What trading really is
Learning objectives
- Compute the profit or loss of a long or short NQ, MNQ, ES or MES trade in points, ticks and dollars, before and after costs.
- Explain why futures are zero-sum before costs and negative-sum after them, and name who receives each cost.
- Convert a round-trip cost into ticks and into R, and explain why the same cost weighs more on a tight stop.
- Explain adverse selection: why a resting limit order fills most surely when price is moving through it.
It is 09:43 ET (Eastern Time, New York; 20:43 ICT, Indochina Time in Vietnam during US summer time) on Wednesday 21 October 2026. NQ, the Nasdaq-100 future, has slid since the 09:30 ET regular-session open. A minute ago you placed a resting order to buy one contract at 29,800.00. At 09:43:17 it fills. In the next 34 seconds, 45 contracts trade at 29,800.00 because a seller hit the bid, and only 6 because a buyer lifted the offer. By 09:43:51 NQ trades 29,771.00, 29 points below your fill: −$580 on one NQ, −$58 on one micro.
Was the instant fill luck? This lesson covers what you bought, who sold it to you, where your money goes on every trade, and why fast fills deserve suspicion. (Historical prices, our lab’s NQ tick record.)
Key terms
Futures contract (hợp đồng tương lai): a standardised exchange contract to buy or sell an underlying index or commodity at a set price for a future settlement date Definition. NQ and ES track the Nasdaq-100 and S&P 500 indexes at CME and settle in cash during the regular session (phiên chính, 09:30–16:00 ET) and nearly 23 hours a day. You trade the price change.
Long (vị thế mua) means buy first and sell later (profiting if price rises); short (vị thế bán / bán khống) means sell first and buy back later (profiting if price falls) Definition. Every open contract has one long and one short.
Bid (giá chào mua) is the highest price a waiting buyer offers; ask (giá chào bán) is the lowest price a waiting seller offers; the spread (chênh lệch giá) is ask minus bid, at least one tick Definition.
Tick (bước giá): the smallest price step, 0.25 index points on all four contracts below. Point value (giá trị một điểm): dollars per full index point per contract Definition (CME contract specifications):
| Contract | $ per point | $ per tick |
|---|---|---|
| NQ (E-mini Nasdaq-100) | $20 | $5.00 |
| MNQ (Micro E-mini Nasdaq-100) | $2 | $0.50 |
| ES (E-mini S&P 500) | $50 | $12.50 |
| MES (Micro E-mini S&P 500) | $5 | $1.25 |
Stop (lệnh dừng lỗ): an order that exits your trade automatically if price moves against you to a set loss level. Target (mục tiêu chốt lời): a resting limit order that closes the trade at your planned profit price Definition.
Round trip (một vòng giao dịch): opening and closing one position. Gross edge (lợi thế gộp): a strategy’s average profit per trade before costs, plotted over many trades on an equity curve (đường vốn) Definition.
Term you need: R. R is the dollars you lose if your stop is hit Definition. A 10-point stop on one MNQ is 10 × $2 = $20, so 1R = $20.
The arithmetic is identical for everyone Definition:
Long P&L = (exit − entry) × point value × contracts − costs. Short P&L = (entry − exit) × point value × contracts − costs.
Chart first: costs tilt the curve
Net expectancy per trade as round-trip cost rises
DefinitionHow it works
Where each dollar goes
Every futures contract pairs one buyer with one seller. When NQ rises 10 points, the long gains what the short loses, so all traders’ results sum to zero before costs Definition. Then three costs come out:
- Commissions and exchange fees go to your broker and CME, leaving the traders’ pool.
- The spread goes to the resting order you traded against.
- Slippage (trượt giá), the gap between the fill price you expected and the price you got, also goes to the other side of your trade.
Traders as a group therefore end below zero: trading is negative-sum after costs Definition. EV2.01 reviews large empirical studies of retail day traders; this accounting identity is the mechanism behind them.
Costs in ticks and in R
Check your own broker’s fee schedule. For arithmetic only, this lesson uses a realistic full-cost round trip (entering at market and exiting via a slipped stop) Definition:
| Per round trip | MNQ | NQ |
|---|---|---|
| Commission + exchange fees (assumed) | $1.50 = 3 ticks | $5.00 = 1 tick |
| Crossing the spread once | $0.50 = 1 tick | $5.00 = 1 tick |
| Slippage on a stop exit (assumed) | $0.50 = 1 tick | $5.00 = 1 tick |
| Total | $2.50 = 5 ticks | $15.00 = 3 ticks |
Micros cost more in ticks because broker fees do not shrink tenfold with the contract. And the same dollar cost weighs more on a tight stop: $2.50 is 0.0625R on a 20-point MNQ stop ($40) but 0.25R on a 5-point stop ($10).
Makers, takers and adverse selection
A market order (lệnh thị trường) trades immediately against resting orders: you are the taker (bên lấy thanh khoản) and pay the spread for speed. A limit order (lệnh giới hạn) waits at your price: you are the maker (bên cung cấp thanh khoản), hoping to earn the spread instead of paying it Definition.
