After trading the index futures for 2 years, I get a feeling that the indices that contain many stocks e.g. SP500, are usually rather choppy and their trends are usually short-lived . Indices contain fewer stocks e.g. DOW(30), STOXX50, usually move quite smooth and their trends can last longer. I think they may need different trading systems. But I cannot prove it mathematically, it is only my gut feeling. If my feeling is correct, the Narrow-Based Indices futures planning by the OneChicago should be quite attractive if the liquidity is OK. I welcome any comment.
I was thinking the same thing. Just one or two large-cap stocks should move their Narrow-Based Indices very nicely up or down and cut out some of the chop. Can't wait.....
I think the opposite, from the point of view of company risk and market risk. If you are trading 1 company, you have both company and market risk to contend with. If you are trading an index with 30 stocks, there is much less company risk and mainly market risk. With the S&P500, virtually no company risk, only market risk. So you only have to pick general moves in the market and not worry about individual company surprises. The trendiness of a market has a lot to do with its maturity. The S&P 500 has been around 20 years, everyone trades it, so it is very efficient. All the CTAs running their trend following programs are exploiting away the 'trendiness'. The Eurostoxx has been around much less, so it has yet to be over-run with trend followers and chop it up. The Dow is too illiquid for the big funds to trade. But all this doesn't stop you taking advantage of the smooth trends while they last!
i'm not sure that the number of companies in an index is a good explanation for the choppiness of its futures product, especially with the huge distortion the weighting of the biggest companies in the sp500. either way, i think the choppiness of the es is one of its most attractive features. scalpers and trend traders both getting great ops day in day out.
The S&P futures are home to the big program traders. About 40% of the action on any given day is program-driven. I have a feeling that accounts for some of the intraday chop you observe. The stock indexes have historically been less trendy than most other futures markets. The bubble market changed that dramatically, but I think we are seeing a return to more normal, back and fill type daily trade on the stock indexes. That makes these markets tough to trade. Most of the time you get a range bound market, but occasionally you get a trend type day. To do well, you have to be able to handle both.
In the financial market there are just too many possible reasons to explain a result. May be there are too many players in the SP, so there are too many different opinions. Before the dot com bubble burst, there were also quite a lot of people playing the NQ. But I observed the NQ usually had a stronger trend then the SP. I guessed the reason was most of the tech stocks and traders moved together. In the SP, there were just too many different stocks and players. The rise of tech might be offset by the drop of the banks or the retailers. Of course, people now lose their interest in the tech so NQ also becomes flat. The volume of Eurostoxx is about 200k a day so it is quite close to the NQ and less to the SP but it is still much smoother than them. I guess the guys in the European markets may hold a position longer while in the SP, many of them are scalpers. This is only my guess.
ADX where did you get your information from that Eurostoxx50 trades 200k/day? From looking at the "contracts traded" statistic on the Eurex website, there was only one day in September with less than 400k and quite a few over 500k. Maybe the volume was a lot less than this in other months? Other liquid Euro futures contracts are the CAC40 and Dax100 with about 150k a day each. (DAX with 25EUR mutlipier). FTSE100 is also reasonably liquid, with about 100k a day (and 10BP multiplier). These european futures contracts have only recently attracted my attention as viable trading instruments. Hell, they're more than just "viable", they seem freakin awesome! Definitely something i'll be incorporating into my trading.
a trader friend of mine who trades 30 min time frame has been BEGGING me to look at stoxxx50 . the chart looks impressive but the sp500 30 min chart the past two months has been exceptionally good also for swing trading.