I have recently written a program which will allow me to plot multiple securities on the same plot in percentage terms for comparison sake. I trade primarily ES and NQ. My question is what other securities would you find most beneficial to watch to gain additional insight into these two markets? I see three distinct categories to watch, each with their own benefits. If you could only choose one of the following which would it be? 1) Bottom Up - Underlying Stocks Watch the top ten stocks in each index. The benefits here are spotting similar patterns, confirming S/R breaks across a number of components, etc. Also you know that moves in these heavily weighted stocks will have a direct impact on the index. 2) Side to Side - Sector Indices Watch all sector indices making up the main index. The benefits here would be spotting the breadth of the move across sectors or spotting how contagion between sectors can spread. The potential drawback to using these indices is that you are not capital weighted so without memorizing the weighting of these sectors relative to the larger index it is hard to judge their impact on the larger index. 3) Top Down - Multiple Markets Watch multiple markets such as bonds, currencies, key commodities, etc. The benefits here is seeing the whole monetary picture, where the hot money is flowing that day. If you know what to look for this can be very important. The potential drawback here is that correlations decouple all the time and those old standby sayings you use to keep the macro economic relationships straight can be painfully inadequate at times. You've got to know what you are doing. I'm hoping this can spark some interesting conversation on what us elitetraders find to be the most important relationships in the market. As a minor compensation for sharing your thoughts I've attached a text file I compiled of all the most useful indices IB has available. I hope you find it useful. Thank you.
This is a very good question. It also depends if you are a swing trader or daytrader. If you watch *too many* things, you may also become paralyzed and confused with too many things pointing in different directions. I believe Nitro, in a post some time ago posted he watches 27 different things. Also, some people are able to integrate additional information better than others. As for me, I usully watch other stuff in the same class of instrument I'm trading and look for divergences. I think looking at the underlying components probably gets you confused and takes too much time.
as an equities option trader i watch a few things, not to much. The underlyer, Gama, theta, the option and the cash....SPX and NDX. For me, the SPX and NDX take out the noise of the MINIs which is caused by the Daytraders trying to scalp.
Nice attatchment. We're on the same page. Index futures don't trade in a vacum. I want to know what's moving out there.
If you're going to be day trading, you should just focus on what you intend to trade. Multiple time frames of the ES is more useful than confusing yourself to paralysis looking at a bunch of other things.
I trade ES and have been watching $BKX(Banking Index) for the past 2 weeks. On Friday when the market gapped down, I noticed that $BKX was barely down and began to BreakOut from a consolidation. Market rallied hard. On Wednesday ES was forming a triangle like pattern (5 min chart) mid day and I was wondering which way it was going to Break. $BKX started rallying 10 minutes before ES Broke Out from its pattern. Though $BKX does not allways Lead ES, sometimes it does, and thats a good thing to know.
This is very tricky. Sometimes the dollar leads.. sometimes its the bonds, banks stocks, tech stocks.. Everyday its something else.. and you never will really know until after the fact. --MIKE