The catch is which limit orders fill. Your resting buy at 29,800.00 fills for certain only when sellers push price to and through 29,800.00; when price bounces above 29,800.00 without trading through your queue position, you miss the winning move Definition. Your fills are therefore biased toward moments when price is moving against you—adverse selection (chọn lọc bất lợi). Stock-market studies find that passive fills lose part of the spread, on average, to the move right after the fill PlausibleOther market; on NQ our lab has not measured this yet.
What the data says
Worked example: a long on real prices
Historical NQ prices from 21 October 2026; the trade is illustrative.
By about 09:45 ET NQ has bounced from 29,771.00 to 29,819.75 bid / 29,820.00 ask. You buy 1 MNQ with a market order and lift the ask at 29,820.00 (already paying the 1-tick, $0.50 entry spread relative to the 29,819.75 bid). Stop: 29,790.00 (30 points = $60 = 1R). Target: a resting sell limit at 29,850.00. Your target fills at 09:45:39 at 29,850.00 (with zero exit slippage because your limit was resting), before NQ reaches 29,872.25 at 09:45:54.
- From actual fill prices (spread already inside the 29,820.00 entry fill, limit exit): (29,850.00 − 29,820.00) × $2 = +$60.00 before commissions; minus $1.50 commission and fees = +$58.50 net (+0.975R).
- Under the full 5-tick ($2.50) table budget (if measured from 29,820.00 mid/touch before 1 tick entry spread, 1 tick exit slippage, and $1.50 fees): +$60.00 gross − $2.50 costs = +$57.50 net (+0.96R). On 1 NQ: +$600 gross, −$15 full costs, +$585 net on $600 risk.
The mirror and the failure
The short mirror. Sell 1 MNQ at 29,850.00, buy back at 29,820.00: +$60.00 from fills (+$58.50 after $1.50 fees, or +$57.50 after the full $2.50 budget).
The failure: one fill proves nothing. The hook’s fill at 29,800.00 sat 29 points underwater within 34 seconds. Yet 29,771.00 at 09:43:51 was the low of the entire regular session, which closed at 29,997.75. Adverse selection describes the average across many fills, not a verdict on a single trade (MKT2.02).
Do it on the platform
Prop-firm note. Evaluation accounts charge commissions on every round trip, and daily/maximum loss limits track your net P&L after costs (PROP1.03, PROP2.07).
Common mistakes
Common mistake: Treating a gross backtest number as a tradable edge. “+0.13R per trade” sounds profitable until you subtract round-trip costs in R.
Common mistake: Celebrating an instant limit fill. A fast, complete fill during a burst of trades means the other side was urgent to trade through your price.
Drill: price your own round trip
Using your broker’s fee schedule (or this lesson’s assumptions):
- Write your MNQ round-trip commission plus exchange fees, and add 1 tick for crossing the spread plus 1 tick of exit slippage.
- Convert that total into ticks and into R for stops of 5, 10 and 20 MNQ points.
Solution
With this lesson’s full budget: $1.50 + $0.50 + $0.50 = $2.50 = 5 ticks.
- 5-point stop (1R = $10): cost = 0.25R.
- 10-point stop (1R = $20): cost = 0.125R.
- 20-point stop (1R = $40): cost = 0.0625R.
What we don’t know yet
- How far NQ moves against passive fills in the minute after a fill: not yet measured (our lab’s tick record stores trades without quotes).
- Whether the opening-range breakout result survives CME NQ futures costs: not yet measured.
- Takers pay for speed too. In a first-stage lab test (53 NQ sessions, Aug–Nov 2026), after a sweep (lệnh quét nhiều mức giá, one aggressive order eating through three or more price levels at once), price travelled about 2 ticks less far in the sweep’s direction over the next minute than after comparable single-price trades PlausibleNQ (forward test pending; smaller than a round trip’s cost).
Recap
- A futures trade is arithmetic: points × point value × contracts, minus costs. Long gains when price rises; short gains when price falls.
- Futures are zero-sum before costs and negative-sum after commissions, fees, spread and slippage.
- Express costs in ticks and in R: tighter stops and micro contracts make the same fee consume a larger share of 1R.
- Resting limit orders fill most surely when price trades through them (adverse selection); evaluate fills across a sample, not one trade.
Further reading
- CME Group: E-mini Nasdaq-100 contract specifications and Micro E-mini Nasdaq-100 contract specifications.
- Larry Harris, Trading and Exchanges: Market Microstructure for Practitioners (Oxford University Press, 2003): dealers, informed traders and the cost of liquidity.
- Glosten and Milgrom (1985), “Bid, ask and transaction prices in a specialist market with heterogeneously informed traders”, Journal of Financial Economics 14(1): why the spread exists at all.
- Our lab: a published gross edge of about a tenth of R on the Nasdaq-100 fell to about zero after costs in a public replication; our own NQ replication has not been run yet.
Prerequisite: none, start here. Next: M0.02 Core terminology names the parts of every order you just priced (bid, ask, tick, aggressor, R), and M0.09 then shows how to read the price chart itself.
Educational content only. Not financial advice. Futures trading involves substantial risk of loss. Not affiliated with Topstep; firm rules change; check the Topstep help center.
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