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Monday, October 20, 2008

Mini-Dow Trading Tip - Watch the Big Board

We are often asked why so many of our index trading students are now trading the Mini-Dow successfully and not the S&P Emini. While any index will do, we especially like trading the mini-Dow while watching the Big Board.

Because of the faster movement of the Dow versus the S&P 500, the mini-Dow more closely follows it's big board parent.

So if it is just a matter of speed, then the mini-Russell would be even better right? Not exactly. The problem with the Russell is the low volume. This will no doubt change in the future. The mini-Dow had too low a volume for our money just a couple years ago, but that has now changed.

One more reason why we prefer the mini-Dow is that we like no-cost tools, and it is much easier to find a reliable Dow chart. In fact there are many online that work just fine.

No matter which Index you prefer, we feel it is an advantage to watch the big board chart, and not the mini chart. We also prefer the 5 minute time frame.

Many traders watch both, which is what I did years ago before deciding to focus on the big board. Here's why. I found that I would not move on what the mini chart was telling me unless I confirmed it with the big board. A popular confirmation among traders. It finally hit me that if I would not make a trade without confirming it with the big board, then why did I need the mini chart at all?

When I dropped the mini chart and focused on the big board movement, my trading improved. I have since confirmed this strategy with Hundreds of my students and other traders. Just recently, one of my students who moved on to using the mini-chart (a paid service I might add), came back to our style and is now focusing on the no-cost big board chart we use. He also confirmed that his trading improved, and he now sees why we focus on the big board.

The mini chart (even in the 5 min time frame) is like trading with a 1 minute chart. There are too many head fake moves that get you in a trade before it has fully developed. The big board averages some of those moves out for you. It keeps you on the sidelines when you should be. Sure, you might not get in as early on some runs, but in the long term it will save you!

It is difficult to catch any move from top to bottom or vice versa, but by watching the big board you can fairly easily get a nice chunk out of the middle (or many chunks with our BIG MONEY small trades strategy). A few nice chunks a week will keep you from needing a bail out plan!


Doug West has taught thousands how to grow wealth with
simple Index Trading and by eliminating debt & interest
charges. Get his Debt-Free Report at no cost.

You can also watch him make live Mini-Dow trades by visiting his site.

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