Trading stocks, you can focus on sector and stock specific news quite intimately. You soon get a "feel" for the stock, and get to know those who trade it and how they trade it. Sure, stocks follow the markets too - to a degree. Some days your favourite stocks are up on good news, while the general market is lackluster or down.
When you consider the indices and the e-minis, the picture is so much different. You won't get to know those trading it, or how they trade it. You are dependent on a plethora of news sources and indicators like news from companies, sectors, global affairs, macro-economics, technical indicators ...
I have traded both successfully, but bailed out on stocks after taking a 50% hit in one day's pre-trading when the CFO of the company I used to work for had to say he deceived investors for the last month, because regulations demanded he be fair and give the same information to all investors between quarters.
ES is a beast, but can be tamed if you remember that the levels fluctuate around the real master of the beast - the S&P 500 itself (SPX). Then you can consider that the most heavily weighted sector is banking - i.e BKX, along with tech - SOX. Then consider the psychology of the markets with dependencies on both the DOW and the Nasdaq , so you gotta watch the INDU and COMP as well as the YM and NQ. Downticks or upticks gives you the most important indicator you can find, because whatever 'silly' tree-shaking move that one big player is trying, they're still in pretty deep waters if they continue to try and push the ES in the opposite direction of the SPX - which is the accumulation of a whole lot of players and stocks with all kinds of strategies and targets, manipulation attempts, recommendations etc.
So, noone can be the master of the SPX - even though you can manipulate some stocks to make a small dent, and the ES answers to one and only one master. On the other hand the relationship is symbiotic with the ES driving the SPX in pre-market and sometimes influencing the SPX in moments of doubt.
Watching the incremental up-/downticks and the amount in increase/decrease along with the important components and related indices like EURUSD/E7 or similar, gives you a pretty good idea of where things are going. Then you gotta keep the technical information available too - many trade using the rule of stochastics for instance, and therefore you need to be aware of it too.
Making money can be hard, if you change viewpoints all the time, running up a lot of trades, which commisions may eat up in one fell blow some days. Therefore you need conviction and self-confidence coupled with sensible, but still hard-to-reach stop limits. It's better to assess 'erratic' moves and false blocks, than be stopped out on false moves - because they are plentiful for sure.
Margin accounts are really great, and can give you much needed leverage - but it's truly a double-edged sword. If you get paralyzed by some sudden move, and fail to react you'll incur some heavy losses rapidly, and the x contracts you had may hit your bottom line real hard that day, because if you were maxed out, you may not afford to buy x contracts again, but may need to settle for x-y contracts if you finally called it quits for the trade. Thus getting back to the same levels as the inital trade, you may still have a financial loss.
Doing paper-trades or simulated trading to learn your personal system is paramount to your success and confidence in your abilities to ride the little beast tugging the tail of the big beast.
There are some great tips and stories in the psychology forums here on Elitetrader as well, and they're well worth checking out. It sure doesn't hurt so much (financially) learning from some of the others mistakes.
;-)
