Curious. Why do so many newer (and maybe intermediate?) folks insist on daytrading the ES, rather than the NQ? The NQ seems to offer great advantages over the ES when it comes to risk v. reward. ES per tic = $12.50 NQ per tic = $5 Trading hours are exactly the same, and daytrading margins are nearly the same as well (at least through brokers I have looked at). Both instruments are 4 tics per point. The NQ has much better price action than the ES, on average. And trading futures is all about price action. So what is the reason ES is so popular?
ES range for friday 14Pts = 700$ NQ range for friday 42Pts = 840$ So Risk Reward is about the same. I look at both while trading but trade ES. More by habit than anything else or ES is cleaner.
There are many reasons, including: 1. Liquidity / volume is much higher in ES. Yesterday, about 8 times higher in ES; far more, when you also consider SPY vol vs QQQ vol; 2. Partly to account for #1, margins are generally higher on gross vol of contract for NQ; 3. More impt: QQQ/NQ are 100 stks, vs 500 for SPY/ ES, providing not only more liquidity, but more diversification; 4. AAPL itself represents more than 10% of QQQ/NQ. The FANG stocks + MSFT are close to 40% of QQQ/NQ. So trading a few options on FANG may be provide better margin/risk, vs NQ. But not better diversification.
See this article for a good explanation of the advantages of the NQ over the ES. Some traders like chop and are fine in the ES, others are breakout traders and trade the NQ. Liquidity is fine in the NQ unless you are moving a lot of contracts - like institutional. When the markets are moving the NQ has a greater $ range than the ES with a smaller tick, which equates to lower trading costs and more profits. http://www.tradingmarkets.com/recent/whats_the_easiest_e-mini_to_trade-640757.html
Think of it this way. What if the NQ had as bad a day as the ES, on 14 pts? 14 point range-bound movement on NQ would be $280. So $700 worth of struggle, or $280 worth of struggle? But the NQ probably never has such as bad ranges as the ES. *shrugs*.
It's kinda flawed ... Take the opposite. What if ES has as a great day as the NQ ? But 14Pts isn't such a struggle... Anyway =D There is no better instrument. Just preferences, strengths & weaknesses =P
I think you're missing the fact that is would be extremely unlikely for the NQ to move only 14 points if the ES moved 14 points. Granted, they are based on different underlying stocks, but I don't think they have every moved 1:1 in terms of points. If the ES moved 10 points, the NQ will move at least 20-30 points. For the above calculation where the range for ES was $700 and NQ was $840, and given the fact that most traders are not profitable, the instrument that moves less is probably easier to trade. The worry isn't on missing out from big moves, the worry is being in on big moves that go against you.
I certainly agree with both of these observations. Earlier discussions of this subject I've seen have typically contained many claims made for ES as "advantages over NQ" which actually apply equally to each. I would think that may well happen again, here. We'll see ...
Its funny because I was about to say that I disagree with both of these. The NQ tends to blow through levels lately because of a lack of liquidity, and with so many move levels, it makes stats analysis harder. Even using the DOM is harder because your'e only seeing 10 levels, and that can be worked through in a second or two. The risk vs. reward thing makes no sense and I don't see how somehow its better with the NQ vs the ES. If you wanna risk $100, you either risk 2 points in the ES, or 5 points in the NQ. If you think its easier to get 5 points in the NQ vs. 2 points in the ES, that's fine, but then this also means that it can go against you just as quickly. If a trader finds one easier than the other, its simply because he has studied it in detail, and it suits his personality more, but I don't think it means that an entire group of people would be much more profitable trading one or the other.
Just saying that with some plateform you can aggregate several price levels on the DOM. So it's possible to get the comfort the ES procure with NQ. However it has drawback as you can't trade to the tick.