A few very basic questions

[GAnderson]

I've been having a bit of a nose at the prices of the FTSE 100 and Dow Jones lately, basically grabbing the historical data from Yahoo and messing about in excel (I love maths and stats) and thought it might be a bit more fun to look at things a little more seriously.

Just to make clear a couple of things before my list of questions:

1) I'm not looking to make easy money
2) I'm not looking to make quick money
3) Go back to 1

What I'd like to do is take a look at some better, more detailed historical data, learn a bit more about charting (the terminology throws me off complete) and slowly develop and test trading methods using historical data, then paper trading them before going live a week at a time (using my holiday) with small stakes (spread betting) for fun.

My main motivation is the enjoyment of developing the trading method and learning something new.

Sorry for the long preamble, time for the questions:

1) How do I know if data (especially historical) is the FTSE Cash or the FTSE future if it's only described as being the FTSE? I've been guessing that the yahoo data I've used is the FTSE Cash value.

2) Is the spread quoted by a spreadbetting company the total number of points you'd lose out on when open and close a trade of the amount you lose out on when you open it, then the same amount again when you close it?

3) I've played about on bigcharts.com but I'm finding it difficult to get a 1-day chart for a day of my choosing. I only seem to be able to get the most recent day. When here I change the drop down boxes to 1-day and 1-minute but can't change which day I'm looking at. Is there somewhere else I can get this kind of data? Being able to get the open, close, high and low for each minute on mouse over is really useful for me too...if only I could see other days!

4) I've read people talking about this feed and that feed, is this just somewhere they are getting market values from? Is it useful to have a reliable feed of data for the instrument you're trading standalone from the data the spreadbetting company give you?

5) If you're trading, say, the "FTSE 100 - Daily" are the spreadbetting companies required to peg their prices to that of the actual FTSE 100 value? I'm asking this so I can ensure the historical data I use is suitable.

Thanks in advance for any help and advice given.

:edit: I've just found TradIndex.com: Financial Spread Betting made easy which makes the distinction between the cash and future FTSE very clear (hooray!) but the DOW isn't listed. Is the DOW sometimes known as Wall Street?

 

[Jaydee]

Hi GA

It's good that you're not trying to make easy money - you'll find there is no such thing as time goes by

Anyway, in answer to your questions:

1) You can't really trade the FTSE Cash - it just looks like you are. When you trade through a spreadbetting firm you are actually trading the Index Future as a representation of the cash. In short, the spreadbetting firm hedges your open position in the futures market and sets their prices in line with the FTSE cash price (let me know if I haven't explained that very well).

2) For the spread, lets say an index is quoted 100 Bid At 102 (100 - 102). The spread is 2 points. Therefore, if you bought and sold at exactly the same moment you would lose 2 points. Here's a better example:

Open Trade Price 100 - 102
You buy (long) at 102 @ £10 per point

Close Trade Price 120 - 122
You sell at 120 @ £10 per point
Profit = £10 X (120 - 102) = £180 (you lose £20 on the spread)

3) Try advfn.com - sign up for a free account which gives you charts and some other stuff.

4) If you are just starting out, data feeds aren't anything for you to worry about. They will just act as an extra overhead. ADVFN do data at a cost if you are really interested. If you want to go the whole nine yards there's Bloomberg and Reuters but, trust me, at this stage you really don't need these.

5) Spreadbetting firms prices should be roughly the price of the FTSE but they are running their own market as a representation of the FTSE. Therefore, they can manipulate and play with their prices as much as they can get away with. They won't do anything too out of line though as punters will vote with their feet and go to a competitor. They are also regulated by the FSA which has a "Treating Customers Fairly" inititive.

6) The DOW is the same as Wall St for Spreadbetting.

CMC and IG both provide data and backtesting software if you open an account and put some cash in it (I'm sure there are others too). Check them out.

Regards

JD

 

[GAnderson]

1) You can't really trade the FTSE Cash - it just looks like you are. When you trade through a spreadbetting firm you are actually trading the Index Future as a representation of the cash. In short, the spreadbetting firm hedges your open position in the futures market and sets their prices in line with the FTSE cash price (let me know if I haven't explained that very well).

Just to make sure I've got it right: When spreadbetting the "FTSE" that I'm trading is an imaginary FTSE made up by the SB company that is valued equally to the FTSE cash. When I open a bet the SB company would hedge my bet in the real FTSE futures market.

2) For the spread, lets say an index is quoted 100 Bid At 102 (100 - 102). The spread is 2 points. Therefore, if you bought and sold at exactly the same moment you would lose 2 points.

I'm fine with how the spread works in that sense. I'm more confused by how SB companies add to the spread. Taking your imaginary index as an example. If the cash price for the index is quoted as 100 - 102 and the SB company I'm dealing with claims a "4 point spread" would I be betting at 96-106 or 98-104? Or would it be 99-103? Hopefully you can see where I've got those 3 interpretations from.

3) Try advfn.com - sign up for a free account which gives you charts and some other stuff.

Thanks for the tip, I'll have a look later. I'll also be ignoring feeds, for the time being at least.

Finally, when I'm looking at historical chart data for an index how can I tell whether I'm looking at the Futures market value or the cash market value?

 

[Hoggums]

You should also note that if you hold positions overnight while the market is closed (e.g. FTSE from 16:30 to 8:00) then the SB's operate a grey market where the prices still fluctuate based on what the US and Asian markets are doing.

So even though your excel spreadsheet from Yahoo says you wouldn't have got stopped out - there's a chance that actually you will get stopped from movement in this grey market.

Also you should note that the open prices that yahoo supply are incorrect and you should not rely on them.

 

[GAnderson]

You should also note that if you hold positions overnight while the market is closed (e.g. FTSE from 16:30 to 8:00) then the SB's operate a grey market where the prices still fluctuate based on what the US and Asian markets are doing.

