What Markets and Information Should a Trader Track Beyond His Own Market?

[HighStakes 10]

Hello everyone,

 

I am currently writing my trading plan and preparing for live trading by September 2010.

 

As a part of my plan I want to include how to keep track of other markets than the one I will be day trading (most likely the ES contract).

 

I am thinking that for my main market, the S&P 500, I should track sector performance, advance/decline, breadth, highs vs lows, etc, support resistance at higher timeframes, long-term trend, etc.

 

For the other markets, I will maybe not be that detailed, but track the long-term trend, mid-term trend and short-term trend. Important support resistance on various time frames, etc.

 

Any important statistic that I have forgotten?

 

What markets then are important to track?

 

From the top of my head, I`m thinking: the other US equity indexes (YM, NQ, TF); currencies (euro, pound, yen, etc); bonds (30 year treasuries, ?), crude oil, gold and possibly some other indexes from the rest of the world (Europe and Asia).

 

If one makes a spreadsheet for this, it should not be too much work to track and update this information on a daily basis after every trading day.

 

To make it manageable, one should perhaps try to limit the number of markets without leaving out any that would be important.

 

Any suggestions or ideas are highly welcomed!

 

Thanks in advance,

 

HighStakes

[AgeKay 10]

I don't trade S&P 500 but Don Miller (google him, he's got a blog) is a pretty large trader of that market and shares what he's looking at, e.g. TICK (dont' remember anything more, I don't pay attention to his indicators).

[BlowFish 10]

I am not sure 'tracking' is a good thing unless you have a good (and very specific) idea how you can use the information you are tracking. Sometimes less is more, as AK suggested maybe a breadth or depth indicator but only of you have a exact idea of how you are going to use it to help make trading decisions.

[HighStakes 10]

I am not sure 'tracking' is a good thing unless you have a good (and very specific) idea how you can use the information you are tracking. Sometimes less is more, as AK suggested maybe a breadth or depth indicator but only of you have a exact idea of how you are going to use it to help make trading decisions.

 

The idea is to keep track of what the most important and related markets are doing on a daily basis.

 

I will not use it to generate trading ideas for my own market (ES). For that I will focus purely on price action, NYSE TICK, volume at bid/ask, new highs vs lows, etc.

 

My initial thought is that due to the correlation between several of these markets, it might be useful to be aware of where other markets than the one I am trading are moving. If oil is moving towards an important support level and I am not aware of what is going on, it might cost me.

 

Not sure how to keep track of it yet though. I`m leaning towards a spreadsheet.

 

That, or I could possibly just review daily charts of all these markets at the end of the day or on a weekly basis.

[Kiwi 16]

Here is some free advice that could save you a lot of money.

 

The human mind collects patterns and sees them when they are not really there. You know this if you've looked at charts and discovered great patterns that don't test out. Adding 3 or 4 other indices etc is a great way of giving your mind something to chew on - and spit you out.

 

If you don't have a tested intention for other data then DO NOT ADD IT. If it didn't work reliably in the past then it sure as hell doesn't predict the future. So just look at things you have tested or trained in.

[brownsfan019 17]

Too much info and you will suffer from paralysis by analysis.

 

Kiwi nailed it on the head - only use what you KNOW has tested well and should produce a reasonable result with consistency. To just overload your brain with info for the sake of it is a waste of time and will be detrimental.

 

If you want to start trading one of the worst contracts in the world, then you should focus exclusively on that since it seems as if you don't really have a trading plan just yet. You are planning to dive right into the deep end with the biggest players and they are waiting for you and your money any day now. Finding a reliable edge in the ES will be difficult enough that to overload your brain with info from 10+ other markets will just make this an even harder task.

[zdo 20]

re "keep track of other markets than the one I will be day trading "

 

I vote none - no other markets... unless you're arbing or spreading or have a natural knack for cross market work...

 

For me, the 'leads' and 'lags' have not proven to be sufficiently and consistently reliable

At times, for example, the NQ will lead immaculately then just as suddenly as it started it stops or becomes a 'trick that keeps on tricking' ....

[HighStakes 10]

Thank you all for your opinions.

 

Just to clarify. I am not looking to track 10 different markets in real time in order to help me make a decision on a potential 2-point trade in the ES That would not make sense.

 

I agree regarding paralysis by analysis, so I will definitely try to limit what I`m watching during the daytrading session.

 

My idea was that by tracking a select few (5-10) related markets (probably not any other equity indexes at all) at the end of every day, it could help me gauge what would happen the next day or during the week. More like getting a view on the big picture.

 

I have made quite a few good trades the last weeks using only a 1 minute chart, simple trendlines, S/R and patience, so I will be very critical of adding anything that does not provide value and that may potentially cloud my judgment.

 

Perhaps I`ll drop my initial idea alltogether.

