After looking at how the different index futures have been acting recently, I made the executive decision to focus on the NQ today as it seemed to be trending the strongest. It also fired off a daily long squeeze play yesterday indicating that it was still looking to go higher.

This morning I was actually hoping to buy a gap down, but none occurred so I had to be patient and wait for something juicy to set up. And boy did my mouth start to watter a little after 10:30 this morning when I saw price dropping into an area supported by 2 FFF Reversal Zones on some lighter volume (not shown).

I had my limit buy order set up at 1845.25, a couple ticks above the bottom FFF Zone of 1844.75. At first I was very disappointed that price failed to fall into my buy zone for by all rights price “should” have fallen to that area. That’s when I started to shift my perspective and really look hard at what the market WAS telling me. Namely, that it was getting ready for a nice rally.

Here’s what I started to see:

1.) Price failed to make it to those 2 FFF Reversal Zones which usually act like price vacuums.
2.) Downwards volume was drying up
3.) There was a reverse H&S Pattern starting to form on the 55-tick chart
4.) Price & TRIX were making higher lows
5.) Then there was the trendline break.

On top of all of that, the TRIN was trending down and the basket of index funds that I monitor all seemed to be drifting higher as well. Needless to say, my disappointment dried up real quick and I got long at 1849.50. I started the day with a bullish bias and this seemed like a nice spot to go long.

for the next 30 minutes, price grinded higher but the volume just wasn’t there to keep me in. So when I saw the – Trendline break & TRIX Divergence, I closed my position for a nice gain of 3 NQ points. It ended up being the only trade I made today. If I had stayed in, I would have fared much better as the NQ went on to make new all-time highs today, but I can’t be displeased with the play.

I’ve been fiddling around today a lot with Oanda’s FXGame currency trading demo platform. From what I’ve learned thus far I’d be losing and gaining some advantages by switching to the FX Markets.

Advantages:

No Commissions: You pay the difference in the spread, period. That’s not to say that the spread isn’t a significant cost but not paying a broker’s commission has to count for something
Better Leverage: 100:1 (I’ve heard that some brokers offer 200:1, but let’s not get carried away)
Better Hours: 24/7 trading (which is great, especially if I start selling real estate during the day)
Maximum Liquidity: 1.5 Trillion a day should be enough to cover my positions
Carry / Interest: If you play your cards right and stick with the right currency pairs, you actually earn money on the money you borrow to trade with… 4.00% p.a. with 100:1 leverage sure goes a long way towards putting a dent in your losses

Disadvantages

No Volume: I use volume a great deal in my current style and would have to get used to not having it to lean on
No Market Internals: (NYSE-TICK, TRIN, Put/Call, Basket Monitoring) All of which plays a huge role in my trading methodology and all of which would be useless if I switch to the FX markets
Big Educational Curve: There is so much I need to learn, become familiar with, and master before I feel confident putting up any kind of a real stake in the FX Markets. What kinds of economic reports to pay attention to from the gazillion different countries and when will they report just to name one.

In a way though, if I can become proficient at trading profitably without having to rely on volume and market internals, I think that in the long run it will make me a more robust and profitable trader. I am not looking forward to the lumps I’ll undoubtedly receive as I try to find my way in this new arena, but I always love a good challenge.