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 wouldnt want to stand in front of that because the momentum of that boulder has the potential to crush you. This is the same concept in day trading futures. If there is a clear trend for the day in one direction you want to take the path of least resistance and not fight the trend. So how do you identify the trend for the day so you can be on the right side? Here are two tools to help you do just that.
I Tick, You Tick, We All Tick
One of the tools I used to identify whether bulls or bears are in control 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 found by using the following symbol $TICK. The $tick represents the number of stocks going up minus the number 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 are just noise. Second, watch for + or 800 tick reading this is a sign of a trend. What you are looking for is the ticks to consistently hit + or 800. Third, you want to fade the first + or 1000 tick reading, but only the first one. If there are multiple + or 1000 tick readings that is a clear trend and you only want to initiate short or long positions in that tick direction when day trading futures.
Volume Spread Analysis
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 known 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 have 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 control 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.
Although day trading futures is challenging it can be made easier by only taking trades following the intraday trend. The tools provided in this article can be used as starting point to your trading career.
