Now if you were trying to expand your size in terms of your trades; would it be easier for you to expand in the TF or in the ES? Obviously the ES allows for more room to expand in terms of execution and slippage, but that doesn't mean it is better.The further you try to increase your trading size in the Russell the harder it may get for you to execute the trades you were placing before. So for me when I'm trading I'm okay with a tick or 2+/- in terms of entry as well as a tick or 2+/- in terms of exit in which to ensure a fill. If I'm not willing to use this tick range I'm okay with limiting my size to ensure control.
I want to make clear that I'm not saying to limit your Russell futures trading, but rather am conscious of the idea when developing strategies and aware that this aspect of your trade needs to be included in development. When trading the TF make note even if way back in your sub conscience that trying to be greedy in a contract with much less daily volume can put you in a bind in terms of execution. This is not to say that you should stay away but be aware of this when entering trades. I don't feel you should worry about a tick or 2 on any trade, but even more so when trading the TF.
FULL RISK DISCLOSURE: Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.