Tick size has little if nothing to do with volatility. Reducing it to decent levels will simply leave more profit opportunity in the market for common traders, profits now flowing in the lazy deep pockets of the few. With the gross difference between the ES and the big contract, it is a no brainer to understand that the better connected CME crowd thinks exactly what you are thinking. They also act in ways you can't.
I don't trade es, but I know that lower tick size equals less average profits for discretionary traders.
From what I see, the tick size is basically the difference between the wholesale and retail price. We have to buy at retail and sell at wholesale. The spread is not there for the benefit of the small trader. Sometimes it appears that you can buy on the bid or wholesale price but what I see happening is you have your offer on the bid and the prices shifted down to take your offer. If you could consistantly buy on the bid and sell on the ask, it would be very easy to make money as the spread is more than the commission in most cases. Us small guys can't do much to force the tick size to be smaller. The only thing we can do is look for a market large enough where the spread is smaller and take our business there. If enough of us changed to something like YM futures with a smaller percentage spread, one way or the other the problem would be solved.
stocks when from fractions to decimals and it killed trading stocks for me... now take the same future contract such as ES and take it from 1/4pt spreads to 1/10th pt spreads... me says no thanks.. I like making an instant 1/4pt
That's an illusion. Take the ER2, you'll make as quickly 2-3 1/10pts. What's the difference? I have done extensive simulations between ES and SP. No doubt in my mind that you make MORE money with the identical strategy. It must be as some smart fast guys syphon some of your ES profits off in playing constantly - risk free - the SP/ES game. Keep enjoying your instant 1/4pts.
What about the Mini Russell ? 0.1 = 10 $....hmmm I'd like 0.1 = 5$ Finally.....We could have a tradable book! 2/300,000 contracts per day Any thoughts? Lorenzo
That's an excellent point. I'm sure that the CME is watching the growth in contracts in the YM vs ES very carefully and if they see a trend developing I'm sure they'll act to prevent loss of business. Incidentally does anybody know which contract is growing faster?
I haven't done extensive simulations but I have done some and my results are the same. Smaller tick size equals larger profits for same strategy.