A lot of people recommend watching the futures as a leading indicator of where the market is going but I have not been able to find any value in this. The markets appear, to me, to move in lockstep, with the lead switching momentarily from one market to another, but never by enough to be of any help. I do watch the futures along with the indexes but not as a leading indicator but simply to get an overall feeling for where the market is going. I have also found watching the futures activity premarket has very little predictive value for the open. I trade off of 5 min. charts but even when watching one minute charts I can't see any advantage. Am I missing something? Is anybody using them in a way that I don't see? If so, would you please share it with me.
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Back to the Futures
- Thread starter Nicodemus
- Start date
D
dkamp
Yup. For your time frame futures will not be very helpful as a leading indicator. For popular, highly liquid stocks, arbitrage keeps prices in lockstep, and when it does look like there is a delay, you may just be seeing an artifact of slower executions (such as via a specialist), or be stuck dealing with a larger spread for illiquid stocks.
I have to admit that I've never found the futures predictive in any way I systematically could test.
Most people don't realize that SP and ND futures are open outcry, and that the quotes therefore are typed in by a clerk, who observes the action in the pit. Also, there is no guarantee that the clerk reports trades that actually happened. He/she may report bid/ask's where no-one took the other side of the trade. No way to know.
If you want to use futures, I recommend following the mini's, ie ES and NQ. They at least have an electronic limit book and what you see are trades that actually happened.
Most people don't realize that SP and ND futures are open outcry, and that the quotes therefore are typed in by a clerk, who observes the action in the pit. Also, there is no guarantee that the clerk reports trades that actually happened. He/she may report bid/ask's where no-one took the other side of the trade. No way to know.
If you want to use futures, I recommend following the mini's, ie ES and NQ. They at least have an electronic limit book and what you see are trades that actually happened.
FWIW:
i just got Nextrend's free quotes a couple weeks ago and have been watching the NQ emini. So my experience with futures is very limited.
In fact, only today did I try my first trade using only the 1 minute NQ as an indicator. I noticed that changes in direction of AMAT were preceeded slightly by changes in direction of the NQ.
At 14:59 NQ was on it's 3rd consecutive down tick but AMAT was steady so I jumped in and shorted 400. But AMAT kept going up so, at 15:04 I shorted 400 more to average up. AMAT kept going up but, at 15:08, it thought the NQ was ready to turn down so I shorted 200 more.
Turns out I was wrong - NQ had one more decent uptick at 15:10 and AMAT went along. Now I am sweating a little but not really 'cause I was expecting a little downward motion at the end of the day. At 15:17 NQ did indeed tick down nicely and 3 minutes later, at 15:20, AMAT followed (with a sigh of relief I might add).
If I was smarter I would have ridden it down (NQ kept going down), but instead I was out by 15:23 for a whopping net gain of $48
So, that's my first futures-based trade. I don't know if it is representative of a typical example...
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ADDENDUM 9/25: Of course I tried the same thing again today. Started watching and took a position in AMAT around 2:30. This afternoon AMAT had a definite positive bias vs NQ and it did not lag NQ as it did yesterday. Every postive tick in NQ seemed to result in a disproportionately larger uptick in AMAT...
i just got Nextrend's free quotes a couple weeks ago and have been watching the NQ emini. So my experience with futures is very limited.
In fact, only today did I try my first trade using only the 1 minute NQ as an indicator. I noticed that changes in direction of AMAT were preceeded slightly by changes in direction of the NQ.
At 14:59 NQ was on it's 3rd consecutive down tick but AMAT was steady so I jumped in and shorted 400. But AMAT kept going up so, at 15:04 I shorted 400 more to average up. AMAT kept going up but, at 15:08, it thought the NQ was ready to turn down so I shorted 200 more.
Turns out I was wrong - NQ had one more decent uptick at 15:10 and AMAT went along. Now I am sweating a little but not really 'cause I was expecting a little downward motion at the end of the day. At 15:17 NQ did indeed tick down nicely and 3 minutes later, at 15:20, AMAT followed (with a sigh of relief I might add).
If I was smarter I would have ridden it down (NQ kept going down), but instead I was out by 15:23 for a whopping net gain of $48
So, that's my first futures-based trade. I don't know if it is representative of a typical example...
------------------------------------------------------------------------------
ADDENDUM 9/25: Of course I tried the same thing again today. Started watching and took a position in AMAT around 2:30. This afternoon AMAT had a definite positive bias vs NQ and it did not lag NQ as it did yesterday. Every postive tick in NQ seemed to result in a disproportionately larger uptick in AMAT...
Roger2,
Thanks for the detailed example. I don't have a futures chart, but QQQ seemed to move about the same as your description of the futures. In fact, it seemed to lead at one point. Have you compared the QQQ to the futures to see if one typically leads the other? Perhaps using both of them as indicators would be the way to go. Thanks again. Anyone else have any input?
