What to trade, what to chart?

[hampy]

All,
After much thought and research over the last 6 months I've made the decision to try and learn intraday trading of the US indicies.
The advice on this excellent site appears to be that spreadbetting is not the way to go, so opening an a/c with IB appears to be the obvious route and my many year's of equity investing has given me the capital to do so.
The 1st question is whether to trade the ES, YM or something else, bearing in mind I'd like to start with as small a contract size as possible.
Secondly, I then need to decide what to chart, the mini future, the main future, or the actual index and also which volume feed would be most appropriate.
Your help would be much appreciated.
hampy

 

[Skimbleshanks]

You need to chart what you are trading - if you are using direct access, such as IB, and trading emini S&P (ES) then you chart ES.

It's only with spread betting indices do you need to chart the futures because that is what the pricing movements are based on.

IMO there's very little point charting the main futures, coupled with the fact that it often costs more for the feed for the main futures.

 

[neil]

Hampy
When you dip your toes in:

Make sure you know how much you could lose in a trade before you enter, and:

Always use a stop.

Good luck

 

[stevet]

hampy

forget the YM - its only traded by ex dow spreadbettors

go for the es or the nq - both are real different - on balance the nq is easier to trade - but neither are a walk in the park

the big contract data, and the cash index data, can provide you with real key information, but you have to remember that both have data which is delayed and not accurate, and also you may well get information overload

so certainly to start with - just really focus on the emini data, learn how the spread works, how it can trade in a range without breaking in one direction or another, and start making big bucks!

and re the stop - deciding where to exit a losing trade is the most key issue in trading - so dont look at a stop as protection against losing - look at it as a key element of making a profit

if you end up just setting stops as protection, you will end up making lots and lots of losses as the stop gets hit, and the wins will never oversome the accumilated losses

using stops can be as dangerous as not using them

 

[Trader333]

stevet,

.....the big contract data, and the cash index data, can provide you with real key information, but you have to remember that both have data which is delayed and not accurate

Can you give a greater explaination of this please ? Are you saying that data for trading futures is delayed and if so by how much time and why ?


Paul

 

[sandpiper]

Paul,

I sure Stevet will elaborate, but essentially, the trades (ticks) for the pit traded contract are entered manually into a computer by a spotty faced kid on a podium. Hence the "delay". Even then the trades recorded may not accurately reflect what is going on in every area of the pit.

As I said on the other thread, the reported volume that you get on the large contract is just tick volume and means nowt anyway.

If you wish to treat e-mini volume as a proxy for volume on the large then clearly (as per other thread) an accurate data feed is essential. However, imho (interested in Stevet's views) monitoring e-mini volume is, by and large, a waste of time.

If you want to get a feel for order flow then that's an entirely different matter (but e-mini volume isn't going to give you that). The only things that are going to give you that are (obviously) being in the pit, or a decent squawkbox commentary (and I only know of one that's any good). I did try trading with marketvoice for a while after using a squawkbox for two years but it wasn't anywhere near as usefull.

Again, imho, at the very least e-mini volume is distorted hugely by program trading and arbing. At the very best, you should know where to expect the volume before the price gets there and volume just gives you a confirmation of your expectation.

 

[hampy]

Folks, Thanks for the replies so far.
The concensus seems to be to trade and chart the ES , taking care with the placement of stops so as not to get them gunned by fake moves, but not to far away to risk big losses. Trial and error for a beginner I guess.
The opinions on volume seem really varied, so any further advice on what source, and when and how to use it would be much appreciated.
hampy

 

[Skimbleshanks]

Trading with volume is easy. Trouble is, it takes you some time to get the hang of it, and you really need to be taught in real-time to learn the subtleties, such as how to tell the difference between longs and shorts. That's my experience anyway.

In my personal view, there's no real point in reading what has been printed about volume in books. It's written by people who don't trade using it, so all the subtleties, set-ups, early warning systems, etc, which appear every day on ES aren't covered.

The basics of volume are: go back over the charts and see the volume needed to turn the market. Note the approximate times of the day - more volume is needed in the morning and afternoon than at lunchtimes, etc. Don't bother with volume on any chart less than 5 minutes - complete waste of time IMO if you are just trading on price and volume.

