The Magical Power of Micros

Sept. 9, 2024

In our last several Newsletters, we saw some potentially good news.

The portfolio of four strategies that I track each month on my website produces a lot of hypothetical profit.

(A few people have gotten mad at the word “hypothetical”. They want “real”. But any profit that comes from anywhere outside of your own trading is hypothetical. So that’s why I say that. I try as hard as I can to give realistic results. I just can’t make them show up in someone else’s account.)

In fact, the hypothetical profit from the Performance Page Portfolio (PPP) is way more than an index fund for way less drawdown.

Hooray!

There’s one problem, though.

If we trade 1 contract, it would take around $57,000 to trade all four strategies.

Not hooray.

So what do we do?

Do we take a third job selling apricots on the side of the road until we save $57k? We could do that.

Or we could do something magical.

We could trade Micros.

What are Micros?

They’re regular Futures contracts but are one-tenth the size.

Instead of using the full E-Mini S&P 500 contract, the ES, we can use the Micro E-Mini S&P 500 contract, the MES.

The MES was designed for exactly the problem we’re discussing: people who don’t have tens of thousands of dollars in their accounts.

How does that affect us?

In exactly the way you might think.

If we traded the PPP with MES (instead of ES), we would only need one-tenth the money.

For example, here are the margin requirements again for the ES if we hold a position overnight:

For comparison, here are the margin requirements for the MES:

Look at that. We only need $1,518 to trade the MES.

If we get out our trusty calculators and multiply $1,518 times four (to cover all strategies in the PPP), we get $6,072.

That’s much better.

And remember, it’s not likely that all four strategies will be in a trade at the same time, so we could theoretically have a little less in our account.

Now for the bad news.

The Micros don’t trade exactly like their big brothers and sisters. The charts aren’t exactly the same and the volumes are not the same.

They’re very close, mind you. But not quite the same.

So, if that worries you, then you’re worried.

But I’m trading some Micros on a smaller account and I haven’t seen any problems thus far.

And it’s great to be able to get started using a smaller amount of money.

In our next Newsletters, we’ll talk about some portfolios that we could put together using Micros.

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.