There are so many advantages to index futures trading over regular ETF trading PROVIDED that you have proven to yourself that you can make money with a consistent approach/strategy in trading the regular ETFs. There’s not that much difference in terms of price patterns, though there absolutely will be some variance.

Basically, you’ll (most likely) save on commissions (sometimes 1/2 the cost of an ETF round-trip trade), taxes (a majorly overlooked area), slippage (rarely will you ’slip’ on futures), and leverage (this is where it gets dangerous and differs the most from ETF trading).

With a leveraged ETF, the most (correct me if I’m wrong) you get is 2x the index. One Dow-Mini contract (@YM) is equivalent of 500 DIA shares. To control that amount, you need to put up $3,500 to $4,000 and that’s it (compared with $70,000 to control 500 DIA shares).

You seem to have a valid method, and I use many of those features. Programming it is the difficult part. You really need discretion when trading index futures, if for anything then regarding the principles of confirmation/non-confirmation with the TICK, TRIN, breadth, other indexes, other futures contracts, pending news reports, etc. I personally can’t envision myself trading mechanically – it’s just not me but it works great for some people.

I use TradeStation to backtest ideas, but I really haven’t done strategy automation with them. They’re probably #1 in terms of strategy automation in terms of platforms for retail traders so I give them my 100% approval for you.

I don’t want to recommend too many resources because there’s so much good information out there and I don’t want to feel like I’ve excluded anyone or any company or blog.

Suffice it to say that you should avoid any service/blog that claims they make tens of thousands of dollars a day and that you can too. Avoid anyone who proclaims that they have a 90% win-rate.

There really is a lot of information out there, and it’s best to find a match between what the site teaches/trades and how you approach/trade the markets.

If I can be of further help, please let me know.

Great post.

I want to learn more about index futures (e-mini) trading. I currently trade QQQQ with leverage through QID and QLD. I am very interested to learn more about the pros/cons of trading the E-minis vs. index ETFs and which strategies to consider. Are there any good blogs or books you recommend?

My current methodology involves using DMAC and basic price pattern recognition along with pivot points/support resistance and trendlines to establish entries/exits. I have found this approach to be profitable but it lends itself to a mechanical/automated approach rather than discretionary. I am curious what you think of Tradestation’s automation features (EasyLanguage).

Tom

Thank you for the comment! In TradeStation, I’m going to start turning off the 24-hour chart set-up, which essentially eliminates any overnight data. I’ll still include the 1-hour pre-market open for each day (because I feel that is valuable information). I sometimes like to see the overnight data, but feel that constantly viewing it – and the calculation (indicator and MA) ‘errors’ that result – aren’t worth the benefit.

I’ll be going back and adjusting my desktops/workspaces to reflect this change and already I am liking the results. In regards to TradeStation, it has a very large and active developer community that are often willing to take suggestions and create new code as needed, which is often offered free on the forums.

Corey

I day trade the Dow mini Futures (never holding overnight), and when I feel a swing trade is warranted, I will use the DIA. I didn’t mention it, but there are many ‘games’ and tricks that occur overnight including large volatility moves that run and then fade back to normal, but the result is that any hard stop had been ‘nailed.’ This, combined with the larger leverage, keeps me from (currently) holding futures overnight. I’ll probably try holding overnight on a couple of contracts at some point in the future just to learn more.

And the setups are surprisingly different, because the moving averages are different because the futures trade all night (and establish more price information) than the ETFs. As such, it’s often difficult to find any relevance to the futures moving averages (a lot of what I do involves moving averages, btw).

What I’ll do on a typical day is watch the DIA chart, TICK/TIKI/TRIN, Breadth, Dow Index itself, and then when I feel an extremely high probability set-up occurs there, I’ll switch to the @YM and put on some leverage beyond what my stock account would typically allow. I’m playing for very small targets with (relatively) extremely close stops. History has shown me that if I’m right, I’ll know very soon after entry.

Basically, I currently use the futures as a leveraged vehicle of what I see in the DIA or Dow Jones price index.

As time goes on, I’m trading more and more with the @YM contract. The reasons above are part of it, of course!

Are you day trading or swing trading the mini’s? If both, are the setups the same? Do you treat your approach differently? Thanks

Jonathan