A quick way to tell what the Nasdaq is doing compared to the S&P is to put up a chart showing the spread between the two markets. I first type in the (ENQ) Nasdaq symbol minus (-) the (EP) S&P symbol (ENQ-EP). I use a line chart. This helps me quickly identify whether or not the Nasdaq is stronger or weaker than the S&P at that current moment. This helps me a lot with my execution.
In order to be a successful trader you must be able to adapt to the conditions of the market and one of the keys is finding the leader of the market and adjusting your approach to your execution. This is an important tip:
When the leader of the market is breaking and you have a buy signal always remember to buy at and below your prices for better execution of your trades. When the leader is rallying and you get a buy signal remember to buy at and above your prices.
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| E-mini 5 min. chart |
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| Nasdaq - S&P spread 5 min chart |
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Is it not necessary to account for the volatility differences between the S&P & Nasdaq? I look at a chart of NQ-ES and it looks similar to yours (I'm not sure if you use the futures or the cash indices) but I'm curious why one wouldn't weight them for volatility, for example 2NQ for 1 ES.
ReplyDeleteIt is not necessary to account for volatility when you are not trading it but when I do trade the spread I trade 5 NQ to 2 ES.
ReplyDeleteI use the line chart to give me a confirmation that in that moment before I execute my trade if the NQ is trading stronger or weaker than the ES.
In my strategy I have a way to compare other markets to the ES futures telling me if they are stronger or weaker than the ES or each other.
When you are day trading you need to have glances that give you confirmations to help you execute your trades from strategy. If you would like a more detailed explanation send me your email I will do that for you. Thanks for the great question.