I asked primarily because it seemed reasonable to have a 3pt stop if your MAE was only up to 2.5. However, there must also be a definition of "winning". I assume that with a 6pt stop you're trading trends rather than scalping. If that's true, then you're hoisted on the same pitard as everyone else who's trying to come up with the "best" stop. If the trade is a "winning" one, you're in the clear. If not, you're out $120 per contract. My own experience - purely empirical - has been that the NQ can bounce as much as 8pts and still be a winning trade. But letting it go that far just isn't in the cards for many people. One difficulty lies in the fact that, as you say, so much depends on conditions. If conditions are right, a stop is irrelevant since even a one-tick stop would never be hit. And if conditions are terrible, you may as well get out almost immediately, assuming that you enter the trade at all. It's all those trades in the middle. Given a particular definition of "winner", have you done a statistical analysis to determine how often stops of n, n+1, n+2 and so on are hit so that probabilities of a sort could be assigned to each stop level? In other words, if it is extremely unlikely that a winner will reverse for more than 2.5pts, perhaps it is better to exit the trade rather than "hope" that this particular trade will stop its reversal and resume its move. On the other hand, if "winners", however they're defined, routinely back up 3.5 to 4pts, then a 4.5 to 5pt stop seems to be in order. It just depends on how many times each of those levels is reached before the move is resumed. --Db
hmm, if the above is true I wonder why NQ's exchange margin is 20% less than ES? Could the very smart trader share his/her insights?
This is very true IMO - the questions we face every day are: "Will ES or NQ lead today, and will that be up or down?" "Will ES or NQ be lagging enough today to stop/reverse momentum of the one that is leading?" "Do I sell ES's new high because NQ can't follow?" etc. etc. Of course this is only for intraday - if you look at hourly timeframes on up, they do look pretty similar Best Wishes, Paul
It doesn't matter over multi-day timeframes IMO - natural arbitrage seems to keep them connected (more or less). Less overnight margin for the NQ but also more "event risk" as the NAZ is more volatile to major overnight news. Best, Paul
Many people have already said much of the difference. When you get to study the movement closely, you will find out just how very different they are and where a technique may work on one most of the time it may not be nearly so good on the other and vice versa. Their ranges are different, their movement is often out of synch, the machanics in terms of costs vary, even the feel of how they move is unique to each. They are similar in general direction, but go any deeper than that... Natalie
The math is very simple. Risk 1 percent. Even daytraders need only to risk 1% of their account. If your system tells you to risk 2 pts ($100) in ES then you need $10,000 to trade ES. If your system tells you to risk $250 trading NQ then you need $25,000 to trade NQ. Believe me it takes a lot of pressure off.
>>However, there must also be a definition of "winning". << any trade that covers comms. and provides any profit above that is a winner. >>I assume that with a 6pt stop you're trading trends rather than scalping. < < Actually No, the system is a scalping system and is currently producing on avg. of 8-12 trades each day. >>If that's true, then you're hoisted on the same pitard as everyone else who's trying to come up with the "best" stop<< I understand how this could be misconstrued, however, finding the best stop is Not exactly what I am referring to. However, that is more a function of me not explaining myself clearly enough. >>One difficulty lies in the fact that, as you say, so much depends on conditions<< Yes, this I agree on. Moreover, as with any system, you typically have multiple options for a legal exit. Or at least with this system you do. Therefore one can see that not only must you backtest for statiscal significance, but for variance of each exit option as well. a.k.a- gonna take me a while.... ;-) >>If conditions are right, a stop is irrelevant since even a one-tick stop would never be hit<< I can't remember anytime since I started "daytrading" the e-mini Naz futures that I felt that a stop would never be necessary. Furthermore, I can't imagine consistently finding a setup within the Nq that would Not go at least 1 tick against me. >>And if conditions are terrible,......< IMHO, conditions are always terrible. I go into each trade expecting to lose... but I've become more of a cynic this past year. Don't get me wrong, not a self-defeatest attitude, just a realist to the game. >>Given a particular definition of "winner", << You now have my curiosity peaked. What is your operational definition of a "winner"? >>have you done a statistical analysis to determine how often stops of n, n+1, n+2<< I am doing some analysis, not exactly in this way, but useful nonetheless. >>.....rather than "hope"...<< The only hope I have these days, is that overall in the years to come I "Hope" to be successful. On a final note I appreciate your thoughts on this. I will let you know what I figure out if anything, in the coming months with more testing under my belt. best- momo
So your saying that a system that requires a risk of 2 ES points ($100/$50) would require an equivalent risk of 12.5 NQ points ($250/$20) if the same, or similar system were used? So NQ is over 6 times as volatile, has over 6 times the range etc... IMHO currently the equivalent NQ risk on 2ES points is around 3.5-4NQ pts, meaning that you you need less capital to trade NQ.