c15 JWBT016-Busby October 9, 2008 9:21 Printer: TBD
146 STRATEGIES TO WIN
FIGURE 15.1 The price movement of IBM and the S&P 500 on May 6, 2008. The
chart is a 30-minute chart. The charts follow the same general pattern that is often
seen. That is, IBM and the S&P index often mirror each other’s movements.Many volumes have been written about trading stocks, trading mutual
funds, and trading exchange-traded funds (ETFs). Here, I want to share just
a couple of ideas that might be helpful to you when dealing with these prod-
ucts. First, consider some basic market facts that might help your overall
trading performance. Many stocks mirror the movement of the S&P 500
futures or some other futures index. That is, many of the blue chips that
are listed on the index will move up or down in close relationship with it.
Figure 15.1 shows the parallel movement of the S&P E-mini and IBM on
May 6, 2008.
The same fact is also true with other indexes and the big corpora-
tions that trade on them. Look at the Nasdaq and Apple on April 6, 2008
(Figure 15.2). The chart on the left is a Nasdaq 30-minute chart of the mini
futures index, while the chart on the right is a chart of Apple for the same
time frame on the same day. As Figure 15.2 clearly indicates, the images
mirror each other.
I maximize my trading hours by trading some of these stocks while I
am also trading futures. My StockBoxTMsoftware helps me locate stocks to
trade. Before trading any stock, I check to be certain that it meets my basic
criteria. First, I want the stock price to have a daily average true range
(ATR) of at least $1. That is, there must be an average price movement