Thanks for the detailed example. I don't have a futures chart, but QQQ seemed to move about the same as your description of the futures. In fact, it seemed to lead at one point. Have you compared the QQQ to the futures to see if one typically leads the other? Perhaps using both of them as indicators would be the way to go. Thanks again. Anyone else have any input?
Eldredge,
i have not used QQQ but have been using 'comp' throughout - NQ seems to lead comp. I would assume it would also lead QQQ but have not tested it, but I will soon.
i remember that you are a fellow QQL user, as such QQQ and comp are your two best alternatives to eminis
I recommend getting the FREE Nextrend quotes - the program does not hog much resources (at least not on my W2K sys), it works well
amazingly, when I called Nextrend to ask for help, i was not made to wait long and i spoke to a very friendly woman who actually was able to answer all my questions - i was like a time warp back to pre-phone-routing-bullshit days
the only negative about Nextrend is that the scaling of their charts is not as flexible or as nice as QQL's. I have one Nextrend workspace set-up with 3 NQ charts: 1 min, 5 min, and 1 hour. I arranged the 1 min and the 5 min chart at the bottom, I move Nextrend's compulsory ad window to the top of the workspace, then open QQL on top of Nextrend so that the only part of the Nextrend workspace visible is the 1 min and 5 min NQ charts.
I also go into the 'View' menu and turn off 'Standard toolbar' and 'Status bar' to free-up screen space, unfortunately these changes don't 'stick' and must be done each time nextrend is started.
All things considered - it was easier than I thought it would be and is useful...the data feed seems to be reliable... if you day trade and only have QQL, i say give it a try!
i have not used QQQ but have been using 'comp' throughout - NQ seems to lead comp. I would assume it would also lead QQQ but have not tested it, but I will soon.
i remember that you are a fellow QQL user, as such QQQ and comp are your two best alternatives to eminis
I recommend getting the FREE Nextrend quotes - the program does not hog much resources (at least not on my W2K sys), it works well
amazingly, when I called Nextrend to ask for help, i was not made to wait long and i spoke to a very friendly woman who actually was able to answer all my questions - i was like a time warp back to pre-phone-routing-bullshit days
the only negative about Nextrend is that the scaling of their charts is not as flexible or as nice as QQL's. I have one Nextrend workspace set-up with 3 NQ charts: 1 min, 5 min, and 1 hour. I arranged the 1 min and the 5 min chart at the bottom, I move Nextrend's compulsory ad window to the top of the workspace, then open QQL on top of Nextrend so that the only part of the Nextrend workspace visible is the 1 min and 5 min NQ charts.
I also go into the 'View' menu and turn off 'Standard toolbar' and 'Status bar' to free-up screen space, unfortunately these changes don't 'stick' and must be done each time nextrend is started.
All things considered - it was easier than I thought it would be and is useful...the data feed seems to be reliable... if you day trade and only have QQL, i say give it a try!
Roger2,
Thanks for the detailed reply. After the discussion on the last thread, I started using QQQ because it seemed to lead comp at the times I compared it. I haven't had a way to watch the futures, so I'll have to try next trend. I'm hoping the new IB TWS might allow charting of futures. Thanks again.
Thanks for the detailed reply. After the discussion on the last thread, I started using QQQ because it seemed to lead comp at the times I compared it. I haven't had a way to watch the futures, so I'll have to try next trend. I'm hoping the new IB TWS might allow charting of futures. Thanks again.
D
dkamp
NQ, QQQ, and NDX all track the Nasdaq-100, and will remain in lockstep due to arbitrage. The arbitrage occurs quickly, but is hampered by various factors, including uncertainties in the relationship between the true value of index futures and their underlying stocks, as well as differences in execution between the various exchanges and ECNs that trade QQQ.
You can use these facts by either figuring out in detail the various arbitrage-related tendencies that may be of use on a very small time scale, or by finding other stocks that may have a delayed response to changes in the Nasdaq-100. However, I doubt if any of this would be useful to someone trading with 5-minute bars, as was referred to in the original question.
BTW, another thing to consider is that stocks can lead futures, such as when stock investors start buying a lot of MSFT after a Microsoft-related news event. So what leads what, and by how much, is somewhat news and stock-dependent.
It can take months to figure out all the details, so I'm not surprised that others may be reluctant to make these public. There are many courses available related to trading NQ and QQQ, including Don Miller's (a very friendly and helpful guy), which you can find out more about at www.methodtrading.com.
You can use these facts by either figuring out in detail the various arbitrage-related tendencies that may be of use on a very small time scale, or by finding other stocks that may have a delayed response to changes in the Nasdaq-100. However, I doubt if any of this would be useful to someone trading with 5-minute bars, as was referred to in the original question.
BTW, another thing to consider is that stocks can lead futures, such as when stock investors start buying a lot of MSFT after a Microsoft-related news event. So what leads what, and by how much, is somewhat news and stock-dependent.
It can take months to figure out all the details, so I'm not surprised that others may be reluctant to make these public. There are many courses available related to trading NQ and QQQ, including Don Miller's (a very friendly and helpful guy), which you can find out more about at www.methodtrading.com.