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Friday, October 17, 2008

A few quick thoughts on Futures - ES vs. NQ

My futures trading is split 80% NQ to 20% ES, reason being that (in my opinion) there are better (cleaner) moves and signals in the NQ. I don't have specific evidence that points to that conclusion - it is just my "feel" after looking at futures charts for about a year.

But if I trade after-hours, I always trade the ES (that is where I get most of the 20% referenced above). The reason is simple - the ES is more liquid than the NQ, and you can get in and out with less slippage.

Even though I focus on the NQ, I always have the ES chart up. I often see either the ES or NQ hit a level and react whereas I would not expect a reaction just looking at one of the charts in isolation.

Yesterday was a good example. The NQ broke the previous day's low, but reversed on the way to the Fibonacci extension (FE). The logical target was the FE, and there didn't seem to be anything to stop price from reaching that point. However, if you look at the ES chart, you will see that it hit its FE, reversed, and was headed back up; in this case, the strength in the ES was lifting the NQ. If you had both charts up, you would have been watching that level in the ES and you could have still exited the NQ with a nice profit (notice how the NQ also printed nice "offsetting bars" at that level).

ES:



NQ:




Check back over the weekend as I hope to post some thoughts on plotting Fibonacci lines.

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6 comments:

Aaron said...

Very glad you are back Trader-X. Does the shift to futures mean no more stock gappers?

On futures, do you find ES leads NQ, or is it vice versa?

Trader-X said...

Aaron-

I still trade stock gappers, but with the volatility in futures over the past month I have focused primarily on them. There have been some great moves that map nicely to my strategy.

I am not sure if there is a set answer...in my analysis, sometimes ES leads NQ sometimes NQ leads ES.

Roger B. said...

Great post X. Looking at today's action, it appears the ES is leading again. If my numbers are right, it reversed at a key level.

This is one of the most beneficial things I have read on a blog in a long time.

Trader-X said...

Roger-

You are correct. The ES hit the FE and the markets reversed. Good short trade...I took the NQ. Good eye. I will put a short post up after the close and before I go for Margaritas!

hypr said...

Did you short the break of the 10/16/2008 9:50 inside bar shooting star candle?

If not can you give your opinion on it?

Great posts as always.

Trader-X said...

Hypr-

I think it was a valid entry provided you watched for signs of a reversal at the morning low and the previous day's low. That was a high probability reversal area and you still would have a good trade. As it turns out price broke easily through that level, turning a good trade into a great one.

FYI - if you use MAs, the 34EMA was providing resistance as that bar and the previous one tagged it and left upper tails.