Liquidity in mini Dow (YM)

Discussion in 'Order Execution' started by Zen Student, Nov 5, 2011.

  1. I am working on a price and time model for trading this market.

    I am concerned initially with trading the open. My statistical analysis shows that there is often a trade within the first seven minutes of the open, and such trade is good for a minimum of 20 points. This is $100/contract gross.

    Ignoring scaling out for the time being, how many lots could I practically trade? I know exchange initial margin is around $5k and Interactive Brokers give a 50% initial margin discount for a day trade. This means I can trade 1 YM contract per $2,500 balance. So if I am making $96 a day net on each $2,500 this means that I am doubling every 5 trading weeks.

    After a year, I should be trading 1024 contracts. YM depth seems to be 30-40 contracts, so surely this is not possible. Will I hit problems with my strategy after only six doubling cycles, or 30 weeks?

    Does anyone here scale in this way and what are their results?
  2. nkhoi

    nkhoi Moderator

    theoretically you can trade as many as you want, there is no limit in sim.
  3. lwlee


    There is a decent amount of correlation with the ES. ES has better liquidity. One suggestion is to open a corresponding position in that market.
  4. Funny. :)

    Zen Student,

    Are you perhaps putting the cart in front of the horse?

    Provided that you were able to develop such a model, yes, you would eventually run into liquidity problems when day trading the YM contract.

    I do not have intimate knowledge of the YM contract, but I am quite sure that while it has its idiosyncrasies, it moves in a similar fashion to big brother ES.

    Why not develop your model for that market instead?

    Comparable volume from last Friday:

    ES 2,242,372

    NQ 235,043

    YM 114,787


  5. the1


    Many brokers offer $500 intra-day margin. No need to trade with IB whose requirements are much higher.
  6. AFAIK those $500 intra-day margin brokers won't let you do 1000 contracts on $500 per contract margin.
  7. Arnie


    The depth in YM is more than it appears.