Mini Dow and Underlying Issues

Discussion in 'Trading' started by carltonp, Aug 15, 2011.

  1. Hello Traders,

    I'm still relatively new to trading and I was wondering if you guys/gals can shed some light on what's been happening with the markets over the past week.

    Basically, I've been having reasonable success trading YM(mini-dow) by focusing on the movement of the underlying issues of the DJIA. I have a very basic signal to alert me as to when to buy contract(s), however I won't enter until I see strength in the underlying issues in the direction inwhich I want to take the trade. I use the opposite method to get out i.e. when I see weakness in the underlying issues.

    As I've mentioned, its been working quite well for me, however over the past couple of weeks the strength of the underlying issues simply won't move the YM. There have been situations, (even as I write this post) where every single issue of the DJIA has been trending up but the YM still won't move with the issues.

    Now, I'm assuming the mini-dow would follow the underlying issues of the DJIA, unless told otherwise?

    I'm beginning to think the past few months was just luck.

    Can someone please advise if they believe observing the underlying issues as a method to trade Minis, whether it be S&P 500 for es-minis or DJIA for the mini-dow is a feasible/viable method?

    Now, I'm aware that the markets are simply wild at the moment and no matter which direction the strength of the market is at any moment in time it seems to be turning in the opposite direction in a split second.

    As you've probably guessed I day trade.

    For those that take the time to respond, please be constructive in your comments with pros/cons.
    You comments, suggestions and advice will be very much welcomed.


  2. Guys,

    I just thought I would add that I use a custom calculation with Excel to assess the strength of the underlying stock. Also, by underlying stock, I mean the 30 stocks that make up the DJIA.

    I very much look forward to your comments.

  3. Its just luck, a gazillion bots are already arb'ing the major indices/underlying component stocks, there is no edge to be gained from observing movements in the underlying issues.
  4. Trickshot,

    Very constructive .... Noooootttt. I wish I hadn't used the term luck - it's makes it so easy for bods like you to repeat it without giving any positive feedback.
  5. Unfortunately, trickshot is correct. The YM is arbed against the underlying by hundreds of people. That in itself leads me to believe there is no edge watching the underlying stocks, except for confirmation of move.

    What you can use however is another index like the NQ or TF, or watch market internals like adv issus-decl issues Or TICK.

    Hope that helps!
  6. Yes it does

    Put that way, I can accept what both you and trickshot say.


  7. Julian would you use the underlying issues / components of NQ to trade YM?

  8. That could be possible as they are normally not arbed, but at the same time, all stocks have their own personality, so normally its not the best idea to trade indexes off of stocks. However they definitely can be used as confirmation.
  9. Thanks again for responding.

    To be honest, I would only use the stocks for confirmation. However, I have compiled a Excel spreadsheet which monitors all 30 stocks in realtime. OMG, as I writing this post all 30 stocks are tanking and the YM is tanking in sync....... Shite....

    I have another question .... give me second.
  10. Looks like you could be right mate.....
    #10     Aug 16, 2011