Day trading futures can be extremely challenging. There are several market maxims to trade by. One is the trend is your friend. When day trading futures you want to initiate positions that go with the trend. Imagine a boulder rolling down a hill you would not want to stand in front of that, as the momentum of that boulder has the potential to crush you. This is the same conception in day trading futures. If there is a clear direction for the day in one direction you wanna take the path of least resistance and not fight the trend. So how do you identify the trend for the day then you can be on the good side? Here are two tools to assist you do just that.
One of the tools I used to determine whether bulls or bears are in supervision of the market while day trading futures is using the NYSE Up/Down Tick Ratio or ticks for short. On most platforms the ticks can be obtained by using the following symbol $TICK. The $tick represents the amount of stocks going up minus the amount of stocks going down on the New York Stock Exchange. If the $tick reads +500, that means that there are 500 more stocks going up than there are going down on the NYSE. When day trading futures you want use the ticks keeping a few rules in mind. First you want to block out readings from a + or – 600 they’re just noise. Second, watch for + or – 800 tick reading this is an indication of a trend. What you’re looking for is the ticks to consistently hit + or – 800. Third, you want to fade the first + or – 1000 tick reading, but that the first one. If there are multiple + or – 1000 tick readings that is a clear direction and you only want to initiate short or long positions in that tick direction when day trading futures.
Of course, there are other things to consider when talking about futures trading thinkorswim…
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The second tool I use to identify the intraday trend while day trading futures is the comparing the up volume to the down volume also referred to as the volume spread. When a stock trades up by a penny or more than its last close the volume on that trade is counted as up volume. When a stock trades lower by a penny or more than its last close the volume is counted as down volume. When you combine those two numbers you get the volume spread. You can look at the volume spread on any time chart and I prefer the 5 minute. This is a valuable day trading futures tool especially for trading the close because you can quickly see whether bulls or bears have been in supervision of the market throughout the day. The symbol for the volume spread in Tradestation is $VOLSPD and in the ThinkorSwim platform it is $UVOL-$DVOL.