So even though your excel spreadsheet from Yahoo says you wouldn't have got stopped out - there's a chance that actually you will get stopped from movement in this grey market.

Also you should note that the open prices that yahoo supply are incorrect and you should not rely on them.

Thanks for that Hoggums When the real market opens again is the overnight value moved to the opening value of the real market? I'm only really playing around with the idea of the Daily bets at the moment so the overnight market isn't of huge concern so long as the SB indicies open at the same point as the real ones. If they don't I'll have to delve a bit deeper into the rabbit hole me thinks!

Is there somewhere I can get accurate historical values for Open, close, high and low in an easy to use in excel format like Yahoo provide? How far out are the opening values on yahoo?

 

[barjon]

..................I'm fine with how the spread works in that sense. I'm more confused by how SB companies add to the spread. Taking your imaginary index as an example. If the cash price for the index is quoted as 100 - 102 and the SB company I'm dealing with claims a "4 point spread" would I be betting at 96-106 or 98-104? Or would it be 99-103? Hopefully you can see where I've got those 3 interpretations from...........

...........Finally, when I'm looking at historical chart data for an index how can I tell whether I'm looking at the Futures market value or the cash market value?........

ga

There is no cash price for the index as such - it's just an index. The SB companies build a trading model based on the index. Thus if the index stands at 100 and your SB has a 4 point spread it will quote 98 - 102. The only problem with that is that the SB price (in the example the mid-price would be 100) doesn't necessarily match the index exactly, that's because they build their trading model from some sort of algorithm with the futures (which are tradeable directly in the real market unlike the index).

If you're looking at a historical chart for the index provided by SB companies it will reflect the mid price movement of their trading model. If you looking at one from, say, ADVFN it will reflect the actual index.

hope that helps

jon

 

[GAnderson]

That helps alot Jon, thanks very much

With this in mind would it be appropriate to thrash out the bare bones of a trading method using the real index value before testing it against the historical data of the SB company I'd trade with? Or am I best off picking a SB company and then just working with their values?

 

[barjon]

Use the real index, I'd say, I'd be surprised if you can get historical data from sb companies anyway. Their prices sometimes vary quite markedly from the index and then there's that grey market hoggums talked about to complicate things.

The next complication in using index data is that varies as hoggums points out. The official LSE guidance for FTSE says that the opening value = previous day close and a lot of data providers like yahoo stick to that. In reality the price of the constituent shares in the index can change as a result of the pre-market auction period which means that you can't trade them at the "old" price when the market opens which, in turn, means that the index moves to reflect the "new" prices right from the off - ie: the opening gaps. If your anticipated trading model is going to encompass opening prices and gaps then you need data to suit.

jon

 

[GAnderson]

Use the real index, I'd say, I'd be surprised if you can get historical data from sb companies anyway. Their prices sometimes vary quite markedly from the index and then there's that grey market hoggums talked about to complicate things.

The next complication in using index data is that varies as hoggums points out. The official LSE guidance for FTSE says that the opening value = previous day close and a lot of data providers like yahoo stick to that. In reality the price of the constituent shares in the index can change as a result of the pre-market auction period which means that you can't trade them at the "old" price when the market opens which, in turn, means that the index moves to reflect the "new" prices right from the off - ie: the opening gaps. If your anticipated trading model is going to encompass opening prices and gaps then you need data to suit.

jon

Thanks again Jon. Just to ensure I've understood what you've said correctly am I right in saying that the opening prices at the pre-market auction are yesterday's close and that the price when the market opens properly is the price at the end of the pre-market auction?

If what I've said above is correct then I don't think the opening price and gaps will be an issue and I can go with Yahoo's data

 

[firewalker99]

3) I've played about on bigcharts.com but I'm finding it difficult to get a 1-day chart for a day of my choosing. I only seem to be able to get the most recent day. When here I change the drop down boxes to 1-day and 1-minute but can't change which day I'm looking at. Is there somewhere else I can get this kind of data? Being able to get the open, close, high and low for each minute on mouse over is really useful for me too...if only I could see other days!

4) I've read people talking about this feed and that feed, is this just somewhere they are getting market values from? Is it useful to have a reliable feed of data for the instrument you're trading standalone from the data the spreadbetting company give you?

You'll find answers to these questions here as well:
Trading FAQ - T2W Day Trading & Forex Forums

 

[barjon]

sort of - there isn't an opening price in the auction as such. Basically, just a load of orders tossed in the ring and cross-matched. When the market opens offers and bids are put on the order book which "sets" the price and those orders are influenced by what has happened in the auction.

 

[GAnderson]

Right, I think I've got enough questions answered to make some decent progress now. Thanks alot guys

 

[GAnderson]

Use the real index, I'd say, I'd be surprised if you can get historical data from sb companies anyway. Their prices sometimes vary quite markedly from the index and then there's that grey market hoggums talked about to complicate things.

The next complication in using index data is that varies as hoggums points out. The official LSE guidance for FTSE says that the opening value = previous day close and a lot of data providers like yahoo stick to that. In reality the price of the constituent shares in the index can change as a result of the pre-market auction period which means that you can't trade them at the "old" price when the market opens which, in turn, means that the index moves to reflect the "new" prices right from the off - ie: the opening gaps. If your anticipated trading model is going to encompass opening prices and gaps then you need data to suit.

jon

This made great sense until I checked the data I've pulled from Yahoo more closely to find that often the difference between the open and the previous day's close isn't always 0 Based on a quick glance at the last month or so it seems to vary by anything from 0 to about 10 points in either direction and this can't be accounted for by the adjusted close value.

Would I be right in saying that this means Yahoo are quoting the de facto opening price rather than going with what the LSE says it should be?