 

If you want to start trading one of the worst contracts in the world, then you should focus exclusively on that since it seems as if you don't really have a trading plan just yet. You are planning to dive right into the deep end with the biggest players and they are waiting for you and your money any day now. Finding a reliable edge in the ES will be difficult enough that to overload your brain with info from 10+ other markets will just make this an even harder task.

 

Could you please expand on what you mean by the worst contract in the world?

 

I have heard so many different opinions regarding this contract and I feared the worst, but my experience so far (observation and demotrading) shows that it is highly tradeable. Of course, I`m not stupid enough to make snap judgments based on papertrading and a relatively small sample.

 

I made a comparison of the different contracts on the CME and I found that the ES has by far the most volume of the equity indexes. That alone should make the ES the preferred contract to trade among the equity indexes (less slippage). Actually, overall, the ES is only surpassed by the eurodollar contract and that by a small margin.

 

There are many contracts that have twice or thrice the average true range of the ES, but more volatility is not necessarily better if it is less predictable and less liquid (more slippage).

 

Just thinking out loud here...

 

You are correct in that I do not have a complete trading plan yet, but I am working on it on a daily basis and I have a very good idea about how I`m going to trade. Part of my plan is to look at different contracts the following months and eventually decide to trade one exclusively.

 

If you have any suggestions to aid this process or simply a better alternative than the ES, I would appreciate it a lot:)

 

All the best,

 

HighStakes

FuturesMarketsOverview(1).xls

[brownsfan019 17]

Simply, the ES is one of the biggest traded contracts = biggest players are here. And they are good. Along with the bots, I'm not interested. You are pitting yourself up against the biggest traders in the world + the many bots out there ... not an easy task.

 

What your eyes think they see as easily tradable (I assume you are looking at static charts) aren't so easy in real-time.

 

So while you are new and looking around to find your groove, it's worthwhile to examine some other 'different' markets - Oil, Gold, Currencies, Grains, even the RLM can act differently to the ES.

 

Also - daily volume means nothing when you first start. Slippage on 1 contract should not be a factor in your decision making. With 1 contract, you could easily trade the QM with minimal slippage. Check daily volume on that one to see what I mean.

[OsbourneCox 10]

Hello everyone,

I am thinking that for my main market, the S&P 500, I should track sector performance, advance/decline, breadth, highs vs lows, etc, support resistance at higher timeframes, long-term trend, etc.

 

For the other markets, I will maybe not be that detailed, but track the long-term trend, mid-term trend and short-term trend. Important support resistance on various time frames, etc.

 

...

 

From the top of my head, I`m thinking: the other US equity indexes (YM, NQ, TF); currencies (euro, pound, yen, etc); bonds (30 year treasuries, ?), crude oil, gold and possibly some other indexes from the rest of the world (Europe and Asia).

HighStakes

 

Hi HighStakes,

 

I'll ignore the question of trading the /ES and get back to your original question about markets to track.

 

I think it's worth making a distinction between intraday tracking and after hours tracking because some of the things you really want to monitor when you're placing trades and other things are fine being reviewed when you're preparing for the next day just to get a sense of the overall market.

 

I also think it's worth making a distinction between markets and indicators. Your list includes both.

 

First of all, you make a lot of comments about mid-term/long-term time frames. So this isn't a market, this is your perspective of the market you're trading. And I'm a big fan of watching multiple time frames. Alexander Elder's book "Come Into My Trading Room" has an excellent writeup about using triple time frames. Check it out and definitely investigate creating a setup screen to view all the time periods simultaneously. It works much better than flipping between windows.

 

As for what to watch intraday, everyone is spot on with warning against including too much and suffering from analysis paralysis. (It will also affect computer processing power.) Only add things you know you will use and do it incrementally. Remove what you don't use.

 

In regards to indicators, my screen includes A/D lines, A/D Volume lines and TICK, one set of each for the NYSE and Nasdaq. I take all of these into account when planning trades and rank them high on the list of things to watch.

 

As for markets that I keep open on my screen, I watch the SPY, QQQQ, IWM and XLF. I also watch the VIX, US Dollar futures, and TLT (30 year treasuries). These aren't the markets I trade, they are simply the markets I watch.

 

I keep things like gold, oil and other currencies in a "Market Overview" watchlist and will review them from time to time, sometimes during the day, many times not. I guess this is where a lot of the "after hour" candidates can find a home. Things like sector performance, currencies and foreign markets fall into this category. I have found constantly monitoring specific sectors during the day is definitely information overload with very little value added.

 

Also keep in mind: The auxiliary markets that you track can and should change over time as they become more or less important. For example, a few months ago, the SPX had a very close correlation to the USD. If the dollar fell, the market went up. Eventually that correlation disappeared (basically when the USD started to rise) but while the correlation existed, it was worth watching closely.

