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Trading correlated markets
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Trading correlated markets

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Trading correlated markets

The ES and the YM move quite closely together, as does the TF, though not quite as closely. This is what I have observed. Would you agree with this observation?

If so, would there be an advantage to holding the same positions in two or three of these markets at the same time? Wouldn't it be better to just up the volume and manage one trade or position? Just trying to find out if anyone would do this.

Better yet maybe, would there ever be a reason to be long one and short the other?

Thanks!

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josh View Post
The ES and the YM move quite closely together, as does the TF, though not quite as closely. This is what I have observed. Would you agree with this observation?

If so, would there be an advantage to holding the same positions in two or three of these markets at the same time? Wouldn't it be better to just up the volume and manage one trade or position? Just trying to find out if anyone would do this.

Better yet maybe, would there ever be a reason to be long one and short the other?

Thanks!

Yes.
None that I can see as they are closely correlated. You'd be increasing your risk, not diversifying. What you could do, however, is to use the other ones as confirmation. In other words, only take a trade if your setup is present in the other correlated market as well.
There's gotta be some HFTs that do arbitrage between the two. Sim it for fun and see what happens.

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Personally I would prefer one trade as it is easier to manage than three, especially when the action sets in all at once in all three...

vvhg

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josh View Post
The ES and the YM move quite closely together, as does the TF, though not quite as closely. This is what I have observed. Would you agree with this observation?

If so, would there be an advantage to holding the same positions in two or three of these markets at the same time? Wouldn't it be better to just up the volume and manage one trade or position? Just trying to find out if anyone would do this.

Better yet maybe, would there ever be a reason to be long one and short the other?

Thanks!

It will be a personal choice, as you will find from many replies. Personally, I like to trade ES/EMD/YM/NQ at the same time, I dont like TF all that much anymore by itself... i do spread TF against ES for example.. TF breaks down/advances faster.

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Existing threads on correlation that may be useful:

https://futures.io/platforms-indicators/2437-correlation-indicator-ninjatrader-7-a.html

https://futures.io/psychology-money-management/3411-multiple-non-correlating-strategies-portfolio.html

https://futures.io/platforms-indicators/4680-correlation-trading-multiple-instruments.html

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Thanks Mike--before I posted I searched for 'correlated', but should have looked at other variations of the word.

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sysot1t View Post
Personally, I like to trade ES/EMD/YM/NQ at the same time

sysot--thanks for the reply, do you have an objective reason for trading these at the same time, or just a personal preference? I'm looking for "easier to manage" and I've seen several setups line up on ES, TF, and YM at the same time, but can't see an advantage to trading all three versus bumping up contracts on one, if I even wanted to assume the extra risk...?

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josh View Post
sysot--thanks for the reply, do you have an objective reason for trading these at the same time, or just a personal preference? I'm looking for "easier to manage" and I've seen several setups line up on ES, TF, and YM at the same time, but can't see an advantage to trading all three versus bumping up contracts on one, if I even wanted to assume the extra risk...?

it is only personal preference, nothing more.

One of the 4 usually lead the other, so if one "triggers" the trade, I enter all of them at the same time.. each one has different $$$ risk, ATR, etc.. so it is not like I am doing 1 contract across the board... ES might have 1, YM might have 3, NQ might have 2, EMD might have 1, etc... margin wise it is all the same, profit wise, about the same..

I do it mainly to train myself to being able to manage multiple positions real time.. I could just as well go ahead and trade ~10-20 contracts on YM/ES/NQ/EMD and manage a single position and scale in and out of things but while there might be something going on in ES, there might be nothing on NQ/YM/EMD, etc.. if one picks only one market to trade and focus on it...

as I said, personal preference, nothing more... find what works for you, if account size small, pick YM/NQ to test your ability to trade more than one instrument at the same time... EMD moves, not as fast as TF... TF moves just like CL/6E.. very aggressive instruments.. IMO.

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Thanks everyone for the very helpful comments!

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