Trading the Nasdaq-100 (NQ) Futures

[Dogpile]

ok fellas, its us against the machines (progam trading institutions). let's work together. this thread is for discussing the technical structure of the NQ futures and strategies for profitable trading in this contract.

[walterw]

	Quote:	Dogpile
	ok fellas, its us against the machines (progam trading institutions). let's work together. this thread is for discussing the technical structure of the NQ futures and strategies for profitable trading in this contract.

This future has been always a great question for me, I understand it has quite nice volume, but doesnt have that much range...

[Dogpile]

Nasdaq is a game of stop-gunning and shakeouts. This is good news for short-term traders. My strategy is to patiently wait for the shakeout and then go the other way.

A few guidelines I use:

1. Look for a reversal in the 10am - 11am timeframe if the first move of the day is 'away' from the previous days value area. There is very often a shakeout move that looks violent but is often a good counter-trend trade. It will often look like a trend day but the odds are to fade the shakeout and think about trading back towards 'value' -- think Dalton -- you are getting asymmetric location when you fade a morning 'price spike'... even trend days will often have a monster counter-move shakeout which you can catch for a few points. you are not investing with the closing price in mind -- you are just playing for a flush in your direction.

2. Look for ABC pattern to set up... this is often another shakeout play as a lower low or higher high looks scary but is usually just another counter-trend set-up.

3. You don't need to try to pick tops and bottoms. 7-10 point swings are common -- just try to catch the middle part of the move.

4. Look for NQ to touch its previous days POC -- it is a volatile contract that will touch its previous days POC 75%+ of the time. NQ loves to hunt down the previous days POC -- often even when it seems totally unreasonable. In general, its a good idea to look to trade in the direction consistent with NQ touching its previous days POC (though there are clear exceptions).

5. Don't overtrade this contract. There is all the liquidity you need. You just need to pull a few points out a day to make a living. Make 3-6 points per day with good size and you will rule the world. Some days, the thing is just nasty. Avoid it for a while. For example -- today -- NQ gapped down TOWARDS thursdays POC at 1954.50 (you prefer the first move to start AWAY from the previous POC). When it gaps and then carries into it, the market is basically back in balance and might just chew everyone up for a while. This is what happened. I may still try a trade in it but I will use smaller size.

Comments and other observations. Please join me. You are not 'giving away secrets'... we are all peons in a world of immense institutions. their algorithms couldn't care any less about our scalping strategies.

[brownsfan019]

I like the NQ, it's probably my 2nd or 3rd market of choice. I'm mainly focused on the ES now, so can't comment on the recent movements.

[glenbee]

Glad to see this thread.

I trade the NQ largely because I've found that it's amenable to predictive analysis. It's price action produce market profiles that fit into vey nice little jigsaw puzzle peices. And so, for example, I felt that it was reasonable to assume that today's price action would be bounded by the red horizontal lines on the accompanying chart. Thereafter, intraday analysis gave direction and quite a few entries and exits targets.

I also like the fact that the NQ seems to be less "nosiy" than some of the other e-minis. Take the ER. It has about the same daily volume as the NQ but far more ticks (trades) per day. This suggests that there are more small lot ER trades which tend to produce more whipsaw action at pivot highs and lows. Trading is tough enough as it is and I prefer not to have to deal with this noise.

[Dogpile]

<<It's price action produced market profiles that fit into vey nice little jibsaw puzzle peices. >>

well said. when you get a chance, would enjoy seeing something you saw in todays technical structure.

[glenbee]

For some reason the chart didn't come through in my first reply. It's edited and the chart I referred to should be there now.

[Dogpile]

here is a look at thursday... a beautiful day for NQ traders:

(I generally skip opening 30-minutes -- just watch)

1. play for a 10-11am reversal if 1st push is away from previous day value... (note there was also a little abc down).

2. ABC up forms into previous day 'last hour high'... this high forms while STILL in the 10-11am reversal timeframe. fade it for a flush down.

3. note how NQ hunts down and touches previous day POC wayyyy up at 67.50. there was a long play here off a mid-day coil breakout. a little tricky since no good ABC down to fade but there is a good tendency to go touch previous day POC.

4. after touching the POC, the market is extended and reached that congestion zone (the POC) for some resistance. again, fade this giant ABC up for a flush down...

http://bp1.blogger.com/_5h-SWVGx6Ms/...ne+21+2007.bmp

[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

[Dogpile]

YM is a well-structured contract -- the issue is sometimes the range seems to just die for a while.... lately though, YM has opened up nicely. I can understand why YM is popular. personally, I don't understand why NQ isn't more popular relative to ER2. as stated above, ER2 can be extremely noisy around swing highs and lows. I find ER2 to be pretty frustrating -- you have to use wider stops.

say an upswing begins across all indices.... for whatever reason, NQ often ticks up with the other contracts and then out of nowhere really kicks in with big-time acceleration. it will just burst 2-4 points in a few seconds. nevertheless, if you are on the wrong side of a surge, you will get filled on your stop at whatever price you put in. I find NQ to be excellent for 'stop-market' orders.

the nice thing with NQ is the way it can really stretch out --- it can move far away from 'value' because its so volatile but it still has a very strong tendency to mean-revert back towards value. I find the YM to be a little less mean-reverting simply because it is less volatile. very often, at the end of a downswing -- I will see YM (and ES) make a 'higher low' while NQ makes a lower low (ABC) --this is NQ hunting down the stops below the last swing low. as far as I am concerned, this is a good thing. more 'stretch' means further to go when it mean-reverts.