spread vs volatility?

Discussion in 'Trading' started by abxs, Jul 8, 2006.

  1. abxs


    I've been daytrading futures (fdax, aex,...) which have very low spread cost in comparison to the volatility throughout the day. So these offer a lot of opportunities to gain money (or lose it).

    Now I'm looking for other options to extend my trading hours and I checked ES mini but the spread (0.25) is very high in comparison to the overall average movement (the bars/candlesticks are only 0.25 to 0.50 where the high-low interval of an average day is only 5 - 10 points.

    On FDAX the spread is 0.50 but the average bar is about 2-3 bars and the hi-lo interval throughout a day is usual 50-100 points... About 100 times x the spread, where ES it's only about 10 times...

    Which other contracts could be useful then that are liquide enough to daytrade?

    Any suggestions on the matter?
  2. Why dont you try SPY, spread is only 0.01 and it usually moves around a $1 range intraday.

    QQQQ moves only around 0.60 per day on a 0.01 spread, but it´s way more liquid than SPY, you can easily trade it on 10k shares or even more...
  3. Since you're daytrading, you want to focus on the most liquid contracts; i.e. eMini S&P, 10-year note & crude oil. The comparison you made with the bid-ask spread versus the average daily range was "arbitrary". One market may seem more profitable than another based on volatility but if you take volume into consideration, it should even out. If in the DAX/DEX, you're trying to make 2 ticks on a one lot, you can do the opposite with the S&P to "preserve" your profitability. Maybe you'd want to look at the Dow Jones or Russell contracts if you want something that moves around more. The european contracts should be in the summer doldrums until after Labor Day.
  4. good point. You could easily trade 200 contract blocks on the ES without afecting the contract´s trends too much...
  5. abxs


    I agree that it's easier to buy a large amount of contracts without influencing price... but that does not take in account the increased total transaction costs. If I can buy 1 contract and wait for a 5 tick move for instance, or I have to buy 5 contracts and wait for a 1 tick move... the latter will diminish by profits a lot.

  6. abxs


    I haven't traded a full year yet, but do you have any idea if European contracts are really that quiet in summer times? Are American contracts too? Because you mentioned "until Labour Day" so that 's about two months from now if I'm not mistaken the 4th of September...

  7. .........Yes.....yes.........and it's "Labor Day", not Labour Day. You'll get your volatility in September and October. Trust me on that!
  8. Well yes, if you go for only a 0.01 profit transaction costs eat you alive no matter how many contracts you buy.

    I wouldn´t advice anyone to trade ES for less than a $2 {8 tick} profit... another good thing about the ES is that each tick is .25 like the old days {$12.5 per contract}... so you can scalp a few bucks in a matter of minutes.
  9. Take a look at NQ. New 0.25 point spread, 5 point moves common. Come play with us!
  10. I´ve been learning the ropes at qqq just to jump into NQ once I get the hang of it.
    #10     Jul 9, 2006