Trading the Nasdaq-100 (NQ) Futures

[Dogpile]

ok, let's looks at another ABC. I think this demonstrates why market profile 'value' concept is so useful as a filter for trading.

on Friday, look how this is a tough set-up. It looks like a nice corrective ABC down off Thursdays late afternoon 'lower high'. Moreover, this ABC down formed a swing low during the standard shakeout/reversal time of 10-11am. The problem with the set-up is that the first move of the day was not 'away' from previous day value. Instead, there is a pretty big gap down 'towards' value and then it trades further down to 54.50 area, which was the P O C (point of control) for Thursday.

I decided to take the trade for a long but I used smaller size because of marginal 'trade location'. It wasn't trading much ABOVE previous day P O C, so location wasn't horrible --- but it wasn't trading 'away' from previous day P O C so trade location was marginal at best. It started my way but didn't go far enough to fill me for a profit and so I insted stopped out for a small loss. In retrospect, I made a mistake -- I think I got carried away because the 10-11am reversal had worked basically every day this week. (of course, had this trade worked for a few points and filled my limit order to sell, I would be patting myself on the back for putting something on when I saw a good pattern -- despite marginal location). (Monday thru Thursday all showed nice tradeable swings off of a 10-11am swing low).

So it goes with trading... use smaller size when its not a realllly choice set-up.

btw, note that the upswing petered out at the previous days 'last hour low' -- just an interesting sidenote to the structure of the day....

http://bp2.blogger.com/_5h-SWVGx6Ms/...ne+22+2007.bmp

[Dogpile]

Another ABC pattern...

this was another ABC pattern.... note that you don't know how far the B to C leg of ABC will go up.... you have to remain open to the possibility that it COULD rocket higher... you can't just short every ABC... in this case though, look how the ABC up found resistance at the 15-min 20ema amid a very bearish day... when it starts down off this, I think its worth a shot. Not at full size but ABC up is just a great pattern if you think you have a good reason that trade location is also good. Not a pristine set-up but worth reviewing I think:

http://bp1.blogger.com/_5h-SWVGx6Ms/...ne+22+2007.bmp

[notouch]

	Quote:	TinGull
	Here's a quick Q...why do you think the NQ doesn't get as much love as the YM? Tick value seems really nice for the risk...really its similar to the YM. Just curious

There's a lot more volume on NQ than YM. If you multiply the tick value by the daily ATR the NQ is the cheapest of all mini US stock index futures to trade. It doesn't get debated much on this forum (until now) but does on other forums.

[walterw]

	Quote:	notouch
	There's a lot more volume on NQ than YM. If you multiply the tick value by the daily ATR the NQ is the cheapest of all mini US stock index futures to trade. It doesn't get debated much on this forum (until now) but does on other forums.

I will look closer to NQ this week, sounds interesting this aspects on this future... I want to find the way to be able to trade 100 contracts confortably on a given future (ES would do it but I am not good at it )... I dont know if NQ would make it... someone here trades 100 contracts on NQ ? thanks Walter.

[brownsfan019]

	Quote:	walterw
	I will look closer to NQ this week, sounds interesting this aspects on this future... I want to find the way to be able to trade 100 contracts confortably on a given future (ES would do it but I am not good at it )... I dont know if NQ would make it... someone here trades 100 contracts on NQ ? thanks Walter.

Walter - when I traded the NQ, I traded 50 a clip with no problem. I would not think 100 would be an issue either. Of course, those numbers are not a problem on the ES as well.

[walterw]

	Quote:	brownsfan019
	Walter - when I traded the NQ, I traded 50 a clip with no problem. I would not think 100 would be an issue either. Of course, those numbers are not a problem on the ES as well.

yhea, you Brown made my mouth water with your ES trading man... I envy you... jejeje.... ES was a project for me, but never made it... not easy to trade, now volume there its really nice... cheers Walter.

[TinGull]

Yea, I'm starting to watch NQ now...seems intriguing for a guy who likes small PnL like me...

[cooter]

If you're accustomed to trading the YM, but would like to use more SIZE, then use the NQ instead, since the tick value and range is pretty much the same.

NQ has more volume and depth than the YM, IMHO.

[TinGull]

Nice, yea I like the look of it so far.

[Dogpile]

Discussion of todays action in NQ:

NQ opened Mondays session 'in balance' --- near 1948.00 POC from friday... then did an instant flush down below Fridays low to 34.25 (-13.75 from POC) to wash out weak holders before launching higher. I was looking for a reversal below fridays low for a long but it was a quick-spike-whipsaw which led to tougher trade location for a long as it pushed back into the choppy range from Friday. NQ found a little resistance near 'last hour high' at 1952.00, forming a bull flag that led to a 2nd push up reaching 56.50.

NQ then began to trade down before pushing a 3rd time up into the lunch hour timeframe. Volume and breadth during this entire move were mediocre.

On the final push up, a price/momentum divergence formed on both the 15-min and 1600-tick timeframes -- my primary pattern focus timeframe. See attached chart which shows this divergence (price new high, oscillator lower high). It is not uncommon for a 15-min divergence like this to mark the high or low for the day.

http://bp0.blogger.com/_5h-SWVGx6Ms/...ne+25+2007.bmp

NQ chopped slowly lower in somewhat bizarre action for NQ (it tends to move around quickly). The days POC formed here at 1953.25 -- the market appeared to have found balance.

Not long after this, we had a break away from balance as volume picked up sharply. This pattern had general feel of a head & shoulders topping formation on YM and ES (NQ not so much) but the markets drifted down slowly for the first leg creating difficult location to take a short. I would be happy to hear how others may have entered a short here. To tell the truth, I was thinking about taking a long on YM but it just fell and fell and never really came close to triggering me in with parabolic break to the upside.

By the close, we still have an afternoon 'trending profile' to the downside on accelerated volume -- but the market close of 40.75 is 12.50 points below the daily POC. This creates an interesting situation for tomorrow. We have ABC pattern up after a very strong momentum push down. This is an excellent short set-up. At the same time, there is a strong tendency to go touch 1953.25 tomorrow.

I will not be surprised if NQ touches 53.25 tomorrow and I will not be surprised if NQ completes its ABC-up and then makes a low below todays low tomorrow. Stay flexible and take whatever it is that sets up.

http://bp2.blogger.com/_5h-SWVGx6Ms/...un+25+2007.bmp


comments on todays markets appreciated.