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Secondly, I'm struggling with concepts such as "front contract" and "rollover". How do you know which contract to trade and when to switch to the next one?
I have a Forex background but I'm really enjoying learning about Futures
Thanks in advance
Cheers
Can you help answer these questions from other members on NexusFi?
Trade the contract with the highest cumulative volume/number of traded contracts, so the June contract. I am not exactly sure whether the Front Month is technically the one with the highest traded volume or the most open interest (contracts being held at the end of the day so held by longer term traders). Usually that is the same though, and anyway, as a trader you want to be trading the contract with the most volume being traded that day so you can get in and out with the least slippage.
Rollover happens sometime before the contract expires. If you look at that webpage each morning, or add the current contract and the next contract to your platform quoteboard close to rollover you will see that at some point volume will start trading in the September contract and decreasing in the June contract. This will probably happen over a day or two, then one morning they will have very similar volume or there will be more in the September contract. Then trade September.
If somebody is an orderflow trader for example they might well sit out on the actual rollover day as they find it hard to read.
I don't know about Eurex products, but the US CME products use the month codes, M for June, U for September, so the equity index future based on the S&P500, the ES June contract is the ESM0 (June 2020), for my platform/datafeed.
If you look at other products, not all contracts roll every three months, some like WTI Crude (CL) roll every month. Some grains or meats etc I believe roll more or less frequently depending on the month of the year in their seasonal cycle.
"You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade" - Gary Norden
Hi guys
Most platforms out there have options for rolling over contracts. I use Ninja Trader and roll over contracts every week. Its more like checking to make sure I trade the front month contract and not soon expiring one. This caught me out before. I was trading and couldnt understand why my charts were different to my trading buddies.
