e-mini dangers

Discussion in 'Index Futures' started by o_2_b_sean, Apr 9, 2002.

  1. hello all,

    I am interested in getting into e-mini trading in the very near future. I have traded the QQQs some and stocks alot. I am basically a purely technical trader and I understand most of the classical TA principles fairly well. I base most all of my trade descisions on the NDX and COMP movements, cycles, trendlines, etc. However, there is still quite a lot about macro and micro economics that I have yet to learn, business cycles, stock rotation, bond market cycles, and to be honest, many of the principles and quirks of the commodities markets still elude me.

    My question is this: what are some of the dangers of index futures trading of which a beginner such as myself might not be cognizant? Having stated above some of my limitations, to what degree am I handicapped?

    From what I have read and intuitively understand there are some basic practices of trading the index futures that would help to limit risk:

    1) trade during market hours

    2) avoid days where major economic policy decisions may be made, such as fed meetings, etc. Especially when the outcome is unknown or multiple outcomes exist...

    3) Start with just one or two contracts

    So can anyone add to this list?

  2. I forgot to mention something...

    To clarify my question: I have heard that the futures move with the market index, except when they don't ;-)

    What I am trying to understand here is the "when they don't" part. What events might cause a wild, and unexpected, move in these securities?
  3. stevet


    if you are a technical trader - why dont you just follow the futures and learn how they move - it does not matter why they move as much as how they move

    once you get a feel for how they move - you may be close to why

    for what its worth - the futures on the whole lead the cash, except when the cash does not want to be led
  4. Atlantic


    you don't necessarily have to avoid the entire trading session when economic reports come out. just check the time:


    there you can find when, what, etc.

    write those times down and watch what is going to happen in the market. you can ignore the report itself - you only have to know the time. if you avoid being in the market when a report is to come - one "danger" is already taken away from your trading.

    good luck.
  5. I haven't looked at this in detail, but it seems that the nq leads the cash most of the time, except for those times when there is a change of direction, in other words the nq seems to exagerate all moves. For that reason i'm not sure you can really call it 'leading.' 'Pretending to lead' would be more accurate.

  6. stevet


    "I haven't looked at this in detail"

    enough said!
  7. DblArrow


    If you are trading TA, my opinion is to simply forget all the outside funnymentals (execpt certain report days).

    As stevet said, simply watch the market, get a feel for what it does after certain patterns, etc. learn to react and not predict and you should come out ok.
  8. stevet,

    Are you sure that was enough? lol.

    All I've done was calculated the ndx value for bid and ask for each second, calculated the average premium for the day and added that to the ndx value, then created a chart of the ndx from that and overlaid a tick chart of the NQ. Didn't look to me like the NQ was leading. But I didn't do any statistical work on the numbers (that's what I meant by 'detail'), just compared the moves on the chart.

    Perhaps this was an unusual day, perhaps the nq does lead on average, but I doubt it, and if it does then not in a consistent way and the 'lead' is so short lived that it seems pretty useless.

    Now it's your turn to elaborate :)

  9. i think its of little use to try and determine if the cash leads the futures.. much of the futures movement is caused by arbitrage between the underlying stocks and the qqq and the nq... since the cash is made up of the last trade of the individual index components, its not possible to tell what the exact market (price one could actually buy or sell) would be for that stock.. and so it would not be possible to know if the futures are leaning on the cash or if the cash is leaning on the futures.. although i have some ideas in the works to examine this relationship in more detail, i think its better to use the Dow, ES and some of the major index components in addition to the cash for finding direction..

  10. stevet



    the futures always lead the cash

    just watch the future and cash in realtime


    i guess you don't trade futures!
    #10     Apr 10, 2002