While talking with a couple of fellow futures traders Friday, we started talking about our journeys and testimonies to becoming better at this crazy thing called trading!
Invariably, the Psychology of trading came up in conversation with little resistance! Heck, let’s face it, there are thousands of books written
on using psychological techniques to improve almost everything that we do as humans.
There are “Trading” Psychologists that get paid handsomely for helping traders improve just a couple of percentage points!
Interestingly, when you combine something that is a learned skill, that has a
decent component of “art” to it, and the outcome/success has currency attached ..you get a recipe for psychological chaos!!!
Our conversation continues, and I begin showing some “dollar cost averaging” techniques with the trend, and what we each consider the minimum
number of practice/paper/simulated trades that should be taken before trying [said] trade with live money. The consensus was that 250-500 trades
would be sufficient (assuming that you have already been trading live successfully!) Immediately we discuss what is success as a trader? One of the
other traders discusses how many friends and other traders that they’ve known that cannot conquer the apparent canyon from LIVE simulated success to LIVE “real currency”
success! (albeit there are the noble few that bridge that canyon as though it’s a minor speed bump)
The above preamble is to set up what ended up being a great discussion about the pros and cons of the Micro ES (MES) at $5 per trading point vs the ES at $50 per trading point.
One of us had hardly considered the MES, and I know that when I was first starting to trade futures the MES wasn’t even available to trade!
I brought up that the ES was originally created because the original SP trades at $250 per point which seemed unanimously too expensive for almost everyone as a place to start or learn to trade.
If you are in any “sport” you have many levels of competition to help you progress along the way. Golfers have club tournaments, then Golfing Pros
have mini-tours that have incremental steps of money and skill! Tennis is the same! Even Pickleball has age divisions, and skill level divisions at
the amateur and Pro levels. There are many endless examples of professions where you need incremental training as the stress & skill level increases.
So why not consider trading the MES?
From everything that I’ve read and been taught, the Psychology aspect of trading with real money is anywhere from 70% 90% of the business once you have a foundation and your setups dialed in. The MES at $5 per point could alleviate some of that psychological stress of losing and winning money!
(btw, kudos to the legacy of Mark Douglas and talking about trading in the “zone” where there aren’t highs and lows but consistent trades based on your track record)
The only “con” that I see is that the commissions per trade are typically higher on the MES (on a percentage basis), so it makes sense to be aware over the long term.
Ninja Trader is currently at $0.82 per round turn with the lifetime license (I’m talking about all the fees and taxes included together in that round turn),
((so please let me know if you hear of other discount futures brokers that have lower fees!))
That would make an MES round turn 16.4% of the trade vs the ES at 7.7% of the round turn, so you can do the math and realize that the expense side
of the business plan will be higher initially when going LIVE, but in the long run you may have a stronger and more successful track record LIVE by taking
some time transitioning from LIVE simulated, to LIVE MES, to LIVE ES (and possibly reach my goal of LIVE SP some day!!!)
Let me know if this helps you on your journey to be a consistent, money-making futures trader! Also, please let me know of any topics, as well as blog & vlog ideas
for me to discuss.
Happy Trading!
~Derek D’Amour
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