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For those that trade multiple markets, do you exclusively look for your setups on each respective market or do you initiate a position if one of your correlated markets shows a trade?
Example: we know that the US indexes move in correlation most of the time. Very rarely are you going to find the ES down while the YM is moving up. Knowing that, could you not take a trade on more than one market if you get a signal on one of your charts?
Here's my thoughts - as I've been looking at better exits with WRB's and such, I've also noticed that if I have a YM trade and it works, odds are that an NQ trade would have worked as well, even if the NQ did not provide an actual setup for me. The thought process being that if my analysis is correct, why not exploit that on multiple markets.
If we assume that one can implement that, you could trade some sort of combination of the ES, YM, ER2 and NQ.
Now, I know the next question will be why not just focus on the one and trade larger lots there. Good question. First, unless you are just trading the ES, trading larger lots could create some slippage issues. Second, and more importantly in my opinion, while your analysis can be correct it's not always clear to tell which market will provide the most bang for your buck. In other words, if you just trade the YM at $5/pt, your 'opportunity cost' is another consideration.
Anyways, just thought I'd share something that hit me like a ton of bricks this week since we have some great volatility here with us this week.
PS
Not exactly sure what part of the forum this should be categorized under, so feel free to move it mod's if need be. |
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Hi brownsfan019,
At first glance when I read your question I thought you were asking for example...
There's a trade signal in ES but you take the trade in NQ for whatever reasons.
Many futures traders only trade one market but it shouldn't prevent them from monitoring other markets that are highly correlated to prevent missing trade opportunities when their trading instrument doesn't have a pattern signal
I talk about this a lot in the Trading Hammers (revisited) thread at ET and I use the term
Sister Trading.
This involves using a correlated market (+90% correlation at the minimum) to help with more trade opportunities in your trading instrument because there will be times when your trading instrument doesn't have a pattern signal while the correlated trading instrument has a valid pattern signal to merit a trade in your trading instrument that doesn't have a valid pattern signal.
For example, I mainly trade ER2 but can easily trade any other Index Futures.
When I trade ER2...I closely watch the exchange traded fund IWM of the Russell 2000.
Therefore, if ER2 doesn't have a valid pattern signal and IWM does have a valid pattern signal...it gives merits to opening a position in ER2 based upon what's occurring in IWM.
However, whenever I do sister trades...I manage the trade via the price action of the trading instrument I took the trade in and not via the price action of the correlated trading instrument that produced the valid pattern signal.
Also, in the second half of your message it seems like your asking about managing trades in different markets at the same time that are correlated.
For example, going Long in both ES and NQ at the same time.
I personally don't like to take trades at the same time in correlated markets unless there's a broker platform problem.
For example, your Short YM and broker A system goes down while your backup broker B is still working.
If YM goes against you...you can open up a Long position in YM via broker B.
This is a type of hedging to protect your original position even though I know your not talking about this situation.
I just wanted to mention such to give an example of the benefit of having a backup broker.
Anyways, if I'm going to open trades in different markets at the same time...
They aren't going to be correlated or they aren't going to be via the same trading style.
For example, a Long position in ER2 and a Long or Short position in Copper futures at the same time.
Another example, a day trade in YM and a swing trade in T-Bonds at the same time.
Thus, the above types of trading multiple markets at the same time are good examples of when such is appropriate in comparison to a more difficult type via taking the same position in two highly correlated markets via the same trading style.
Simply, diversity in our trading is good as long as it doesn't put all your eggs in the same basket sort'uv speak.
Mark
(a.k.a.
NihabaAshi) Japanese Candlestick term