Slippage: ES Emini Trading
Back in the days of open outcry trading, the futures market was not nearly as efficient as it is today. Online trading has greatly improved the quality and quantity of trading and executing trades.
But there is still one little nagging issue to beware of: slippage.
From Wikipedia:
"With regards to futures contracts as well as other financial instruments, slippage is the difference between estimated transaction costs and the amount actually paid."
There are many other definitions on the internet, some very complex, but I believe the above referenced quotation is simple enough for our purpose. Slippage occurs when you sell or buy at a specified price and your actual execution price is higher or lower than your specified pricel. Even more likely, slippage can occur when you have a stop price specified and the executed stock price is higher or lower than you intended stop.
Slippage can occur for a number of reasons:
1. You are trading in a thinly traded market and there are simply not enough traders to fill orders in a timely manner.
2. Your brokerage software package is not efficient and is unable to execute buy/sell orders on a timely basis.
Whatever the reason, slippage can sap your profits if you don't pay close attention to your execution prices and specified prices.
Very thinly traded markets, say copper, often don't have the liquidity to handle large market orders. If you intend to trade thin markets, you will need to cut down your order size to accommodate the reality of the thin market.
On the other hand, markets that have a high degree of liquidity are excellent for avoiding slippage. For ES contract, for example, is one of the largest futures contracts, and I experienced very little slippage when trading this market. More than a million contracts, some times even higher, are traded daily on this exchange and you will have little trouble getting your trades executed and filled in a timely manner. I have trade up to 100 contracts on the ES and had excellent fills.
Pay close attention to the manner in which your broker's software fills a trade. Sometimes slippage can occur because the firms software is not "up to snuff" in the digital age and cannot keep pace with the fast moving, highly liquid markets like the ES.
For whatever reason, slippage is a real cost in your trading operation and you should do what it takes to make sure you trades are executed and filled at your specified parameters. The failure to do so will result in real costs to your trading account, which is an undesirable outcome.
Questions and Answers
Not all emini contracts exhibit the same trading characteristics, and each has its own personality. If you are struggling on the ES contract, consider trading the YM contract and see if your luck doesn't improve. There are good reasons why it will improve.
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.
The growing Indian market is attracting investors on the ground of the promising and assured return. The online trading is very popular these days and most of the people prefer it for quick money.
Learn the fundamentals of committing cash in Stocks, Ties, Common resources, Merchandise, Actual estate We create Getting Inventory Industry straightforward for you with a comprehensive guide to committing. Any effective stock market buyer must be acquainted with the fundamentals of stock market committing.
Online share trading is one of the most popular financial markets in the world today; however, any people are hesitant in starting due to not knowing a lot about it. This article will help explain what online share trading is all about, how you can get involved for a low initial investment and what to consider before, during and after trading.
The stock market is mostly used to create money. . I am sharing my investment strategy as a retail investor. Most financial experts recommend investors to initially contact a financial advisor. Able to provide advice, it can ensure that the money an investor get a good return or not.
This article has discussed about the importance of Stop orders. Stop orders act like the life jackets
It is not unusual to hear individuals ask about trading the "high probability" gap trades. It seems that there is a perception (by some traders) that e-mini gap trading falls into the sure-fire trade class of trades. Note: I have yet to locate a sure-fire trade in several decades of trading.
I've been writing some about trend lines lately and noted my observation, in several of the articles, of the declining use of this valuable charting tool. I don't have any illusions that a couple of articles by a relatively unknown author will have any effect on the use of these lines; but if just a couple of traders see the value of trending lines and e-mini trading, then I suppose I have done my job.
I like trading indicators that help me understand e-mini trading in real time. I can think of no better real time trading experience than watching price action move toward a known area of support/resistance (SAR) and evaluating what the possible outcomes may be when price collides with support lines or resistance lines.
Given a choice of just one e-mini trading indicator/chart pattern I would select, hands down, support and resistance. In my little world of trading, support and resistance (SAR) reign supreme.
Trend breakouts and breakout volume share two important factors (among a list of other important variables) in shaping the likelihood of a successful trend breakout or breakdown. For obvious reasons, volume in a specific direction is a key ingredient in a successful trade.
Discuss this Article