 

But in the end, trading is about finding your style, your edge and what works for you. So take people's suggestions (or criticisms) into consideration but in the end, there's no single best way to trade.

[HighStakes 10]

Simply, the ES is one of the biggest traded contracts = biggest players are here. And they are good. Along with the bots, I'm not interested. You are pitting yourself up against the biggest traders in the world + the many bots out there ... not an easy task.

 

What your eyes think they see as easily tradable (I assume you are looking at static charts) aren't so easy in real-time.

 

So while you are new and looking around to find your groove, it's worthwhile to examine some other 'different' markets - Oil, Gold, Currencies, Grains, even the RLM can act differently to the ES.

 

Also - daily volume means nothing when you first start. Slippage on 1 contract should not be a factor in your decision making. With 1 contract, you could easily trade the QM with minimal slippage. Check daily volume on that one to see what I mean.

 

Thank you for your observations and recommendations. I will definitely keep an open mind for other contracts.

 

To clarify, I have been trading and observing the ES contract in real time.

 

Hi HighStakes,

 

I'll ignore the question of trading the /ES and get back to your original question about markets to track.

 

I think it's worth making a distinction between intraday tracking and after hours tracking because some of the things you really want to monitor when you're placing trades and other things are fine being reviewed when you're preparing for the next day just to get a sense of the overall market.

 

I also think it's worth making a distinction between markets and indicators. Your list includes both.

 

First of all, you make a lot of comments about mid-term/long-term time frames. So this isn't a market, this is your perspective of the market you're trading. And I'm a big fan of watching multiple time frames. Alexander Elder's book "Come Into My Trading Room" has an excellent writeup about using triple time frames. Check it out and definitely investigate creating a setup screen to view all the time periods simultaneously. It works much better than flipping between windows.

 

As for what to watch intraday, everyone is spot on with warning against including too much and suffering from analysis paralysis. (It will also affect computer processing power.) Only add things you know you will use and do it incrementally. Remove what you don't use.

 

In regards to indicators, my screen includes A/D lines, A/D Volume lines and TICK, one set of each for the NYSE and Nasdaq. I take all of these into account when planning trades and rank them high on the list of things to watch.

 

As for markets that I keep open on my screen, I watch the SPY, QQQQ, IWM and XLF. I also watch the VIX, US Dollar futures, and TLT (30 year treasuries). These aren't the markets I trade, they are simply the markets I watch.

 

I keep things like gold, oil and other currencies in a "Market Overview" watchlist and will review them from time to time, sometimes during the day, many times not. I guess this is where a lot of the "after hour" candidates can find a home. Things like sector performance, currencies and foreign markets fall into this category. I have found constantly monitoring specific sectors during the day is definitely information overload with very little value added.

 

Also keep in mind: The auxiliary markets that you track can and should change over time as they become more or less important. For example, a few months ago, the SPX had a very close correlation to the USD. If the dollar fell, the market went up. Eventually that correlation disappeared (basically when the USD started to rise) but while the correlation existed, it was worth watching closely.

 

But in the end, trading is about finding your style, your edge and what works for you. So take people's suggestions (or criticisms) into consideration but in the end, there's no single best way to trade.

 

Hello OsbourneCox,

 

Thank you very much for this informative post.

 

Yes, the distinction between tracking in real time and after markets is important. My work would be after the market close to get an overall sense of the markets as you say and a heads up if an important market is close to an important price level. This was what I alluded to in my initial post.

 

I`m aware of Elders triple screen system and I will definitely be using that for my main contract on a dedicated screen.

 

Are you trading the ES contract exclusively yourself? I would appreciate your opinion on this market if so.

 

An example of how sector performance can be tracked: TraderFeed: Tracking a Basket of Stocks for Volume Weighted Average Price

 

It should be very valuable for gauging the probabilities of a breakout from a range or a mean reversion trade.

 

Regards,

 

HighStakes

[OsbourneCox 10]

I don't trade futures, just straight equities, so I have no opinion on the comments on the ES market.

 

As for the TraderFeed example, if you're looking to track sector performance, just track the sector ETFs. No need to bother with a basket of stocks as the ETFs are the basket of stocks. (And more than you'd want to put into a spreadsheet.)

 

Personally, I have a watchlist for each of the sector ETFs with each component stock so I can quickly review all of the charts.

[HighStakes 10]

I don't trade futures, just straight equities, so I have no opinion on the comments on the ES market.

 

As for the TraderFeed example, if you're looking to track sector performance, just track the sector ETFs. No need to bother with a basket of stocks as the ETFs are the basket of stocks. (And more than you'd want to put into a spreadsheet.)

 

Personally, I have a watchlist for each of the sector ETFs with each component stock so I can quickly review all of the charts.

 

 

I agree. A watchlist of the sector ETFs should do the job