E-Mini Trading: More on the Advantages and Disadvantages of the YM and ES

E-Mini Trading: More on the Advantages and Disadvantages of the YM and ES

There is no shortage of opinions among e-mini traders as to which contract is the most profitable to trade. In my opinion, the various financial index e-mini contracts all have specific advantages and disadvantages that an e-mini trader should consider. Many individuals trade ES because it is the largest and, in some individuals thinking, the most prestigious e-mini contract. There is no doubt that the ES is a heavily traded contract and very popular.

When choosing which contract you will trade, especially if you are a new trader, there are a number of variables you might want to consider, such as:

Which contract matches your trading style?

Which contract would best facilitate your trading based upon your futures account size?

Which contract is currently most active, or least active?

Which contract matches your risk profile most accurately?

As you can see, there are a number of variables (including some I have not listed) that should be taken into consideration when choosing an e-mini contract to trade. Further, I highly recommend learning to trade one contract at a time. That is to say that I do not believe in jumping from contract to contract is a good idea for inexperienced traders. Every e-mini contract has distinct idiosyncrasies that are inherent in that contract. I think it's important to learn one contract and become consistently profitable on that contract before branching out and tackling a new market.

But the question is a simple one, which is better to trade, the YM or the ES?

For new traders I recommend starting with the YM. In my experience I have had numerous unsuccessful traders who had concentrated their efforts on the ES e-mini contract with poor results. On my recommendation and some coaching, they began trading the YM contract and experienced a turnaround in their profits. It is my opinion that the YM is an easier contract to begin your trading career on than the ES. This is not to say that you cannot make money trading the ES, only to point out that the YM seems to lend itself for new traders to profitably trade.

Why?

For various reasons, the ES tends to have more backfilling in individual bars and groupings of bars. At times, there can be a tremendous amount of retracement in each bar which many new traders find unnerving. Not only is this retracement activity unnerving, it makes it very difficult to trade tight stops on the ES. My observation is that the YM tends to trend more consistently than the ES contract and does not have the level of backfilling prevalent on the ES contract. In short, the YM tends to be a better behaved contract than the ES; for new traders the less volatile behavior on the YM and enhances their comfort level.

Depending upon your trading style, the larger index size (the index numbers on the YM are 10x the size of those on the ES) allows a more exact entry and exit points. As a scalper, I am very cognizant of the exact point I want to enter a contract and where I place my profit targets. For a new trader, the YM provides greater latitude for exact entries and exits.

One tick on the ES equals $12.50, while one tick on the YM Inc. equals $5. During the learning phase of the trader's career I generally recommend trading only one contract. The lower tick value price on the YM allows a new trader to safely trade an e-mini contract without a tremendous amount of risk exposure. This fact alone often allows traders to trade in a less stressful environment and gives them the opportunity to focus on technique as opposed to the amount of money they may be risking.

To summarize, we have pointed out that there are many variables a trader should consider when choosing a contract to trade. I also believe it's important to learn to trade one contract profitably as opposed to jumping from contract to contract. I believe that new traders are well advised to begin on the YM e-mini contract because there is less backfilling, more precise order entry, and lower dollar tick values. Finally, my preference for trading the YM is aimed toward new traders, and once a trader can consistently profit trading the YM there is certainly no reason not to explore trading the ES or any of the other financial index e-mini contracts.

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