Trading the NQ

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dbphoenix

Well-known member
Aug 24, 2003
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#1
Trading price will “work” in any auction market, i.e., any market that moves according to the law of supply and demand. However, the swings in some markets are much wilder than the swings in others. Some markets gap more than others. Some markets sit and do nothing for far longer than others, wearing out those who don’t have the patience to wait it out.

The general objective, however, is to find an instrument that is simple to trade, easy to trade, that is “directional”, that moves smoothly, that moves with ”intent” (i.e., that is decisive after reversals and breakouts), that chops as little as possible, and is, of course, liquid.

Avoiding gaps pretty much eliminates stocks. Trading outside regular market hours generally means futures. The S&P is the most popular stock-index market and the ES is therefore the most popular futures market. However, that popularity means that the S&P and the ES are the first choice of arbitrageurs. The practical consequence of this is that there will be lots of sideways movement, lots of back-and-fill, lots of congestion. For many traders, particularly small retail traders, this means scalping for ticks, and doing so alongside professionals, including HFTs, who are in a much better position to make a success of it. The small retail trader is in effect wearing a sign on his back that says “Kick Me”.

This is not to say that the ES never goes anywhere. How a particular futures instrument moves depends largely on its underlying. Dow futures are based on 30 stocks. The NQ is based on 100. The ES is based on 500. There is also the character of the underlying to consider. The NQ is essentially technology; it has for example no financials. The ES, however, incorporates nine sectors, including financials and industrials. For all these reasons the ES moves differently. Whether that difference is better or worse depends on the trader’s objectives.

When all is said and done, the more directional the instrument is, the more money there is to be made with it. Trade costs are less given that the number of trades is less due to the fact that sideways movement is less and stops are hit less frequently. And, consequently, commission costs are less. If the trader therefore finds himself resorting to scalping ticks because his instrument is yanking him around, he most likely would be better off investigating a smoother and more directional instrument, for example the NQ.
 

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Sep 22, 2016
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#4
why it's no short

Dear dbphoenix,

I'm following your posts as lurker but now have question to you regarding 09-29 example (shorting open range thrust).
You shorted at 10.02.30 sec bar an the reason is clear. But what about 10.01.00 sec bar (attached). Is it legitimate short but stopped or invalide one?
The time scale on my chart is Moscow time zone. I also attached range bars chart to show in details.
These two situation (10.01.00 and 10.02.30) is the perfect illustration of the real problem for me. Shorting the thrust should be (IMHO) with tight stops to avoid holding position against steady continuation move. But tight stops are useful only if the timing is perfect, otherwise most trades will be stopped.
 

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Aug 18, 2015
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#5
The extent to which one exercises patience is in direct relation to how well he understands what it is he's waiting for.
dbphoenix:

You note in your second chart in Post #3: "Pot'l Short Not Triggered". I don't think I understand why you noted this. Can you explain what you were looking for and did not see?

Was a short not triggered because price began to range after the Opening High was established?

Would a short be valid after the LH was formed (i.e. where your up/down arrow is drawn)?
 

dbphoenix

Well-known member
Aug 24, 2003
6,903
1,144
223
#6
Dear dbphoenix,

I'm following your posts as lurker but now have question to you regarding 09-29 example (shorting open range thrust).
You shorted at 10.02.30 sec bar an the reason is clear. But what about 10.01.00 sec bar (attached). Is it legitimate short but stopped or invalide one?
The time scale on my chart is Moscow time zone. I also attached range bars chart to show in details.
These two situation (10.01.00 and 10.02.30) is the perfect illustration of the real problem for me. Shorting the thrust should be (IMHO) with tight stops to avoid holding position against steady continuation move. But tight stops are useful only if the timing is perfect, otherwise most trades will be stopped.
The first short is legit, but it didn't trigger my entrystop. Immediately thereafter I saw that supply was being withdrawn, which suggested that price was either going to move sideways or rally, after which it rallied. However, demand was immediately withdrawn which justified another short entry. This entrystop was triggered.
 

dbphoenix

Well-known member
Aug 24, 2003
6,903
1,144
223
#7
dbphoenix:

You note in your second chart in Post #3: "Pot'l Short Not Triggered". I don't think I understand why you noted this. Can you explain what you were looking for and did not see?

Was a short not triggered because price began to range after the Opening High was established?

Would a short be valid after the LH was formed (i.e. where your up/down arrow is drawn)?
One can't know that a LH is a LH until after it's formed. By that time one may be too late to enter, depending on his risk tolerance. That's where context and the entrystop come in.
 

aex

Member
Sep 19, 2016
11
0
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#8
I rarely use charts, but I will still follow this thread, as I am currently trading Nasdaq as my first choice for an instrument and I liked the first post as I believe it has some interesting points.
 

Gring0

Well-known member
Aug 31, 2015
251
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#10
Weekly: Price around the median (pink/blue), Price also unable to continue higher after BO from TR around 3900 - 4740. But not crashing either.
Daily: Price around median. 50%
Hourly: TR (4680 - 4780), moving towards potential R.

Gringo
 

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dbphoenix

Well-known member
Aug 24, 2003
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#13
NQ Weekly: Very close to the TR top and SL.
NQ Daily: TR top.
NQ Hourly: Ranges and medians. Graveyard for the trend follower.

Gringo
FYI and FWIW, I haven't been concerned about channels since we began trading sideways in August. The money has been in trading the range and exploiting all the balancing that's been going on. Today, for example, provided a nice 30pt move if one understood the equilibrium process (moved up another 20pts after I posted this).
 

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Gring0

Well-known member
Aug 31, 2015
251
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#14
NQ hourly

NQ horly:

"Livin' on the edge
You can't help yourself from fallin'
Livin' on the edge
You can't help yourself from fallin
'

--Aerosmith

Even Aerosmith was a avid fan of Wyckoff. This of course doesn't mean we know the future. We react to what we've planned in advance based on what the price does. If it goes up we follow the plan. If it goes down we follow the plan.

Gringo
 

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dbphoenix

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Aug 24, 2003
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#16
FWIW, I take a broader view, off the daily, beginning with the first decline after the break of the stride, followed by the first rally, i.e., 4625 to 4892. This provides the frame for everything that occurs thereafter. I want to focus on what The Money looks at, so I'm not overly concerned with what goes on in the big middle. That thrust on Oct 25, for example, resulted in a nice decline.
 

Gring0

Well-known member
Aug 31, 2015
251
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#17
FWIW, I take a broader view, off the daily, beginning with the first decline after the break of the stride, followed by the first rally, i.e., 4625 to 4892. This provides the frame for everything that occurs thereafter. I want to focus on what The Money looks at, so I'm not overly concerned with what goes on in the big middle. That thrust on Oct 25, for example, resulted in a nice decline.
Is that what you are talking about?
 

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dbphoenix

Well-known member
Aug 24, 2003
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#18
No. For that particular period, that range is useful, but for the present, I was referring to the low on 9/12 and the high on 9/22.
 

dbphoenix

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Aug 24, 2003
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#20
Yes. You will have noticed, I'm sure, that the market has been news-driven ever since Brexit. This is challenging. However, it should be obvious even to those who don't trade price that we've been ranging ever since, and the principles of trading price still apply. It should also be obvious that the "reasons" the trade press -- and trading forums -- gives for all this movement is mostly imaginary, e.g., the "Trump rally". Rather it's just the same old ranging trending ranging trending.
 
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