Does the futures has any influence over the cash index ?
- Thread starter Surprise
- Start date
There is causality between the futures and the index and some older studies have concluded that futures lead cash:
http://www.questia.com/googleSchola...Qn9KPfnGCfvh91SZyDVny2vBhbZjqhMlwcbyJC0DMfJC2!73151239!944498916?docId=5000129581
Some claim most of the impact comes from the E-mini:
http://ideas.repec.org/a/bla/jfinan/v58y2003i6p2375-2400.html
The short answer is YES.
There is no such thing in the markets as always "BEING RIGHT". Thats the problem new traders have to contend with because they are fresh from reading textbooks and some loser professors thoughts on how things are "SUPPOSED" to work.
If markets worked as they should there would be no trading at all in a so called perfect world.
Today mkts work like this..........i see something and interpret it as i have conditioned myself relative to the odds i place on the setup. You see the same setup and interpret it the way you have conditioned yourself and we both place our bets accordingly.
Neither one of us knows who is right or wrong and because we will have seperate risk tolerance parameters we will never know or care who was right or wrong. Tomorrow we could take the same exact bets and the mkt will do just the opposit of yesterday.
Welcome to the real world of a game that involves money. There are no textbook right or wrongs.
Learning how to trade mkts and understanding them are seperate. understanding mkts are nothing compared to understanding yourself.
Forget reasons, just trade the crap.
PS: FWIW, this is how much i worry about reasons. When ES closes at 1615 est, i print out the 5 minute chart to put in a pile and hardly ever look at them anymore. I do my non trading life for the rest of the evening and look at mkts only in the morning news etc. Do not start the trading pc until about 0900 est and wait for opening. Then i trade what i see on the screen and thats all there is to it. I care less why or if the ES is even, up or down 10 handles. My mind starts to click when the ES starts to click in regular trading hours. "KISS" works
SURPRISE................a squawk box just tells you what has been happening. personally i used to have a squawk box and Ben does not or allowed to give trade suggestions etc. he reports what already is history. It is kinda neat though to almost "BE THERE"..,
If markets worked as they should there would be no trading at all in a so called perfect world.
Today mkts work like this..........i see something and interpret it as i have conditioned myself relative to the odds i place on the setup. You see the same setup and interpret it the way you have conditioned yourself and we both place our bets accordingly.
Neither one of us knows who is right or wrong and because we will have seperate risk tolerance parameters we will never know or care who was right or wrong. Tomorrow we could take the same exact bets and the mkt will do just the opposit of yesterday.
Welcome to the real world of a game that involves money. There are no textbook right or wrongs.
Learning how to trade mkts and understanding them are seperate. understanding mkts are nothing compared to understanding yourself.
Forget reasons, just trade the crap.
PS: FWIW, this is how much i worry about reasons. When ES closes at 1615 est, i print out the 5 minute chart to put in a pile and hardly ever look at them anymore. I do my non trading life for the rest of the evening and look at mkts only in the morning news etc. Do not start the trading pc until about 0900 est and wait for opening. Then i trade what i see on the screen and thats all there is to it. I care less why or if the ES is even, up or down 10 handles. My mind starts to click when the ES starts to click in regular trading hours. "KISS" works
SURPRISE................a squawk box just tells you what has been happening. personally i used to have a squawk box and Ben does not or allowed to give trade suggestions etc. he reports what already is history. It is kinda neat though to almost "BE THERE"..,
Bighog i am not new , and i dont want to make a setup based on the idea that cash follows the futures or vice versa ...
The real reason for my question is i am thinking to subscribe to the SP pit squawk box ( tradersaudio ) , i finished my free trial and i liked the idea that i am listening to whats going on in the pit second by second , but then i am thinking is the futures has any influence over the cash index or it follows the cash always ? in other words r those big locals and banks r trading by only watching the cash index and the ES and then reacting in the Pit futures or they can make the market ? i think i got my answer for this ...
And here comes a good question : Does the Pit has any influence over the ES ?
The real reason for my question is i am thinking to subscribe to the SP pit squawk box ( tradersaudio ) , i finished my free trial and i liked the idea that i am listening to whats going on in the pit second by second , but then i am thinking is the futures has any influence over the cash index or it follows the cash always ? in other words r those big locals and banks r trading by only watching the cash index and the ES and then reacting in the Pit futures or they can make the market ? i think i got my answer for this ...
