| Author |
Message |
     pse
Member
Username: pse
Post Number: 1
Registered: 10-2007Rating: N/A
Votes: 0
|
| | Sunday, October 21, 2007 - 11:03 am: |  
|
Hi All
I've recently developed an interest in trading an index - namely the Aus200 Cash(A2C).
I am hoping a reader will be able to clarify something for me.
I am told that the A2C reflects the XJO but it is not identical, nevertheless the behaviour of each is reasonably well synchronised when they are both open.
I've been trying to understand what happens when for example:
Friday at 4.10pm the XJO closes at ~6706, the A2C is at ~6708, but finally closes at 6569 Saturday morning.
How is the synchronicity between the XJO and A2C restored?
Some internet research tells me it is related to the process of arbitrage which brings the two back into synch. And consequently big differences b/w the A2C at 7am and the XJO from the previous close, causes dramatic gaps in value at the open - if there is a difference in value between the two.
Is it true that:
1) if the XJO closes at say 6000 Wed 4.10pm and the A2C trades to say 5900 overnight,
then the A2C is brought back into synch with the XJO Thurs morning by a process called arbitrage?
2) if so, does this happen at a particular moment in time or during a particular time? [9.50am-10am??]
3) big differences b/w the A2C which develop overnight and the XJO from the previous close, causes dramatic gaps in A2C value at the open?
your clarification is much appreciated
Peter Elliott
|
msparks
Member
Username: msparks
Post Number: 1091
Registered: 10-2004
Rating: N/A
Votes: 0
|
| | Saturday, October 27, 2007 - 08:14 pm: |
|
Hi PSE
When looking at the charts of world markets on IC and index's, the open is always the yesterdays close.
Hence you do NOT see the GAP up open and GAP down open on the charts.
Stock charts do show the GAP opens.
I find it confusing when trying to compare and cannot really see what benefit you are trying to achieve by the comparison ?
The futures and underlying index also drift apart and one may lead the other or them follow. Some people trade this discrepancy.
The cfd index market is supposed to follow the underlying index and seems to fairly closely, however it is a 24 hour market , while the index cannot be traded overnight so the index open the next day will likely mirror the overnight action of the cfd equivalent at open the next day,however the data will not show the GAP on IC charts.
Hope this helps ?
PS - And when you work out how to beat the bastards , let me know , i have blown up 2 cfd accounts already with a dream of 24 hr available , trading for income, but the CFD provider is getting all the income. 
Many have tried to be master of the index trade but few survive and most go back to swing trading stocks , seems to be an easy method to make money.
Playing tennis in the local competition at home is a bit different to playing tennis against the worlds best at the US Open or Wimbledon , if you get my drift.
|
bluedog
Member
Username: bluedog
Post Number: 431
Registered: 08-2005
Rating: N/A
Votes: 0
|
| | Saturday, October 27, 2007 - 09:14 pm: |
|
Hi PSE Msparks,
I have had a bit og a dabble of late, yep its hard, just with your comment about gapping up etc, you can trade it for most of the night on IG Aus200 cash closes for awhile in the morning, same as the dow tech etc pretty well all day and night weekdays save for a hour or two. Agree stocks are easier and am getting to like forex.
Cheers
Bluedog
|
pse
Member
Username: pse
Post Number: 2
Registered: 10-2007Rating: N/A
Votes: 0
|
| | Saturday, October 27, 2007 - 10:28 pm: |
|
hi msparks and bluedog
thanks for your input.
u r right trading the index is not easy. i tread very carefully and now avoid night trading after losing $700 in just 7 seconds the other night. its not much in the big scheme of things but it showed me the power of the index. the cynic in me also wonders if the providers do mess around with the index values at night time when its not following the XJO.
can it be done? can the index be traded profitably over the long term? not sure yet. but there must be someone who does it.
i am presently working on a strategy using multiple moving avs (12 of them) and its showing promise, but more testing is required. it is also easy to overtrade the index which is certain defeat. so i'm careful to take no more than 2 index trades a day. the index probably generates about 1, at most 2, good probability trades per day.
- PSE
|
msparks
Member
Username: msparks
Post Number: 1092
Registered: 10-2004
Rating: N/A
Votes: 0
|
| | Sunday, October 28, 2007 - 09:33 am: |
|
PSE
Timeframes and trends and constant monitoring of the screen seem to be the requirements needed.
CFD providers will do their sums on open positions, stop loss positions, and can create a 20 or 50 point 1 second spike to adjust their books.
Hard to believe but i have seen it several times with the ausie 200 cfd.
It also seems impossible to keep loss's to minor , insignificant amounts, like $100 dollars.
The spreads are a pain also, they always seem to make it just that much harder to control loss.
The best TA setup outcomes are usually reversed after a false break, and usually reversed until the pain is too much to stay with the trade, which is the time you exit and then watch it change back to the direction you wanted.
