Scalping the Mini Dow off the M1 Charts

I never trade the "current bar" for that occasion.

I wouldn't have fallen for that green bar...

very impressed by your skills,
analysis is one thing and trading is another:
you are great at both.

I am quite new to indices and there is one question that bothers me a lot. Perhaps some of the experienced index traders can help me.

How does technical analyis even work on for example the Dow? I mean, the "big Boys" cannot trade the index directly as it represents the stocks of 30 companies.
So to move the market they can only trade directly one or a few stocks of the Dow to indirectly move the Dow index to the upside or downside.

Does this mean, the big Boys place their orders on a certain stock and additionaly watch the resulting movement of the index to e.g. play the ranges or the breakout of certain index Price levels? How do they do it?

Would be fine if someone can give me a short explanation...

This morning's trading video. These moves in January have been stellar.



I have a busy day ahead but will be back later with more discussion.

Thanks for your kind words, I pay 3 pips , even more, of course I'm looking for winners with high leverage and 10 pips or more, but I cant resist get in and out for a few pips with very low leverage for exemple, I make 3 pips and I'm happy and more confident and playing my game , its not thats horrible because that high volatility of the pair, it's really crazy these dayses, with wild moves and lots of 1m candles of 10 pips or more every day, I try to stay a few minutes in the trade and remain pretty flexible, I took high risk with high leverage for a few points, or a litlle of swing trading low leverage but I dont play this so often

some charts 1m of these dayses since monday, today I was out at the morning so I began to trade at 06:00 ET, its was a nice range, but there were no momentum likely all the traders waitig usa data, I play awfull the usa data, but was pretty lucky again, then after the highs a crazy reversal

Cool thread ! Like scalping on guitar too.

wow what a great read this thread was..

Thanx Felix

This is a great question and I will try to answer as thoroughly as I can for the benefit of everyone.

First to take a step back, equity index futures are probably the most difficult to understand because unlike physical products like corn, wheat, oil, government bods, or currency, it's based on an index of stocks which isn't physically tradable. Ultimately though, all futures contracts are financial instruments - derivatives - of something with perceived value, whatever that may be. Just as we can buy a futures contract for corn, we can buy a futures contract for the dow that is derived from the DJIA index (which is comprised of the 30 stocks that make up that index).

A futures contract in the dow trades at a premium of the underlying spot (index) value, to account for financing costs such as interest or dividend payouts that are expected to accrue until the futures expiration date.

The purpose of the equity index futures market are numerous, but as an example, it can be used by an investor for hedging. Say for example you hold a large, well-diversified portfolio of stocks, however, you're concerned about a possible market decline. You don't wish to sell your stocks yet though - for tax reasons, or dividend payments, etc. Shorting equity index futures that correlate to the stocks you have in your portfolio would be an option.

So what exactly happens when a number of stocks that comprise the index suddenly drop? The index will drop of course because it's a formula based on the value of those stocks. But generally, the dow e-mini - in a cause / effect relationship - will drop as well, because no one (either human or algo) watching the index would want to be caught buying at that exact moment in time because of what it represents. So the e-mini futures market will essentially match the index.

The inverse effect can also theoretically happen. For example, if there is massive shorting initiated in the dow e-mini - enough to move it significantly - no one watching the dow e-mini will want to be caught buying those stocks because there has to be a reason for that selling, and can in turn incite shorting of those stocks as well (thus moving the index in correlation). This I would imagine is a rare occurrence as an order significant enough to move the e-mini would quickly correct itself before causing any activity among the stocks themselves. An example of this rare occurrence would be the flash crash of May 6 2010, where 75,000 contracts short in the e-mini S&P caused a cascade effect into the equities markets themselves (and ultimately into other markets as well).

So basically the index and the corresponding equity index futures market are correlated, but not perfectly. It does not move point-for-point with the index but it does track closely enough to act as an effective proxy.

Hope this helps.

I posted this the other day on twitter.



I really hope everyone is safe this week and I know of a few people that made a killing on Thursday, a few that took a small loss, and a few that went completely bankrupt and even have a negative balance. My heart goes out to everyone who got caught in this.

I haven't been trading the dow these past two days, because I know this shakeup is a shock to my system and my judgment is likely to be affected without me even realizing it.

Stay safe.

Great explanation of the E-mini. Thank you, Jason!

This morning's trading video. Good to be back in the market after an insane past few days.



I'm extremely humbled when I realize the cold fact that, my career could have easily been over in a heartbeat last Thursday due to the SNB's policy change. This is the game we play every day and some wise words from a mentor of mine: the goal of any trader is to be in the market as little as possible.

Stay sharp everyone.

Videos for yesterday and this morning.

Nice trading, well done!

thanks Jason, yesterdays trades, happy to be carried along by an unscheduled announcement just after wall st. open. today, not so good, back to the drawing board.

I think stop running is the key to reading the hands of the big boys....shows what theyré up to...they hide as much as they can, remember they own the shop....like a gigantic orca hiding in the depth, but if you look carefully, you can see the shade of the body ...

Felix -I see you mark supp/rest - am I right that price action begins with a fake move ie. price breaks below rest. but then turns rapidly up making ten pips or so at a time. Am I correct ?

Great to see some charts!

When I'm scalping I'm generally looking for only 2 trades. 4 is the maximum for me. Save your ammo for when something sets up just right and always make a case for any trade you enter. It's very easy to get caught up in the price action but ultimately, no trade is expendable.

When I come into the pre-open I will generally mark off the range (if there is one) the market is trading between before the market open. It's discretionary in nature so I don't have a fixed rule (e.g. I don't look at the range that formed from 8:30 - 9:30, for instance. It's just whatever stands out). A lot of traders off the open will look for the breaks of these ranges to get involved in the market hoping to determine the market direction.

The basic rule of thumb I follow is, if it looks important, it probably is.

More often than not, the market will shake out the eager ones right off the open - i.e. the breakout traders, or the impulsive traders (resulting in the "fake move" as you describe), but everything needs to be taken in context and every morning is different. Sometimes it happens, sometimes it doesn't. The point when I can infer that a number of traders have just taken the wrong side, is usually when I get involved.

I was slightly late getting into the market this morning but there was a quick one and done to be had.

rather more control today, thanks Jason

Nice job!