When traders and investors first enter the financial markets, it can be a “deer in headlights” experience. Indeed, the market appears to be a huge chaotic arena. At any given moment, it appears as though a million numbers fly up and down at the speed of light!
Once we get accustomed to the rapid pace, questions usually begin to crop up.
I hope the answers help clarify any questions you may have, and help smooth your path to trading and investing success!
Where do I find stock index futures quotes?
Many stock index futures, such as the S&P 500 futures index (underlying index: S&P 500) and the NASDAQ 100 futures index (underlying index NASDAQ 100), are represented by two contracts: 1) the standard, or original, contract (traders call them the “big” contracts), and 2) the small or “mini” version of those contracts known as the E-mini contracts.
The standard contracts are traded in the pits of the futures exchanges where they originated. For example, the standard S&P 500 contract is traded in the S&P pit at the Chicago Mercantile Exchange (CME). The E-mini S&P 500 index futures contract (“E” stands for “electronic) are traded electronically on the CME’s electronic exchange, the GLOBEX platform.
The E-mini futures contracts have gained widespread popularity among traders, both institutional and individual, and move closely in tandem with the big contracts.
Whether or not you trade the E-minis, if you are an intraday equities trader, you will be wise to watch the S&P 500 E-mini futures, as they act as a leading index for stocks. Traders who trade tech stocks also watch the NASDAQ 100 E-mini futures, as it acts as the leading indicator for the NASDAQ 100. The mini-sized Dow contract, is the leading indicator for the Dow Jones Industrial Average.
Direct-access brokerages usually provide E-mini stock index futures quotes to their customers for a nominal monthly charge.
Traditional online brokers, however, typically do not furnish stock index futures quotes. For those of you who have accounts with an online broker and wish to access E-mini index futures quotes, you can subscribe to the S&P 500 and E-mini NASDAQ 100 and mini sized DOW contract quotes by going to: www.cmegroup.com. Click on "My CME", and then ""Learn about CME's Subscription Data Services. Then click on "E-quotes" and "Package/Pricing Options." At the CME website, you’ll also find other stock index futures that may interest you, such as the E-mini MidCap futures index, and the E-mini Russell 2000 stock index futures.
Where do I find quotes for the TICK and TRIN?
The TICK and TRIN are short-term indicators that active traders find useful as decision support tools.
Each exchange has its own TICK and TRIN. Most traders watch the NYSE (New York Stock Exchange) TICK and TRIN. Traders who trade tech stocks keep an eye on the NASDAQ Stock Exchange TICK and TRIN.
Direct-access brokers usually provide TICK and TRIN quotes to their account holders at no charge.
Traditional online brokers may provide these quotes to traders who execute a certain number of trades per month. To find out if your broker provides TICK and TRIN quotes, call their Customer Service department.
I plan to be an active trader, and trade intraday. Do I need to open an account with a direct-access broker? Or, can I just trade through my online broker?
I recommend a direct-access broker for those who wish to trade actively on an intraday basis.
Here are my reasons: Direct-access brokers give you access to stock index E-mini futures quotes, which act as moment-by-moment leading indicators for the equities markets. These brokers also may provide a host of options not usually offered by traditional online brokers, such as sector indexes and their components, TICK and TRIN quotes, VIX and VXN quotes (CBOE volatility indicators), sophisticated charting methods, news, Level II screens, scanning tools, and more.
Remember, active trading is a serious business. And, like any business, if you want to compete and win, you must use the best tools, and use them well!
For the past five years, I’ve been an investor. Now, I’d like to begin trading a portion of my account. What challenges will I encounter on that path?
I learned this lesson the hard way many years ago: investing and trading are two different animals. You must treat them as such. Just because you’ve accumulated boatloads of money by investing wisely doesn’t mean you’ll automatically repeat that success as a trader.
Here are two important time-frame challenges . . .
First, when you alter the time frame that you intend to hold a position from years to days (or hours), you must adjust your risk-reward planning accordingly. While you strive to earn multiple points on your long-term investments, you may be delighted with a point or two for a swing trade (2-5 days), and a fraction of a point, when jumping in and out of trades on an intraday basis.
Of course, your pre-trade planning should factor in a risk amount that’s less than the possible initial reward, or profit target. For more information on risk-reward analysis, check out Chapter Three of my book, Short-Term Trading in the New Stock Market.
The second challenge to shortening your time frame comes to you courtesy of your own emotions!
An investor-turned-trader not accustomed to the capricious antics of Mother Market during short-term time frames may be blindsided by her rapid mood swings. One minute she holds stocks aloft with a generous smile . . . in the next, she hurls them downward, sneering at their demise.
That means that a sweet, profitable trade can turn sour in a matter of moments, slicing through the purchase price and delivering a sharp loss. Inexperienced traders who ignore the rule, “plan your trade, then trade your plan,” often find themselves controlled by their own negative emotions (read: panic) in chaotic market environments.
As an investor-turned-trader, study risk-reward analysis and adjust it to the time frames you’re targeting. Also, remember that in the short-term, emotions rule the market and can cause extreme volatility. Don’t let your reactions to price volatility deliver big losses to your bottom line. Develop a plan for each trade before you enter, then trade your plan.
For more information on how to deal with the emotional aspects of the market—and how to turn them to your advantage, review the chapters pertaining to market psychology in my books, A Beginner’s Guide to Day Trading Online, A Beginner’s Guide to Day Trading Online and Short-Term Trading in the New Stock Market.
I hope this section of ToniTurner.com has answered some of your questions. If you have a question and answer you’d like added to this page, please send it to us by clicking on the link: Contact Toni.
To your good wealth!