New system, starting small

Discussion in 'Index Futures' started by cipherscribe, Feb 11, 2010.

  1. I have an automated NQ and ES system that has passed my paper trading requirements. I would normally switch to trading the NQ with a smaller position size, however this system pyramids, and even with a small size, I could end up with a larger number of contracts than I wish to, at the outset of the system trial.

    I've heard the QQQQ ETF is very similar to the NQ. Does one track the other, how many QQQQ shares represent 1 NQ contract?

    As long as they are similar, it will allow me to essentially trade a fractional NQ contract, without concerns about position size or drawdowns.

    Thanks for any help in advance!

  2. Super helpful forum we have here. After a bit of testing, I have come up with the following:

    The correlation between the NQ and the QQQQ is around 0.999 from the sample I tested - this gets a big tick from me in terms of one follows the other.

    Yesterday's trade prices were as follows:

    NQ Open: 1746.25
    NQ Close: 1774
    NQ change: 27.75

    QQQQ Open: 43.01
    QQQQ Close: 43.66
    QQQQ Change: .65

    Given there is $20 per point in the the NQ contract, profit from yesterday would be $555. In order to make that from the QQQQ at a change of 0.65 cents, you would need a position size of 854 shares.

    After doing this exercise over a number of days, there are some discrepancies, but not a whole lot that would influence my system.

    Thanks all for your input and advice.....
  3. You will need much bigger account and will pay double on commissions when you trade QQQQ versus NQ .
    I am sure you know that , i am posting this for benefit of those who don't .
  4. Yes, Hombre, good point.
  5. NQ and QQQQ are both derivatives of NDX. Anyone who trades either one knows that the correlation between them is extremely high because they are arbed.

    You are going about the contract/share relationship the wrong way. NQ has a $20 multiplier. QQQQ was started at 1/40 of the NDX. Due to tracking error it is now about 1/40.66. Current contract/share relationship is 1 NQ = 813 shares QQQQ. For short term trading 1 NQ = 800 shares QQQQ is good enough.

    Note that NQ has premium/discount due to dividends and interest rates and QQQQ pays quarterly dividend.

    Also note that NQ is traded only one place - the Globex, while QQQQ is traded many places. An automated system will have fewer potential order execution problems trading NQ rather than QQQQ.
  6. Thanks for the info Jeb.

    I have started trading in multples of 400, basing 800 as the round number as a single NQ contract.