ES, NQ, YM: Which Emini Contract Should You Trade

There are a multitude of futures contracts available to trade, and choosing the proper contract is a matter of great importance.  Each contract has a distinct personality and pattern of price action.  It is little wonder that novice trader bounce from futures contract to futures contract trying to find a profitable formula to trade.

From the onset, I want to point out that my personal style of trading is scalping and this discussion will center around that particular style of trading.  Developing your style of trading is another important variable in your trading career, but that would entail another discussion in itself.

On a further note, I only trade the financial domestic financial indexes, which leaves out the metals, grains and a host of other agricultural futures contracts.  This is also a matter of personal preference.

So with my caveats in place, lets talk about three financial indexes and the futures contracts tied to them.  The ES is the grandaddy is Emini futures contracts, and trades well over a million contracts a day.  This volume creates tremendous liquidity in the ES contract, and allows a trader to tender larger contract order with less slippage.  (at least in theory)  I have traded up to 80 contracts on the ES without problem.  On the other hand, the ES contract can behave very erratically at times, for various reasons.  Many traders blame black box trading (computerized trading) for the ES contract sometimes erratic behavior.  There are several other theories about the ES contracts price action, and all are basic conjecture.  The point is, I find the ES one of the most difficult contracts to trade.

The YM and NQ contracts are rather tame relative to the ES contract, and on numerous ocaissions I have observed novice traders failing miserably on the ES, and advised then to switch to the YM, with very positive results.  It is my opinion, and nothing more, that the YM and NQ are less "manipulated" than the ES and hence, easier to trade.  I have no emperical evidence to back up my claim...it is simply my opinion, based upon years of observation.

Of course, the YM and NQ contract volume is significantly less than the ES, and liquidity on large orders could be a real problem.  I seldom trade more than 5 contracts on the YM, and don't venture much past 10 contracts on the NQ,  Again, the issue is potential slippage, which can cost a scalper a significant amount of profit.  I also want to point out that those figures are simply the numbers that I am comfortable with trading, there may be traders who have had success trading large contract sizes with success.  That has not been my experience though, so I stick with smaller orders on the NQ and YM.

As I said, each futures contract has a distinct personality, and I strong recommend trading just contract, preferably the YM, until you can consistently profit.  Jumping from contract to contract in search of profits is a recipe for disaster.  For novice traders, paper trade the YM until you can trade profitably before you move on the ES contract.  It could save you a lot of money in the long run.