In the world of financial futures one market stands out. If you want to find out which one, try to follow the money. Futures markets are margined products. Which means, you can control them for a fraction of their true value. If we take a look at some of the world’s major futures markets, we can begin to see comparisons that lead us to the money market. Let’s first look abroad, at the major European futures markets. The DAX and the ESX are the most influential markets in Europe. They trade in Euros, and if we take a standard comparison of their activity on April 2nd (the start of the 2nd Quarter) we can get an idea of the power these markets represent. The DAX is worth a value of 25 euros per point. The April 2nd open for the DAX was 6982.50. This information allows to very quickly (with a calculator) determine that the value of the DAX on that day was 174562.5 Euros per contract. This makes the DAX one of the more expensive futures contracts in the world. The question then arises, how much is it traded? Volume on April 2nd for the DAX was 173502. A very simple look at this market on this day would be to multiply the number of contracts traded by the value of the contract. 173502 X 174562.5 = 30286942875 Euros. Further multiply that number by the value of the Euro on April 2nd, 1.3365, and we come to a US dollar basis of$ 40,478,499,152.44. What truly matters in any comparison is not really the method you use to get there, but the consistency. So let’s look at some other major markets using the same formula:
You should be drawn to one very powerful conclusion. The Whole value of the E-Mini S&P 500 futures contract far exceeds that of comparable markets. This makes it a “guiding market.” Essentially the ES can be used to determine the viability of most major moves. If the ES is not in agreement with the move, then that means something. If the ES is the market producing the move, then that means something. In fact, most major markets can make their own moves, but in today’s global economy, even with only tenuous relationships between the markets, they all seem to have an impact on each other. But the bigger impact always seems to come from the biggest marketplace, and the ES is by far the biggest marketplace in futures trading.
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Chuck Crow is one of the “original” employees of DTI and learned side-by-side with Tom Busby since he embarked on a career in trading education. Working as a clerk for Tom in early 1996, Chuck completed his education just 3 years later receiving a BA from Spring Hill College in 1999. Chuck is an expert on watching key numbers and has written DTI’s Pre Market Planner since 2001. Chuck currently hosts the Night Owl where he instructs students on what to look for during the night market and upcoming day market as well as providing an overview of the market weeks, months and quarters.
Tom Busby is the founder, President and Chief Instructor of the Day Trading Institute in Mobile, Alabama. Tom has traded the S&P 500 every day (but six) since its inception in 1982, and is well known throughout the trading community. In 1996, he founded the Day Trading Institute to teach others his unique method of using the S&P 500 as the market leader for trading futures, options, equities and other securities. The Day Trading Institute teaches its students how to approach the market using technical analysis combined with risk management techniques. More information about Tom Busby and the educational and informational services of the Day Trading Institute may be obtained by calling toll-free 800.745.7444 or by email to firstname.lastname@example.org. Visit their web site at http://www.dtitrader.com.