Narrowest spread instruments for trading

Discussion in 'Order Execution' started by shovel52, Oct 4, 2019.

  1. shovel52


    After years of just eyeballing price direction, and practicing price action coupled with volume, I am getting pretty good at calling direction. I am ready to get started real time.
    I have started practicing on Trading View paper Platform.

    Now I need some very hard to find information on the best instrument to trade. and perhaps ..time frame. I have been practicing on the E mini micro (MES). 1 minute chart. My first paper trade on Trading view's paper platform looked great! 20 ticks..I was jumping for joy until I looked at the record of the trade,....$2.50 loss..the bid ask spread ate all the profit for a loss. I got filled at the ask price which was where I pulled the trigger to exit the trade. typical beginner stuff even for someone who has been studying
    indicators etc. for years..

    First beginner question.. Is this typical of all trades? The MES has a ridiculous bid ask spread so it is pretty obvious that a 1 minute chart is not going to work, not on a low volume instrument like this one or is it? Going up several time frames might, 60 minute
    maybe, but now you have to change your whole mind frame, and the setups are going to be once in a blue moon..I would like to get the day over with in a couple of hours in the morning..

    Second beginner question..I have searched and find all kinds of people that like the MES. Why? has to be only because you do lose your butt in the beginning phase, so how to you trade it with the ridiculous spreads? What do people use for scalping? I
    heard one person say that he trades a stock that only has a 2 tick spread, are there instruments around like this? I would really like to stay with the 1 minute chart. and out then up.

    So here I sit. I think I could be good at this, If I can ease into the second phase of trading with the right instrument and time frame..Anyone with any suggestions on
    stocks or instruments with decent spreads? I would like to get filled at least somewhere close to where I pull the trigger, is that possible? just start with a few shares.etc. etc. By the way, I don't need the money, I don't have to worry about that, I have a $20,000 account, and could put another $50,000 if I wanted to, this is as much for challenge as for money..I need to find the right trading instrument.
    Hopefully there are other novices here that can use this post, These questions are hard pressed for answers.. How do people scalp? Do you have to ride through the spread to collect a couple of ticks?
  2. Spot currencies exhibit the tightest spreads bar none. Just a fact. What you do with that fact is up to you. It's also the most liquid market in the world with 6 trillion in daily overall fx exposure and 2 trillion in spot currency notional traded daily.

    MoreLeverage and Real Money like this.
  3. Real Money

    Real Money

    Trade ES, NQ, YM, RTY, UB, ZB, and ZN. You can spread trade index and rate futures with $70,000 margin.

    The benefit of having more money means that you can use leverage to offset exposure, thus lowering overall risk. Buy a few UB and sell some ZB means leverage with lower risk. Trade outright and/or spread. ES, ZB and ZN are the most liquid of the ones I mentioned here.

    I prefer to spread indexes, rate futures, and even rates vs index.
  4. gaussian


    I don't know why people spread indexes. The spread on an index is basically the lending rate of money, and if that's the case you can trade outright eurodollar contracts for less margin.
    .sigma likes this.
  5. Real Money

    Real Money

    Spread the front month not the calendar. The time spreads aren't even liquid.
  6. R1234


    Thought I saw 1 tick bid ask spread on MES and other micros most of the day. Looks very liquid to me...
  7. Real Money

    Real Money

    1 MES contract has $14,760.05 cash value.

    One round lot of SPY has a 1 cent spread (usually) and is $29,435.

    The ES has a 1 tick spread and each tick is $12.50 so if you are trading normal exposure for your account you should not have liquidity problems.

    The MES is not designed for tick scalping (1 minute chart) compared to the other instruments. However, it is still tradable for small notional amounts per trade.

    You say you like 1 min chart and need liquidity, then you should say how much notional exposure you are meaning to trade.

    Maybe you would prefer SPY for short term momentum (1 min chart).

    The only problem is that if you are trading this fast of moves, then you might be playing in a very serious arena with algorithms and exchange member firms that have execution advantages that retail does not enjoy.
    Orbiter likes this.
  8. At what time of day were you trading MES? It is my impression that it has a rather tight bid/ask spread during the times of large trade volume. Of course, if you try to trade it outside regular trading hours you will be confronted with much larger spreads. But the same is true for other highly liquid instruments such as ES, CL, ZN.
    If you don't want to use leverage as in futures, you would have to look at company stocks or equity index ETFs with high daily volumes. Some examples include AAPL, SPY. They usually have a 0.01 USD bid/ask spread during regular trading hours, and their price is rather high, so the spread as percentage of the price is low.
  9. shovel52


    Thanks for the replies..let me ask another one..This mornings trade looked like this..
    buy 1 MES at 2922.50 and exited at 2925.75..that is 13 ticks gain supposedly ..When I pulled the trigger,price was at 2922.50
    I got filled at 2925.75, that is 13 ticks away from my entry, I used a market order, should I have used a limit order, and what chances would a limit order have at getting filled..on a breakout, How do you make money getting filled at 13 ticks away from your trigger? This was 8.30 this morning central. By the way, did you know that the MES follows the SPY when it opens in the morning? about one bar behind, it's pretty accurate and dependable..but who cares if you are getting filled 13 ticks behind it..
    Last edited: Oct 5, 2019
  10. Are you sure that you are not looking at delayed price data?
    Be aware that at the stock market open the price moves can be rather violent and the delay time between you pushing your mouse button and the order is filled can have a substantial influence.
    Both MES and SPY follow the S&P 500 index, so it is obvious that both should move in the same way. If they're not then someone will arbitrage this and make sure that they do.
    #10     Oct 5, 2019
    murray t turtle likes this.