DAY TRADING FUTURES TIP: LISTENING IN ON THE FLOOR--THE VALUE OF PIT NOISE

There are feeds available from people who are day trading futures standing in the S&P futures pit. They will sit there and call out the current bid/ask prices and make comments on the day trading futures market action. I like to have this playing quietly in the background. One of my day trading futures partners, Hubert Senters, likes to play it loud as he pays attention to all of the nuances coming out of the day trading futures pit.

Here is how it works and how I use it:

First off, it's important to understand what they are talking about while day trading futures. All day long a trader is going to hear the bi/ask being day trading futures quotes, and it typically goes like this, "six twenty by a half, six twenty by a half," and so on. This is a quote for the day trading futures S&P contract, which is quotes in tenths instead of quarters like the eminis. This means that the current bid/ask is 1136.20 by 1136.50.

The guy doing the talking with frequently talk in regards to "paper versus local." Paper coming into the market means it is a retail order and can be placed by brokers such as Goldman Sachs, Merrill Lynch, and so forth. "Local market" means that the locals are just trading among themselves--this happens when the action is slow and the volume is light.

A "thin top" means that there are not a lot of bids at these day trading futures levels--look for the market rally to fail. If the guy mentions a day trading futures scale buyer or scale seller, I pay attention to what they are doing and at what levels.

I also like to listen to the overall noise level while day trading futures. Is it quiet and slow, or loud and fast? If the noise explodes it is almost like the TICKS reaching the +1000 level. This level of activity is unsustainable and the day trading futures markets will reverse. If the noise is quiet, and then it gradually gets louder, I will go in the direction of the market until the noise "explodes" and then I'll get out of day trading futures.

If someone is above or below the day trading futures market with size and the locals fill it, go in the direction of that move. This means the locals are pushing the day trading futures markets instead of fading the day trading futures markets.

If the day trading futures pit moderator tells you want the low is and that low is below the lows of the day you see on your charts--the day trading futures market is going lower. If the pit moderator says look for a stop run at 1136 pay attention to that number if you are below it.

The most important thing with day trading futures pit noise is not to get caught up in the excitement. It is easy to think this is the Holy Grail when you first get it. But it's not. It's just another tool for day trading futures. Trader's who get caught up in the excitement of the day trading futures pit buy the highs and sell the lows, just like any other amateur.

It will take about two months of solid listening to get used to it. After you get used to it, its hard day trading futures without it.