And here comes a good question : Does the Pit has any influence over the ES ?
aye, in the same way that ES contracts basically shadow boxes with the cash market, the ES is going to lead, follow, pretty much stay right with what the SP contracts are doing.
this is because they are all basically the same exact thing, perhaps trading in different increments but the same thing so any spread difference between any of the vehicles is going to be grabbed by the algorithmic arbers, be it half a penny or who knows how little with the sick volume they use, again and again and again. ZERO risk for them.
if you have been listening to Ben squawking away, you will occassionally hear him mention an e-mini trade when someone is taking an inordinate amount of "cars" (actually, don't recall if he called the e-minis "cars" too.) and that often seems to accelerate whatever was happening.
to your question, i am going to go out on a limb but i am pretty sure if the locals can manage to move the spoo, then everything, the ES and SPY and an average of the stocks within that derivative, are following along as they must and if the paper is causing the move, then all the more reason as they are also outside and on the computers en masse. not to say the locals can't put up a good fight but...
I have subscribed to Ben's service for about two years now.
Here is what my thoughts are:
1) If you try to base your trades on what "paper" is doing, you will lose 51% of the time. I have found that it is most helpful to analyze WHY paper is trading where it does, especially if you have the data to "see" the volume delta.
2) After a while you can pick up on some nuances that are definitely tradable, and indeed quite profitable. Examples:
Recently the locals were probing the price higher, encountering paper sellers quite frequently (so, the locals were heavy "long" as there was massive selling}, but they kept pushing up, then they found a paper "buyer" (that they could "sell" too). We went short as soon as we heard that and then the locals started pushing down (now cleared of the long inventory they accumulated). On that particuler day we were short 1 tick from the high of the day !
Another instance is when we heard that paper had a large sell order at a given strike...it was trading a couple of ticks below the order, then paper dropped the strike a tick, but no trading at that strike....then paper took its order to the market..and we went short with it...very good trade.
So, as I have stated, for me the value of Traders Audio is the nuance that you can pick-up on. Does the Pit drive the ES or vice versus, I don't know, and really I don't care. I trade what I see (and hear !)
nice comments guys ..
Ofcourse i will not blindly follow the big locals or the banks , but i am thinking to make the squawk box an extra tool for my trading , i like the idea that i am listening to whats happening in the Pit at the moment ...
I will appreciate any advice about the squawk box , cuz i am still not sure ...
Ofcourse i will not blindly follow the big locals or the banks , but i am thinking to make the squawk box an extra tool for my trading , i like the idea that i am listening to whats happening in the Pit at the moment ...
I will appreciate any advice about the squawk box , cuz i am still not sure ...
surprise,
Your question certainly takes a person down memory lane. Others have explained to you how the research worked out.
Today, it is a great advantage to track the lead/lag relationship in markets and across markets.
Your advantage can range from small (20 to 30 seconds) to fairly decent (2 to 3 minutes).
The advantage is found under three categories:
1. Market premium drift
2. Volatility flow considerations, and
3. Front running smart money.
1. Gives you advantage over Bots and algos. As Connors-Hayward determined, in 2. There is a nice advantage for knowing what is going on, whats next and how fast the change is coming up. 3. is a rider on premium so it is easy to see how the imbalance is proceeding, how strong it is and when those who trade it step into the picture.
Historically, when phones were used it was easy to monitor during C&R's or incomings from the floor. Nowadays, it is all done visually on display panels that are set and reset to eliminate distortion and have calibrated go/no go levels. It is good to use a lookup which is reset according to the dynamic for level maintenance.
have a good one.
Your question certainly takes a person down memory lane. Others have explained to you how the research worked out.
Today, it is a great advantage to track the lead/lag relationship in markets and across markets.
Your advantage can range from small (20 to 30 seconds) to fairly decent (2 to 3 minutes).
The advantage is found under three categories:
1. Market premium drift
2. Volatility flow considerations, and
3. Front running smart money.
1. Gives you advantage over Bots and algos. As Connors-Hayward determined, in 2. There is a nice advantage for knowing what is going on, whats next and how fast the change is coming up. 3. is a rider on premium so it is easy to see how the imbalance is proceeding, how strong it is and when those who trade it step into the picture.
Historically, when phones were used it was easy to monitor during C&R's or incomings from the floor. Nowadays, it is all done visually on display panels that are set and reset to eliminate distortion and have calibrated go/no go levels. It is good to use a lookup which is reset according to the dynamic for level maintenance.
have a good one.