I mean, there's more liquidity and leverage compared to buying stocks. Also, don't scalpers and swing traders base their decision on buying or selling a stock based on the how the index is trading for the day; so why don't they just primarily focus on trading the ES, YM or any other contracts and have the added benefit of leverage, liquidity, and simplicity(trading one specific contract as opposed to trading several different stocks)? Is there something I'm missing? If you can develop a strategy that consistently squeezes out, on average, 2 pts a day for 1 ES contract ($50/pt./es contract) which comes out to $100/day/ES contract, you can apply that same strategy with 1000 contracts and make a $100,000/day without many liquidity issues, whereas you buy a small or midcap stock with $3000 compared with $3,000,000, you would clearly have to wait a much longer time for your positions to get filled with the $3,000,000.
You can trade more than 1000 contracts easily on ES, the liquidity is there. Heck, you can trade probably 10,000 contracts over a day without problems on fills, and make at least $1,000,000 per day. No problem.
Exactly my point. You would think a lot more people would be trading the index futures based on that fact alone.
Are you trading futures profitably? If I had a larger account I would be trading stocks. There are some advantages to trading futures but I think there are many more succesful approaches to trading stocks. Most prop firms dont trade futures.
Remember most people start with non-margin accounts. They can't trade futures or short stocks. Look at how quickly QID picked up volume. Not everybody makes the transition to futures from there. Some find a method that works for them with (long only) stocks/ETFs and stick with it, even as accounts grow to 7 and 8 digits.
I have been wondering the same question. Since stocks in sectors tend to move together a trader might as well just trade the index of that particular sector and get the needed diversification. Not to mention there is no need for doing research, it is the same vehicle everyday. But if everybody were to move to indexes, then who would make the underlying stocks move??
IT4M, I agree that there seem to be many advantages in index futures, including leverage & limited manipulation. My edge only exists in the index futures, so I have no real desire to move to stocks. The other reason I steer clear of stocks is that I hate the idea of some analyst dork issuing a random sell/buy note. Although I'm sure that is all very tradable for the experienced. I think Rearden Metal summed it up quite well though, Futures have a higher level of professional participation: ".....Playing individual equities (Not ETF's or indices) is the very best game of all. Why? Think about who the other market participants are. Long term money is good. Dumb money is better. Futures & options have a lower ratio of long term & dumb money flowing in and out. Forex? The very worst game of all." J