Currency trading may be easier, i don't know, Ingot has a system posted recently using longer term view.
ausie 200 cfd seems very tradeable at and around the close each day, but that is only my observation.
Trade with the long term chart trend ONLY is the best suggestion i can make and the trends need to be aligned down to the 5 min chart before entry with the expectation of tight stop and being whipsawed out of some good trades.
Get your stop loss to breakeven as fast as possible.
Take your loss's quickly and don't leave the screen until stops are placed.
Profit target is essential otherwise they take it back from you , best to take it and re enter .
cheers
|
pse
Member
Username: pse
Post Number: 3
Registered: 10-2007Rating: N/A
Votes: 0
|
| | Sunday, October 28, 2007 - 11:22 am: |
|
those 50pnt spikes u refer to, i think that's the adjustment made first thing in the morning (and before the commencment of trading) when the provider doesnt allow overnight trading. the index is adjusted to catch up with the SPIs o'night activity. this is why holding an op overnight is "risky" and if u did, u might get caught in this 50pnt spike.
maybe i am naive but if the aus 200 cash spiked 50pnts between the hrs of 10am and 4pm, there should be a law somewhere to protect against that. such practices would wipe traders out "left right and centre", and all on the whim of a provider looking to make some money.
i am certain such behaviour wouldnt be condoned by ACCC and ASIC, and a provider engaging in such behaviour would have a case to answer.
i have seen the spikes u talk about, but only outside trading hours, never during trading hours. also, i only trade the A2C during the day, and find it to pretty much move with the value of the XJO.
but yes i agree with you, index trading is definetly a challenge. but i am working on a strategy that is showing promose but still requires much testing.
pse
|
moleman
Member
Username: moleman
Post Number: 298
Registered: 10-2003Rating: N/A
Votes: 0
|
| | Sunday, October 28, 2007 - 12:33 pm: |
|
So you're going up against a market maker who has no problem with making sudden adjustments to price and spread to take your money? Tell me, why would you do that to yourself? Why not switch to a CFD provider who doesn't do this, or trade the SPI directly?
Trading the SPI by Brent Penfold is a good book on trading Aus index futures.
cheers
MM
|
pse
Member
Username: pse
Post Number: 4
Registered: 10-2007Rating: N/A
Votes: 0
|
| | Sunday, October 28, 2007 - 01:18 pm: |
|
well this is my point MM, i'm not convinced these types of adjustments occur b/w 10am and 4pm at IG. my experience to date has been that the IGs A2C b/w 10 and 4, follows the XJO point for point, give or take a couple of points.
can u pinpoint a moment b/w 10 and 4pm where IGs A2c has spiked or gapped dramatically and in opposition to the XJO? if u can i would be surprised, and all ears.
pse
|
moleman
Member
Username: moleman
Post Number: 299
Registered: 10-2003Rating: N/A
Votes: 0
|
| | Sunday, October 28, 2007 - 04:42 pm: |
|
Hi PSE
As I understand it, CFD providers hedge their index trades against the futures market then make their money on the interest on the cash used for these trades and by increasing the spread. Some unscrupulous ones also have these price spikes... So I'd say IGs A2C follows the near term spi contract rather than the XJO itself. If you're planning on making 1 or 2 trades a day, surely all those differences in spread would add up compared to trading the spi directly.
MM
|
bluedog
Member
Username: bluedog
Post Number: 434
Registered: 08-2005
Rating: N/A
Votes: 0
|
| | Sunday, October 28, 2007 - 09:13 pm: |
|
Have to agree PSE I havn't noticed anything too out of wack with IG although you do pick up the spread, the mini's aren't to bad to trade, but i had most success trading FX rather than the indicies.If you trade a mini on the majors (x rates) its not too bad and can be reasonably profitable as they seem to be open from early mon morn to sat early as the US markets wind up. Take out three mini's if you have the setup you like take profits and shift stops. Its a lot better practicing with a small amount rather than taking out full contracts.Ive been using daily as controlling time frame trading four/two hourly charts and looking at the 15 & 30 mins for entry.
Cheers
Bluedog
|
qed
Member
Username: qed
Post Number: 81
Registered: 01-2006Rating: N/A
Votes: 0
|
| | Monday, October 29, 2007 - 06:55 pm: |
|
evening all , just read this post ,,, spikes during trading hrs are churning to auto stops IMO ... u have to remember cfd market makers are bookies ,, ahead on the up below on the down ,,, BE VERY CAREFULL IMO cheers Qed
|
qed
Member
Username: qed
Post Number: 84
Registered: 01-2006Rating: N/A
Votes: 0
|
| | Monday, October 29, 2007 - 10:34 pm: |
|
evening all  an interesting chat with cmc , over disputed bar opening price on aussie200 chart 2 charts exactly the same settings .. diff chart ..no wonder they alawys win "quod eros demonstradum"
|
|
