Swing Trading Strategies & Stock Picks Since 2003

Over the weekend I received from a trader what I feel like is really a three-part inquiry. Rather than create one long multi-subject post, I’m going to split the questions out into three seperate posts to focus on each subject. Here’s the first part.

I am trying to build my trading plan, and I feel I would be comfortable trading index mini futures. I would have to choose among ES, YM and NQ. Which would be more advisable, with an initial account size of $50,000?

With an account of this size, really any of the mini futures are perfectly reasonable. The S&Ps (ES) are by far the most actively traded and liquid. There’s somewhere around 3 million contracts worth of open interest in the mini S&Ps, whereas the mini NASDAQ is more like 400,000.

Liquidity and such aside, it’s important to understand the difference between what the three contracts represent. The YM is the Dow, which is a 30 stocks index of so-called industrial companies. That’s going to generally be a pretty cyclical group. The ES obviously is for the S&P 500, which is meant to be the 500 highest market cap value companies. That is going to be a group which is generally going to do a pretty good job of tracking general economic conditions. Meanwhile, the NASDAQ futures are focused on the often more volatile tech sector.

The point is that each index has a different characteristic. You may find one suits your particular trading style better than the others. It’s worth experimenting.