No registration required! (Why?)

Using Interrelating Charts to Filter Trades


I'm new to trading futures, so I'm only beginning to follow the stock indexes. Is it my imagination or does the ES, YM, NQ and ER2 all follow each other to some degree? If that's the case, should I use support and resistance off of other charts to filter trades? For example: Say I'm trading the S&P, and price trades up into the value area, in which case, I look to take an 80% rule trade. But say I flip over to the Russell and the Dow and see that both of them found resistance at the Value Area low. Would I want to avoid taking the 80% rule trade on the S&P? I've seen a few times the 80% rule trade failed only later to notice that it was meeting resistance on another chart. Also, are there any other markets that interrelate, either directly or inversely?

Thanks,
Brandon
Some of the overlap of the indices that you mentioned is due to the fact that some of the same stocks are in each index and generally they are correlated because they all represent US indices. They definitely have a correlation and I believe that the correlation between YM and ES is 0.95. I'm not sure what the others are.

What you are suggesting though is very insightful and may be worth further investigation. However, I've never heard of anyone doing that but it would be a great (although complicated) back test to run against the indices. Good observation!
quote:
Originally posted by day trading

Some of the overlap of the indices that you mentioned is due to the fact that some of the same stocks are in each index and generally they are correlated because they all represent US indices. They definitely have a correlation and I believe that the correlation between YM and ES is 0.95. I'm not sure what the others are.

What you are suggesting though is very insightful and may be worth further investigation. However, I've never heard of anyone doing that but it would be a great (although complicated) back test to run against the indices. Good observation!




That is the basis of my system. Trade the YM, ONLY when both the ES and YM give the same signal. It will limit trades but increases likelihood of success.
Thanks day trader for your kind words, and thank you bakrob for confirming my suspicion. I will certainly implement this in some way now that you've confirmed it.