[neustaju]

It is a general strategy to trade an individual stock with the direction of the major indexes. As a beginning trader I assumed it was my job to analyze the futures markets then trade equities in the direction of the major intraday swings. Too often I have correctly traded with the intraday swings of the Dow/S&P only to find my stock move very little or in the opposite direction. I began to ask myself "Is this why some traders prefer futures over equities"? Doesnt it just make more sense to day-trade futures OR Index based ETF's such as the QQQQ rather than stocks?

[OAC]

It all depend on your style of trading. some stocktraders only concentrate
on 1 or 2 stocks and become an expert at it. they become very familiar with the way the stocks move and direction of the futures is just an added confirmation. The other school is to scan a large universe of stocks for
specific patterns and setups. Again they only use direction of the futures to
help in their entry. If you are trying to scalp stocks for tinnies by watching Level II quotes, people used to do that in the 90s, but I think those days are over.

[brownsfan019]

neu - it really comes down to how you trade. If trading stocks with the general trend is not working but trading the actual index is... well.... just trade the index then. I know that seems obvious, but sometimes we want to make things harder than they really are. We've all been there, trust me.

As for trading the index, it's just a matter of deciding whether the ETF, Options or Futures work best for you. I would suggest narrowing in on one vehicle in the beginning.

[feb2865]

Originally Posted by neustaju »

It is a general strategy to trade an individual stock with the direction of the major indexes. As a beginning trader I assumed it was my job to analyze the futures markets then trade equities in the direction of the major intraday swings. Too often I have correctly traded with the intraday swings of the Dow/S&P only to find my stock move very little or in the opposite direction. I began to ask myself "Is this why some traders prefer futures over equities"? Doesnt it just make more sense to day-trade futures OR Index based ETF's such as the QQQQ rather than stocks?

You must know what's the leading index first. Sometimes is the dow, sometimes is NQ. I prefer when NQ leads the pack to trade QQQQ, but you can get good trades out of the Dow against the cubes. If you're trading a sigle stock out of the futures, is a recipe for disaster on the long run IMHO.

QQQQ has plenty of liquidity intraday and it's a lot cheaper than Spyder's.

Cheers

[dalby]

index futures (Specifically the dow and the s&P) are PURE supply/demand proxies.

stocks, to lesser and greater extent - are not

the difference is that when institutions want to BUY (in general) they use futures, to a large extent. and when they want to see (in general) ditto...

this is especially true in times of chaos, euphoria, and panic

an individual stock, especially a thinner issue means you are dealing with market maker games. not an issue with the dow. the dow is a group of 30 very big stock. no individual player (or two) is gonna have much of a significant impact on it, except in rare and short bursts. so, that's a +, at least for me. for those that are very good at playing L2 games, etc. they might prefer certain stocks

PERSONALLY, i prefer to trade index futures (intraday)... that's how i make my living.

stocks i prefer to swingtrade, and buy for wealth building and dividends, but that's me.

another nifty thing about futures (supply/demand proxy) is that internals can really really help you out, if you know how to use them - watching related sectors, bonds, adv/decl line etc.

not so much with stocks

[neustaju]

I understand that it really depends on individual style. From a purely technical chart patterns point of view though, the QQQQ provides safety from the negative effects sudden News Events can bring by weighting this movement against the other companies it is composed of. My previous quote I was referring to a "Top Down" approach, trading with the Dow/S&P intraday fluctions. Essentially, if my goal is to capitalize from the major index movements (while avoiding the increased risk of trading futures) then it makes the most sense to stick with index based ETF's.

[feb2865]

Index futures are pure supply and demand proxies

That's completely true and it's one of the reasons some traders doesn't like index futures. It makes them playing on a jumpy zero-sum game. On stocks/EFT's etc. you migth be trading against institution/position traders/investors who doesn't care too much about couple of cents here and there. That makes the whole scene smoother. I trade both futures and EFT's (QQQQ) No personal preference here but as I stated before, some traders do.

[dalby]

im not sure what you mean by "increased risk" in re: futures.

the only increased risk is increased leverage.

if you want to trade less than (for example) a 65k (approximately) notional value in the dow, then using DIA's or even DIA single stock futures is the way to go.

100 shares of DIA has 1/5 the notional value of 1 YM contract.

but that is the only "increased risk"

trading 500 shares of DIA has the EXACT same risk as trading 1 YM.

the risk comes (to most traders) from the fact that you can use MUCH MUCH more leverage with futures than stocks (and ETF's trade like stocks).

if you have a 50k account, you can trade (assuming 4:1 intraday margin) 200k notional value with your 50k account using ETF's

if you have a 50k ira, you can trade 50 k notional value using ETF's

but using futures you can trade (depending on your broker) approximately 1.1 million dollars of notional value.

so, you can get over 5 (at least) times the leverage.

THAT is the danger

if you are conservative with leverage, there is absolutely no danger in risk

and as far as overnight holds, there is LESS risk since the futures trade (almost ) 24 hrs, and you can set stops for the overnight session