Micro futures are a godsend for those traders with smaller risk appetites.
Smaller risk appetites due to either;
- limited risk capital or
- being cautious about jumping into futures trading or
- being cautious about jumping into systematic trading.
It allows baby steps.
Baby steps to build an account to eventually accommodate standard contracts.
Baby steps in allowing cautious traders to dip their toes into either a;
- new security (futures),
- new global market/s (financials, energy, metals, commodities etc),
- a new trading approach (systematic/mechanical trading) or
- a new trading technique (trend, counter-trend, mean reversion).
They have been a godsend to allow traders to get started.
Over the years I have been monitoring the growing breath and depth of micro futures.
Take a look at their current trading volume (and low margins);
First, look at the breath of contracts.
Micros now cover a broad range of markets across;
- Indices
- Currencies
- Cryptocurrencies
- Interest rates
- Grains
- Energies and
- Metals
Next, if you have been monitoring the micros you’d have noticed the volume has been improving each year as smaller traders have been discovering them.
And finally, their biggest attraction is their affordable margins.
These micro contracts now allow the trader with less risk appetite to engage in world markets as never before.
And although the volume isn’t similar to standard contracts ARBITRAGE ensures the micros can’t get pushed around.
If you set up a micro page against the standard contracts you’ll see prices are in lock step.
Certainly the micros don’t have the length of historical data for back-testing like standard contracts have, but you don’t need it.
Undertake all your investigating, development, verification, validation in the standard contract’s historical data.
Even search for setups and generate orders off standard contracts, but EXECUTE in the micro contract where the tick value, risk and margin is usually one 10th the size of standard contracts.
Arbitrage will ensure prices in micro contracts track prices in standard contracts.
Micro contracts are a game changer so why not allow them to change your game. :o)