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Dear Ernie,
My observations suggest to me that the E-Mini contracts (NQ-NASDAQ & ES-S&P)
are exquisitely tied to their underlying (NDX & SPY, respectively), such that
any momentary discrepancy is immediately brought back into line by the arbs.
So my answer to your first question is YES.
My answer to your second question would be YES BUT, with the "BUT' being that
ND is the big, open-outcry contract, which in my opinion is less liquid and
thus that its prices (and your fills) are likely to be slightly less
reflective of the NDX than the more liquid, and thus more heavily arbed,
regulated, and stable E-Mini contract (NQ).
As others on the list have indicated, initial questions for your
consideration are "time frame" and "bet size". I haven't been in overnight
since the early 80s, so I will defer to others on time frames longer than one
session. Regarding bet size, my understanding is that that the E-Mini NASDAQ
contract (NQ) has sufficient liquidity such that 10-20 cars can easily be
filled throughout the session without noticeable slippage, and more (50-100)
around the open and close. (For the few days that I was on the floor of the
S&P as a guest of my then-broker, I saw him fill one order of 1000 full-size
S&P contracts all within 0.5 points of each other --- the stock futures
contracts can be very liquid!) The E-Mini NASDAQ contract (NQ), I believe,
currently has a margin of $6750. Many brokers use half of that for
day-traders. Consequently, a $67,500 account (more realistically, a $100K
account) could theoretically day-trade 20 NQ's, each worth $20/basis point,
resulting in a trade moving at $400/basis point. I doubt that you could
obtain such leverage with a $100K stock account trading QQQs or get fills
that were closer to the underlying NDX (ignoring the time-value element of
futures premium). Perhaps others on this list can enlighten me --- given the
NQ contract, I have yet to understand the advantages of trading QQQs for a
smaller, individual trader, such as myself.
Sincerely,
Richard
Ernie Bonugli wrote:
> Hello omega-list,
>
> Can signals based on NDX, be used to trade the Nasdaq futures?
> Would that be ND?
>
> I currently trade QQQ using the NDX signals. Excluding, the cost
> issues, would I achieve the equivelant result trading the ND
> (future contract)?
>
> I continue to hestitate on opening a futures account, simply because I
> have not backed tested directly against the proper futures data. The
> reason, is that I have not figured out what data to use?! But if the NDX
> backtesting can be used and is generates equivelant results, well, then
> I don't have to test directly on any futures data. But I afraid that
> the volatility of the actural futures contract may eat my lunch. And
> possibly render my system useless.
>
> --
> Best regards,
> Ernie mailto:ebonugli@xxxxxxxx
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