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Trading s&p vs dow emini


Well at first i would like to say hi to all since i have just registered in this forum and it's also my first post


Now my first question would be the choice of the right (best suited) market for trading.

Since i am a novice here i only know the emini dow and the emini s&p so i will discuss only about these two markets. (well i believe there are some more like the emini nasdaq but feel free to complete my knowledge
)

Well the few things i have noticed about both markets are :

- by the high amount of shares (bid & ask volume) s&p seems to be less "noisy"

- maybe i am wrong but i noticed that s&p have more often stronger/longer trend than dow
By that i mean when a day was trendy (as opposite to flat) i sometimes noticed that the trend of s&p was nicer and its amplitude higher than dow.
For example : both markets start a nice bullish trend at MA 1Day then at close dow has made 100 pts from its MA 1D and s&p made 11-12 pts.

-When both market charts are contradictory (in short term) i also noticed that s&p often ends dragging dow to its side but that needs to be confirmed

Some problems i have encountered trading with s&p emini are :

- by the high amount of bid & ask sizes you may get queeing and not hit which may push you to pay or sell directly but i guess it's the prize for having less noisy chart.

- trading s&p may put more pressure than dow since each smallest tick is 12.5$ compared to 5$ for dow

In overall i think trading s&p is more suited to me especially since i try to avoid noisy markets (so many stops got hit by false/noisy movement
).

Thanks for reading me and feel free to comment and expose your opinion.
Welcome to the forum ikodu - I hope that you find lots of usable and unbiased information here.

All of your observations when comparing the YM and ES are, in my opinion, accurate and you have already understood the market well.

The problem of getting a fill in the E-mini S&P500 is a universal one and we all complain about that. Especially when the market is slow and sideways, getting a fill at the "edge" can take forever and be very frustrating and wearing on the psych. Perhaps the ES will trade in 0.1 ticks someday which will make it much easier to get fills instead of the current 0.25 which makes fills more difficult.

What type of trading do you feel is best suited to your personality? Are you a scalper, day trader, swing trader, investor?

What strategies have you looked at so far? What signals have you looked at?
Well, so far i could attest that i have tried a few methods without being successfull

Scalping on dow revealed losing $$$ at the end for me, basically killed by stop-noises AND by commission fees (people don't realize how much they spend on fees when they make +10 trades a day !!)
Some days i recall acting like a mad dog following every (small) trends forgetting completely the real trend of the day.
I was like caught in a frenzy state - well a bit like when sharks feel to much blood around them - they get mad and blindly bite every thing around them


Well looking back now, i can only hope that that painfull episode at least helped me learn some few basic trading lessons.


I also tried for some period the "recovery method" which states that (nearly) every day the emini finds back its MA 1D (you can also extend this rules for MA 5D, 10D, etc but the longer period the less accurate)

So basically i waited for a "potential" maximum of the MA 1D trend and i traded against that direction with MA 1D as "potential" target.
As you may have noticed the both "potential" terms are the flaw of that method since you have to guess well the maximum otherwise you may ending being caught against the market which can hurt very bad.

. . .
. . .

I guess you will thank me for taking few shorcuts about my trading journey


. . .
. . .


So, to conclude, lately i am experimenting a simple method which i should have tried much sooner if i was a bit smarter.

I am slowly turning into a more slowly trading pace, trying to trade/catch only main trends on the week.

Don't laugh at me, since basically i am following a method nearly opposite as the "recovery" one stated sooner


Basically i am trying to catch the starting trend of MA 1D (or MA 1/2D)
inside the trend given by the MA 5D.

So i am using a simple crossing MA with few Bollinger bands with very few indicators.

I tried using MACD, RSI, parabolic SAR,etc .. but i have noticed that the more you overload your charts the less you can see clearly something from them - so now i try to return to more basic/simple charts with only the most needed/trusted indicators.

(Indeed, the more you draw indicators the more you feel confident but in fact those indicators will sooner or later lead you to contradictory signals and so will get you confused if you don't know how to read/interprete them.)

As for my trading software i am currently using esignal with metastock 9.0 RT
There are a few traders that I have chatted to who scalp and make money but as you said their commission charges are very high. One of them quoted paying 40% of his gross profits in commissions. This particular trader executes 10 to 30 trades a day I believe.

I did some work studying and back testing Bollinger Bands and discovered a setting on the BB's that was better than the default settings. If I remember correctly you had to shorten all the values for the ES and use it on a 5 minute chart to get the best results. (I don't have the research to hand otherwise I would happily give you the exact values.) One of the problems was that you had to enter as close to the high or low of the 5 minute bar once the BB had been pierced. (This is obviously a counter-trend trade.)

Once you were in a position you were to ignore counter-position signals until the target had been hit or until you were stopped out. If I recall correctly the stop was 2 points and the target 5 points.

The trickiest part of this system was the manual part which required discretion in estimating where the high or low point of the five minute bar would be. If the market was moving fast then you would give it more room, if slow then you would enter earlier because you might miss the reversal.

I apologize that I don't have the exact output from that back-test. If I can reproduce it in the future I will let you know. But I think that the BB's can produce some good counter-trend signals on the ES if you get the settings right.

The other thing to look for is day type. If it is obviously a trend day then you need to ignore the BB signals on the counter-trend side of the day. Again, the $64,000 question is how do you know if it's a trend day?
I'm currently using intraday charts trading more on weekly trends

for Bolg bands i usually use 1,2,5,10 & 20 days with 2% deviation


I do agree with you that BB are a good tool for counter-trend trade.

If it doesnt annoy you, would you mind if i ask you on what market(s) are you currenlty trading ?


I trade the E-mini S&P500 - i.e. the ES. The testing that I did using Bollinger Bands was also in this market. So these settings might not be as effective in a more volatile market such as the E-mini Russell 2000. The ER2.
quote:
Originally posted by ikodu

Well the few things i have noticed about both markets are :

- by the high amount of shares (bid & ask volume) s&p seems to be less "noisy"

Yes!! It is difficult to get whipped in the ES market by people making mistakes. I tried the YM one time and got burnt when there was a fat finger. The ES fat finger is easier to absorb so long as it is not a 10,000 contract fat finger. I think that the maximum size on the ES stops fat fingers as well.
I think that I remember the maximum size for one trade in the ES being raise from 1,500 contracts to 2,500 contracts but I will have to check to confirm that. Also that was a while ago so it could have changed since then.
After a bit of investigation I found the following open position limits for the S&P500:

Futures: 20,000 net long or short in all contract months combined

Options: 20,000 futures-equivalent contracts net on the same
side of the market in all contract months combined

These limits apply in conjunction with the E-mini contract.

I have found the restrictions for entering an order:

"An order for any quantity may be accepted for CME E-mini futures.
However, orders exceeding a specified number of contracts as indicated ... must be entered on the CME Globex system as multiple
entries..."

CME E-mini S&P500 and NASDAQ-100: 1,500 contracts.
All other CME stock index futures: 500 contracts.

This essentially prevents a fat finger from happening on very large orders (if I understand correctly.

If, for example, a trader enters a buy order for 15,000 contracts by accidentally hitting an extra zero then the system will reject this order even though it may be within the traders overall holding limit. If the trader really wants to execute a buy for 15,000 contracts then he/she will have to enter it as 10 separate orders.