Understanding market fluxuations

[Technically Fundamental]

will do. thanks a lot.

 

[glyder]

will do. thanks a lot.

I don't think the CFA is good for trading knowledge. Its too fundamental based...more for research analysts, and analytics/forecasts etc.. its a very tough exam. I've known plenty of people who hold it, they are never traders.

Spreadbetters handook (malcom pryor) is a good easy start for trading, lots of it is useful even if you don't spreadbet., a bit easier for a beginner than John Carter (which is an excellent book).

neither will tell you exactly what moves the market, though. Ask a market maker, They're close to the market, but even then you might find five different mm's wil give you 10 reasons for a move!

 

[Technically Fundamental]

I always thought CFA with its grounding in analysis would be a solid grounding for speculation :-S

Any idea what quals are best for trading? I've only really got accounting experience and I'll be damned sit in a quiet room finding ways for rich people to adoid paying tax. I've wanted a job as a trader for years now.

 

[Technically Fundamental]

grounding ground grounding grounding grounding grounding

 

[timsk]

I been watching the FTSE over the last couple of weeks and at certain times in the day (not sure what markets open in the PM) I have been seeing a huge spike then a dip. Seems to be in correlation with both gold market and $/£.
Now what the hell is the deal with the correlation? Are these spikes the result of someone with a huge funds hedging? Thats the conclusion I came to.

Hi Aaron,
If it's around 2.30pm U.K. time, then this is when the U.S. opens. The FTSE tends to drag its feet over lunchtime and wait to see what's happening in New York. An eventful morning across the pond will result in an eventful afternoon over here. Don't trade the FTSE (or the DAX come to that) in the afternoon without paying close attention to the U.S. and being aware of key announcements in the U.S. that can turn the markets in an instant.
Tim.

 

[MrGecko]

I'm not a professional trader so I've not got as much ground knowledge on what affects the market as you lot but I think it's best for me to go to interviews with as much knowledge as I can. Anyway, a quick question.

I been watching the FTSE over the last couple of weeks and at certain times in the day (not sure what markets open in the PM) I have been seeing a huge spike then a dip. Seems to be in correlation with both gold market and $/£.

Now what the hell is the deal with the correlation? Are these spikes the result of someone with a huge funds hedging? Thats the conclusion I came to.

Well if you're not busy and feel you could help me by answering my questions and giving me a little info on are connected etc then please do.

I'd also be greatful if you would suggest any reading/learning materials


:cheesy:

Mérci

As the current economic situation has deteriorated, multiple causes for concern are on the mind of Money Managers everywhere... With the unemployment issues (equity markets) and credit / QE issues (treasury markets) not looking like sorting themselves soon, investors are looking for other places to save their money - recently, Gold has been on the front foot because of it.

So, if you see a spike in the FTSE, Gold and Cable simultaneously, one reason may be a UK based investor taking a "flight to quality" (or opposite). Remember FTSE contracts are priced in GBP, while Gold is (usually) priced in USD - so any investor moving from one to another would have to exchange their currency in the spot market. If they do it in enough size, this might explain the spikes (and explain why they are all happening at the same time).

You might well see a similar effect if Gilts are on the other end of the Gold position, although this shouldnt impact the FTSE future too much.

Note: It may be that they are doing it in the CASH market, not the futures... i.e. selling a weighted basket of Stocks and buying Bullion... which would effect the fair value of the futures - so you might not see big selling in either the FTSE future or the Gold future, but this could well be the cause of the moves nonetheless.

Anyway, that is something to consider: Liquidating GBP positions, buying USD, Buying Gold (or vice versa).

 

[MrGecko]

Are these spikes the result of someone with a huge funds hedging? Thats the conclusion I came to.

Why would you want to hedge FTSE with GOLD? You might, but why?

If someone is hedging a position, they will usually try to hedge it with a similar asset, or one that has a high correlation / causation (not the same thing) - for example, I might want to Hedge the price of Oven Chips with Ketchup - but it would'nt make any sense to Hedge Oven Chips with bicyle pumps, because there is no relationship there.

 

[Technically Fundamental]

Why would you want to hedge FTSE with GOLD? You might, but why?

If someone is hedging a position, they will usually try to hedge it with a similar asset, or one that has a high correlation / causation (not the same thing) - for example, I might want to Hedge the price of Oven Chips with Ketchup - but it would'nt make any sense to Hedge Oven Chips with bicyle pumps, because there is no relationship there.

I just meant the volumes. Not Hedgeing FTSE against Gold.

Soz for the confusion lol

 

[Martinghoul]

Most likely what you're observing is asset reallocation/portfolio rebalancing flows from real money, like pension funds, as MrG pointed out. As to why they happen with such regularity, I'd guess it's because they always serve lunch and Guinness at the pub at the same time every day .

You can occasionally see similar effects at the end of the month, when big passive index tracker funds have to rebalance. Of course, these things are known in advance and can be front-run. Front-runners can be front-run themselves, so it's a bit of a muddle.

 

[Technically Fundamental]

As the current economic situation has deteriorated, multiple causes for concern are on the mind of Money Managers everywhere... With the unemployment issues (equity markets) and credit / QE issues (treasury markets) not looking like sorting themselves soon, investors are looking for other places to save their money - recently, Gold has been on the front foot because of it.

So, if you see a spike in the FTSE, Gold and Cable simultaneously, one reason may be a UK based investor taking a "flight to quality" (or opposite). Remember FTSE contracts are priced in GBP, while Gold is (usually) priced in USD - so any investor moving from one to another would have to exchange their currency in the spot market. If they do it in enough size, this might explain the spikes (and explain why they are all happening at the same time).

You might well see a similar effect if Gilts are on the other end of the Gold position, although this shouldnt impact the FTSE future too much.

Note: It may be that they are doing it in the CASH market, not the futures... i.e. selling a weighted basket of Stocks and buying Bullion... which would effect the fair value of the futures - so you might not see big selling in either the FTSE future or the Gold future, but this could well be the cause of the moves nonetheless.

Anyway, that is something to consider: Liquidating GBP positions, buying USD, Buying Gold (or vice versa).

I have a lot to learn. What kind of GBP positions could they liquidate to push up the FTSE though. I just couldnt grasp why spikes on the FTSE $ and Gold are all correlating.
If someone were trading enough volume to affect the markets then wouldnt the FTSE take a relative nosedive if they liquidated their GBP positions to snap up dollars and gold?