I remember when I first started trading I was fascinated by the idea of trading the ES.

For those that don’t know the ES is the US S&P 500 emini futures contract. It’s one of the most liquid and more popular contracts that people love to trade. I’ve heard it referred to as crack for traders.

However is it really the best option for new traders?

For whatever reason newcomers seem to be drawn to trading the ES.

Maybe it’s because it’s well know, easily accessible and it’s also easy to understand the fundamentals. There’s also a heap of “training” out there on how to trade it.

But in my opinion it’s those very reasons that make it a bad trade. All these things make it really competitive.

When I think about all the professional traders I know – none of them trade the ES.

The only exception is a few that spread the ES against another contract. But not one of them trade it outright.

So if the very best traders don’t trade it – why would a new trader want to?

So what should you be trading?

Well like anything it comes down to your personalty and style of trading.

I find that new trades are drawn to highly volatile, “exciting” products. Things like the ES or even straight forex.

The traders that I see making money trade the most unpopular, boring things they can find.

Bonds, Short Term Interest Rate (STIR) products like bank bills, random commodities. Things that are generally not going to be popular and even quite boring in many instances.

Why?

Well they’re simply a better trade.

Compare the ES to the ZN. The ZN is the 10-yr treasury note future.

While the ES zips back and forth and is really difficult to get a handle on. The ZN just grinds up and down. It ranges nicely. You can follow the other bond futures as leading indicators. You can really identify your entry points and get good fills. If you trade with the DOM it’s much easier to spot the big buyers and sellers.

It’s just a much better trade.

So if you’re struggling with your trading, don’t be afraid to look at a really unpopular products.

It might just help turn your trading around.

Many people have set times of the day when they trade.

For most it’s the open or close and many don’t like trading during the day.

For the most part that makes sense.

The open is when most of the larger traders (mutual funds, hedge funds etc) do their trading and as a result it’s usually when there’s the most volume.

This is often a good thing because you can get the most bang for your buck. ie. bigger moves.

However this might not always be best for everyone.

I like to consider the type of trader you are before blindly trading certain times of the day.

When I look at different trading personalities, they are usually broken down into those traders who like big breakout moves and those who like reversals or mean reverting types of trades.

If you’re looking for the bigger breakout moves then you should really be looking to trade the most on the open.

You will often get big moves happening right from the opening bell.

However if you like to look for reversals and things such as false breaks, you should be trading during the day as it might be more suitable to the types of trade you’re looking to take.

As I mentioned earlier, the big traders like to execute early.

If there’s no big traders around, when price breaks out of its range or breaks out of certain levels, it’s the big traders continuing to buy or sell that helps the move continue and follow thorough.

If the big guys aren’t there to begin with, it makes a large move a lot less likely.

Of course if the move is backed by something fundamental then of course it will likely follow through.

However it’s just a simple stop run – then be prepared for it to find it’s way back into the previous range.

So next time you start trading the open and you’re getting ready to take an early lunch – consider hanging around…

You might just find some good opportunities.

 

Good Trading.

RC.

I just had a realisation that there are probably a few readers of the blog that are interested in DOM trading and are still new to it.

I just had a silly story that I wanted to share, highlighting the importance of what platform you use. I know many new traders like ninja trader.

When I was just beginning I got into a training program.

I knew that it was all about using the DOM so I thought I’d get a jump on things, so I wanted to start learning it asap.

So I loaded up the ninja dom and sat there looking for setups using only the DOM.

Here’s the stupid part…

I sat there for 1 month. That’s 20 trading sessions. And I saw one “possible” setup.

Now what I didn’t realise is that you can’t really see buying and selling on the ninja DOM.

The DOM is too basic. It doesn’t show the volume accumulating, which is what you need.

While it’s pretty funny now, back then it wasn’t. Funny in hindsight.

My only consolation is that at least it shows I was committed.

So if you’re starting out you need a good platform. Xtrader is a good one but it is expensive.

If you’re using ninja checkout Jigsaw Trading. It’s probably what I would consider the next generation DOM and is pretty impressive. Ideal for ES traders and it’s proving to be very useful in thinner markets.

I hope that by sharing my stupid story, that I just saved a few people a month of their lives 🙂

Good Trading.