Ticks

Why so much emphasis on "Tick charts" for trading es or er2?
Seem like could use technical analysis, price volume action, as one could do with equities.
What are the common setups everyone is using?
Tick charts? 1 5 30 min? Share bars?

msc

Here is an index into 3 pieces/articles about chart types that I wrote:
Chart Types

The advantage of tick and volume charts over time based charts is that they smooth out the generation of bars/candles when there is little market activity. Why give a lunchtime 1 hour candle the same significance (weighting) if only a handful of traders were there to trade it?

Thanks for that link.
Id seen the advantage with volume based charts or in the case of Tradestation Share bars but it seems that so few use this type of chart. Wonder why when the difference is obvious.

msc

Well the main chart that I use is a volume based chart on the E-mini S&P500 (ES) and I only use the time based charts for indicators that won't work on volume charts.

I use a 3,000V chart which approximates a 1 min time based chart.

Using a simple setup for ER2.
1000 share bar and a 20 period moving average.
The more indicators one uses more complex it gets.

What time frame are you trying to replicate with the 1000 contract bars? You can do a calculation to work out the best number of contracts to use per bar based on the time frame that you are used to using. That way the transition is easier. If, for example, you are used to using a 5 minute bar then work out how many 5 minute bars there are during the RTH day and then divide the total volume during this period by the number of 5 minute bars. This will give you the average volume per 5 minutes.

Do this for a few weeks worth of data and you will replicate the 5 minute time frame except when you watch it on a volume chart the chart will be distributed evenly according to volume and each bar will have a true reflection of activity.

Now using a moving average on a chart like this is, in my opinion, way more powerful because each bar now has a justified equal weighting and so the moving average calculated on that is not skewed by inactive periods where no trading happened.

If you need more clarification then let me know...

My time frame trying to replicate is 1 min.
Thanks for the volume calculation. Already do that for stocks I watch. Dont know why I didnt think of it for futs, DUH!!
Is there anyway to avoid slippage on entry?
Looked at Ninjatrader but thats 50/month and Im not to hyper about it.
TS ok for both stock and futs.

You can use a limit order "at market" to avoid slippage for entry - if I've understood you correctly.

So if the market is bid/asked at 671.1 - 671.2 and you want to go long at 671.2 at market but don't want to pay up if the market moves up then you can enter a limit order to buy at 671.2 and if the market is still asked at this price when the exchange receives your order then you will immediately be filled otherwise it will turn into a limit long order.

Thanks so much for your time and help.

Whats the advanatage to trading futures over the corresponing indexes?
Essentially identical products only difference is leverage. I assume the risk potential is the same in comparison?

Good question. I've never attempted to tabulate the advantages and disadvantages of one over the other. To trade the index I think you need to trade the Spiders (SPY) and so you'd hold them like a stock.

I suppose that one of the limitations is that you would be subject to the Pattern Day Trader rules if you day traded Spiders which is not present in the futures.

I'm not sure what other limitations one has over the other. It would be interesting to know...

Been paper trading ER2 past 10 days.
Average about 2-5 points a day.
I admit the leverage does make futs more risky than stocks.
But if you stay within your account total and not use margin thats avoidable. Many find Er2 to be very jumpt sporadic compared to es sometimes it appears to be but it can also be very smooth and predictable.
All Im using is trendlines support/resistance. Sure easier to watch a couple of futs rather than a big basket of stocks. But there seem to be so many with huge losses in futs trading and/or wiped out. So many warnings about added risk.
What am I missing?

msc

quote:

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Originally posted by msc

...but wonder do we stand a chance against the big boys trading them?

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Draw an analogy to almost any industry. Consider yourself entering that industry. Where are you? Right at the bottom. You know nothing and you know no one. As time progresses you learn and your skill set becomes more valuable. The more your learn and the better you are at performing the skills required the more you earn.

All industries have the big boys. In software there are the Microsoft giants. In processors we have Intel. All sectors and sub-sectors have dominant players who through their size have advantages. The small players also have advantages which the larger companies don't.

Have you ever read Peter Lynch's One Up On Wall Street? He discusses and explains how the individual investor can often have a significant advantage over the money management companies. You have to remember that the companies that run the program trades do so to a formula. If you know the formula and understand what they are doing and when they are going to do it then because of your size and the fact that you're an individual then you can jump in front of them and ride their buying /selling program.

How do you do that? You might watch the volume in a certain stock, future or sector. Say Merrill Lynch are going to arbitrage the S&P500 cash against the E-mini S&P500 when the premium becomes too large or small. They will probably proxy the cash index with the 50 largest stocks (the might arb the entire index but I'm guessing they can get the same bang for buck with the 50 biggest and most liquid) and then arbtrage the two and then reverse them out.

If they are executing this type of trade then your job as an individual trader is to isolate when they are going to do this instead of worrying that you are up against big players that you can't "beat" just step in front of them and ride their trades as a one sided arbitrage. For more information on single side arbitrage take a look at Trade Like a Hedge Fund by James Altucher.

Here is a story in another topic that illustrates the point: Only one Move