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Thanks for all the replies. Think I still don't quite get it. I ran the the same cost of trading for a 20 lot position. https://www.cmegroup.com/tools-information/cme-liquidity-tool.html#cmeLiquidityContainer And even that went from 1.2 ticks cost in Jan 2024 all the way up to 3 ticks cost by Dec 2024. So going for your 3 point ES scalp would cost you half of your profits... 3 ticks slippage X $12.5 X 2 (entry + exit) = $ 75 taken away from your targeted 3 point profit of $150. If even 20 contracts result in half of your profits getting taken away by slippage then, well, not sure, but thats more penny stock territory than a market you'd want to compound your trading account. I mean even now and every single day interest rate futures still show the size you were seeing in the ES up to a couple of years ago, 100 - 1000 plus size trades many many times a day. Thats what I don't get. Why do they still accomodate size, but the ES no longer...
Wow, from 2021 FINANCIAL TIMES Downward spiral in liquidity is leading to more market shocks Broad market liquidity — the ease with which investors can buy or sell a security without affecting its price — has been in a downward spiral for more than 10 years. Look, for example, at what has happened to trading in futures contracts on the S&P 500 index — typically the world’s most liquid equity index futures. Over the past decade their liquidity, as measured by market depth, has collapsed by around 90 per cent. This pattern is repeated across asset classes and regions. Depth is broadly a measure of the market’s ability to absorb flows without meaningful price impact in the underlying security. More specifically, it denotes the number of shares or contracts available on the bid or offer on a security at any point in time. https://www.ft.com/content/82845ef0-28a5-4f92-b40a-c4c59e17bc27
Googling around a bit, actually seems to be a bit of a recurring theme in recent years, this here from 2020: Near-Zero Liquidity in S&P Futures Means ‘Slippage’ Risk Is High (Bloomberg) -- Liquidity is vanishing for U.S. equity futures. Traders of S&P 500 e-minis are now only offering to buy or sell a few contracts at a time -- often numbering in the single digits -- compared with an average of more than 1,000 just a month ago, data from Deutsche Bank (DE:DBKGn) Asset Allocation show. Drastically thin markets are alarming because they can fuel outsize price swings. With futures markets being halted almost every day in the wake of wild swings, the lack of liquidity is so severe now that it’s fueling concern even among the pros who’ve lived through the worst market crashes in history. “There’s no liquidity in any market,” said Rick Bensignor, the founder of Bensignor Group and a former strategist for Morgan Stanley (NYSE:MS), who has traded the futures market for 40 years. https://www.investing.com/news/stoc...p-futures-means-slippage-risk-is-high-2118832
From this year: UBS note of caution - says S&P futures & stocks liquidity declines to rarely seen levels A UBS note highlights that liquidity in S&P 500 futures has dwindled to levels rarely seen since 2020, touching this threshold only four times in the past four years—most often in mid-summer. A similar trend is playing out in single stocks, exacerbating the magnitude of recent market moves. https://www.forexlive.com/stock-mar...dity-declines-to-rarely-seen-levels-20250318/
Price swings also cause thin markets. So its not just one causing the other. When markets are volatile and thin you have to go for a bigger profit target, with a smaller lot size and wider stop loss . That way you keep your risk constant and are less affected by the thinning of the market. If you continue to trade the same way after volatility jumps, you will get stopped out more often and also see more slippage.