Toughest trade in the world: S & P 500?

Discussion in 'Trading' started by stockfrosty, Apr 7, 2004.

  1. Whether you trade the mini, the big contract or the SPY, you are trading in the most competitive trading arena in the world. Why trade such a difficult instrument? The odds are againts you because you are trading againts the best traders in the world. If you want a challenge, climb a mountain or run a marathon. If you want to make cash as easily and consistently as possible, trade something other than the S & P.

    Reasons why the S & P is the toughest trade include:

    1) No leading indicator (especially if you trade the e mini)

    2) Time and sales is useless because it is too thick and volume is mostly arb/program related anyway.

    3) No NYSE Open book to establish risk levels

    4) Intraday price action is close to random (it rarely trends cleanly and false breakouts are prevalent)

    5) In the absence of news the S & P is dominated by a few large speculators who manipulate the market exceptionally well, which essentially adds up to one big cash grab)

    6) Market is affected by a practically endless number of variables which make intraday price action as close to random as I've every seen in any market.

    It all adds up to a very difficult trade. So what I'm asking is, again, why do so many insexperienced small time traders trade it? It is a recipe for loss.
  2. why play in the card game where you know they cheat and the deck is stacked?
    I learned long ago to avoid any games where I can't be the top dog. That's why I trade spreads. I follow the trends and only stick my neck out when I am relatively certain that they can't chop it off
  3. This is why the sooner that you accept the fact that the "trend is your friend" you will have the odds in your favor.

    Identify THE trend first, and then trade accordingly.

  4. Maybe you missed my point. Yes the trend is your friend. But it is my experience that the s n p rarely trends cleanly on an intraday basis. So if you want to trade the trend, which every trader should in my opinion, and you are a day trader, trade something that trends well. Don't trade the s n p which tends to chop about all day long.
  5. lescor


    Yes it's true. There are soooo many ways to extract money from the financial markets. I've gravitated to basically cherry picking the easy stuff (it's out there).

    Q: Why continuously bang your head against a wall?

    A: Because it feels so good when you stop.
  6. I agree.

    I think you have better odds in 'Vegas.

    But somr people will say that "they trade the most liquid, largest financial cos. in the world with 1 instrument".

    Not worth arguing with them, since they believe the bullshit fed to them by the futures exchanges.

    Also, many have no other options, since they're trading a small account and want to leverage it up to "make their fortune", FAST!

  7. stockfrosty,

    Ironically, I think I've done better in index futures than stocks. Stocks can be EASIER, but you ahve to do a lto of research to find the good movers of the day. Or news stock. Or momentum plays etc. I think it's easier to hold stocks.

    But on the flip side, futures can be easy to trade once you get the hang of it. Plenty of liquidity. I can scalp a little bit and make a bundle in a hurry. I never made that kind of money in equities. Maybe I will now that I have patience to hold. However, you can lose a bundle in a hurry too if you dont' watch your risk!

    I mean if you are good at scalp a few small move all day long then index futures are really good products. If you like to hold for big trends then equities are better I think. But the leverage in futures mean you get more bang for your bucks. Equities are rigged too with specialist games,etc.

    I think if you are a good trader you can trade almost anything. But somethings will fit your personality better than others I agree...
  8. I agree 100%. I've been trading most developed markets for almost 15 years now and I believe that the only market that I am a net loser in is the S&P. In contrast, I believe that $/Yen is probably the easiest most trendy market of all the major markets. I am going to remember your point the next time I think I see an 'easy' trade in the S&P. It's the toughest game in town. Thanks. Neal.
  9. I have done it on the floor and tried doing it upstairs with stocks.
    The problem is people belive that there is a magic key off or set up on the floor when in reality the set up is have a buddy broker who will give you trades and split the dollars with him. Or scalp stocks for the 1/8 and 1/4 when the specialist must fill you and you can lock up his book. This is the edge. The only other edge on the floor is seeing the big trades come from funds and commercial hedgers and try to surf the big moves.
    The market profile brackets are the only nice stats on the floor but I would not try to scalp based on them either..

    This is not to say that a few people can not do it outside the pit, based on tape reading...but there must be a reason why those traders stand in the pit and slide in and out of manure all day..
  10. I think it's true....the best traders are probably trading the SP, because that's where the money is. I've personally been trading index futures from their beginnings, starting with the old Value Line contract, and then the SP when it started. It's not all I trade....but it's really my favorite trade.

    Alot of guys use the SP as a leading indicator for trading a stock for instance. Because of this they think there is nothing that works as a leader for the SP. Not true in my opinion.

    I've posted many times here that the SP can only move (within reason) with the underlying stocks in the index. I watch all the big stocks and/or sectors for clues on that direction. Now, I would not want to intimate that this is easy. It isn't. And I've been doing this a very long time. But the SP is not normally going to move down for instance when the key stocks and sectors are up.

    That said, the SP is noisy...and that is what gives you the opportunity. A few points either way many times has next to no real meaning. This means that this movement gives you opportunity. But if you're trading as many here do with your hands too tight on the handlebars....tight stops, tight targets, etc. then this is going to be a tough market in my opinion.

    Intraday charts? I don't think you're going to make big money until you put the intraday chart away, and start to look at what really causes's not your 1 minute chart, or the stochastics on it.

    If you're trading a small account the SP becomes a difficult trade. If you overleverage yourself I think it becomes difficult. Smaller size is better in my opinion (relative to your account). Trading too many times a day just gives yourself more opportunity to be caught up by the noise, or to have errors in judgment.

    I would suggest that you step back a little, relax. Think of the SP as a $111 stock. On a stock of that price you would not find it unusual for the stock to rise or fall $1. You probably would not be trying to make 10-20 cents. Now just add a zero to these numbers....1110, 10 points, 1-2 points.

    Just a few thoughts.

    #10     Apr 7, 2004