But volume is just the icing on the cake - price bars really are the cake itself, and you can do very well on ES just by trading on price. Only later will you need to add volume into the equation just to squeeze out an extra few points per day.

 

[Grey1]

In 2000 ENMD annouced a potential cure for cancer and the stock opend from 12$ to 80 $ with no volume.. Well , dumb money wanted to be part of the success and started buying shares @ around 70 -80$ ish ..

Once MM's filled all the dumb positons dropped the price to around 25$ and started doing business in a more gentelman manner..

NoVolume No business.. remember that ..

Why do you think I insist so much on VWAP .. VWAP has volume to back it up ..

 

[Trader333]

I dont doubt that volume = business but what I am most concerned about is that we all appear to be getting different readings for volume.

I can understand that the S&P main contract may have delayed volume but the Emini is all electronic and so volume should be able to be reported in realtime.

I will be doing some checks as suggested earlier from the CME against that charted by IB.

The reason I am so concerned is that the strategy I am developing requires reasonabley accurate volume measurement.


Paul

 

[options]

Hi Trader£££

Please keep us informed of your findings.
I use volume a great deal in trading, though at the mo am doing more fx then shares and indicies. Perversely, fx doesn't chart volume and I find it is not a key factor.

 

[sandpiper]

hampy,

Regarding sources for ES volume, i.e. quote vendors, then any of Q-Charts, E-Signal, FutureSource. CQG are reliable (possibly IQ, maybe looking at that one next month myself). Q-Charts and possibly IQ seem to be the best value.

MyTrack is not reliable (volume wise).

Regarding volume..... I've noticed a couple of posts of stevet's on some other threads relating to trade entry/exit that you should cut out and read till they make sense (if they don't now.... which of course they may do ;-)).

Of course, there are any number of ways to skin a cat, but, imho, you should be aware of where and when there is likely to be volume, before it appears. Once you can do that, you can position yourself ahead of the volume. As stevet says, you either want to be leaning on volume or using it to lighten your load.

I also think of it this way..... Lot's of people use trend lines across high and lows right. Yet, highs and lows are, for the most part where the volume is really light.

With regard to the gunning for stops... It really doesn't happen in the way that you think it happens, or for the reasons you think, quite the opposite in fact.

There, you go.... took me so long to write that that Skimbleshanks got in first..... ;-). And another spot on post too. See, the point I was kind of trying to make to Paul on the other thread is that if you are really bothered about volume then you should download the time & sales for the large contract from the cme for a whole week. Sit down at the weekend and go through it trade by trade comparing it against your chart of the large contract or the mini and work out:

1) When the large volume appears.
2) At what price levels the large volume appears (in relation to previous bars/days, etc).

Not only will this put the whole volume thing into perspective, with any luck you will start to "see" which are the important bar patterns/combinations.

 

[stevet]

Trader333

IB only supply sampled data - which makes their data next to useless for trading

you need to use a platform such as PATS, TT, GL etc for accurate real time data

 

[oatman]

I notice there're 2 ES contracts. Which one are we talking about?

 

[Trader333]

Well it looks like I may have to abandon my ES stratgey as I need an accurate datafeed that can link to Tradestation and I dont think any of the above will do. A shame really because even using IB as a datafeed in realtime it was working remarkabley well.



Paul

 

[stevet]

oatman

if i understand your question correctly, you should only look at the contract which currently ends in decemeber and you should only trade the near contract

 

[oatman]

Hi steve, no there's a CME and a Globex which is open at the mo.

 

[sandpiper]

oatman,

if you are on about the cme site, then the one you want is ES 0312F (rather than ES 0403F). If you are on about IB, I have no clue ;-).

 

[oatman]

Yes mate I'm running IB. I just thought I'd run some charts(Sierra) and wondered which one was more liquid.

 

[stevet]

oatman

you need to be a bit more specific - but maybe this will help

globex is the electronic trading system of the cme - but it is normally considered that the emini is traded on globex and the big contract at the cme - but when the cme pit is closed - the big contract can be traded electronically