Best way of trading the FTSE?

[Jack o'Clubs]

So, I spend ages paper trading a methodology for the FTSE100 which seems to work very well and went 'live' at the start of the year, using spreadbets. What I hadn't accounted for was the way the spreadbetting firm I use skews the price by several points above or below the 'actual' index value, depending on whether the market is trending up or down. Naturally this is putting a dent in my profits, and makes a joke of the two-point margins the firm advertises - on average it's turning it into a four or five point 'real' spread.

My question is, am I using the wrong spreadbet firm (IG Index), am I using the wrong instrument (should I be using CFDs or futures, or...?), or am I just plain naive for expecting that my 'paper' system based on actual FTSE100 values would ever be replicable in real life?

As background, I'm placing one or two trades every couple of days, usually intraday, but sometimes letting them run overnight and on average targetting (and on paper, at least, achieving) about 15 points of profit using technical indicators as my guide.

Thanks in advance folks.

 

[apples10]

So, I spend ages paper trading a methodology for the FTSE100 which seems to work very well and went 'live' at the start of the year, using spreadbets. What I hadn't accounted for was the way the spreadbetting firm I use skews the price by several points above or below the 'actual' index value, depending on whether the market is trending up or down. Naturally this is putting a dent in my profits, and makes a joke of the two-point margins the firm advertises - on average it's turning it into a four or five point 'real' spread.

My question is, am I using the wrong spreadbet firm (IG Index), am I using the wrong instrument (should I be using CFDs or futures, or...?), or am I just plain naive for expecting that my 'paper' system based on actual FTSE100 values would ever be replicable in real life?

As background, I'm placing one or two trades every couple of days, usually intraday, but sometimes letting them run overnight and on average targetting (and on paper, at least, achieving) about 15 points of profit using technical indicators as my guide.

Thanks in advance folks.

The sb firms price their FTSE price off the FTSE Future (March expiry at moment), even the daily ftse prices reflect movement on the Future. You should really have been doing your papertrading against the Future.

By daling straight with the Future (for instance through Interactive Brokers) you will deal on a lower spread. Or you could use Twowayfutures for sb, they base their price exactly on the exchange price and add a small margin.

Regards your papertrading. You'll find that the only real experience is when you go 'live' - there's no p/l emotion on papertrading.

rgds

 

[Jack o'Clubs]

Thanks, I guess that makes sense as the future is the only way the SB can lay off the bet. Although that begs further questions, as IG for example also offer a 'Daily' Future for March which has a different price again. I've also been checking the IG prices against another screen showing CMC's price for its equivalent bet and the CMC prices seem much closer to the index value.

However Apples10, I think I owe you at least one virtual beer since TwoWayFutures were unknown to me, and look like they may be the answer in the short/medium term at least until I graduate at some point onto a proper futures trading platform.

 

[apples10]

Thanks, I guess that makes sense as the future is the only way the SB can lay off the bet. Although that begs further questions, as IG for example also offer a 'Daily' Future for March which has a different price again. I've also been checking the IG prices against another screen showing CMC's price for its equivalent bet and the CMC prices seem much closer to the index value.

However Apples10, I think I owe you at least one virtual beer since TwoWayFutures were unknown to me, and look like they may be the answer in the short/medium term at least until I graduate at some point onto a proper futures trading platform.

The daily Futures sb will be the exchange Future quote plus a spread, whereas the FTSE March sb will be based off the FTSE Future fair value, but move with the Future.

You will see differences in prices between sb firms as they differ in their algorithm usage, but you'll also find that unless you've got a very, very fast PC and bb connection that the spreads will nulify any arbitrage possibilities.

virtual pint = rate my comments and give me some stars!!

 

[Hooya]

cmc spread moves as much as the futures market does so if the market moves 10 points the cmc quote will move 10 points (give or take the odd occassion). You will learn given time how the price moves on an sb.

 

[ukhero]

JPC,

There's plenty of quality advice in the above posts to keep you going for a while, so I'll only add this: have a look at 'Tradeindex.com' - you don't need to register/login in order to view all their prices / spreads, and as such, it's a quick and handy site to compare against your own SP company; it also has business and economic news, although this is somewhat limited in detail.

Good luck

UK

 

[mark twain uk]

my bit of advice:

start with the smallest possible trade, say £1, and keep it like this for at least one month, the chances of losing money in the beginning are very, very high, so at least you will only be exposed to a minimum loss

one more: At all times your main priority has to be capital preservation.

 

[hungvir]

So, I spend ages paper trading a methodology for the FTSE100 which seems to work very well and went 'live' at the start of the year, using spreadbets. What I hadn't accounted for was the way the spreadbetting firm I use skews the price by several points above or below the 'actual' index value, depending on whether the market is trending up or down. Naturally this is putting a dent in my profits, and makes a joke of the two-point margins the firm advertises - on average it's turning it into a four or five point 'real' spread.

My question is, am I using the wrong spreadbet firm (IG Index), am I using the wrong instrument (should I be using CFDs or futures, or...?), or am I just plain naive for expecting that my 'paper' system based on actual FTSE100 values would ever be replicable in real life?

As background, I'm placing one or two trades every couple of days, usually intraday, but sometimes letting them run overnight and on average targetting (and on paper, at least, achieving) about 15 points of profit using technical indicators as my guide.

Thanks in advance folks.

I appreciate your patience. I never papertraded and I did lose some money trading shares.

If you want to test yourself out a bit more, I would recommend trying the 1p bet for 8 weeks by Finspreads. After your first 8 weeks with them, minimum stake is 50p which should be good enough for you.

Good luck!

Hung

 

[Jack o'Clubs]

Thanks for the advice. I do have quite a bit of experience in trading shares, and had adapted my methodology for the index. I just needed a bit of a think about how to adapt my paper system to the futures price rather than cash. Now working well and trading the future directly - thanks all for answers and advice.

 

[JonnyT]

The best way to trade the FTSE is to trade something else that actually moves a worthwhile amount.

i.e. Don't trade the FTSE its for mugs.

JonnyT

 

[neil]

Try the DAX

 

[Jack o'Clubs]

Neil,

Shall have a look at the DAX and see if it suits my trading style.

JonnyT,

You trade forex I think? I've looked at forex and tried trading cable but couldn't do anything with it. Didn't lose anything, but couldn't make enough to make the hours put in worthwhile. Horses for courses I guess. I use forex, but now just to hedge ccy exposure in underlying $ stock positions.

 

[yourf16]

ftse is a small market


ftse, dax and others are all small markets.
reason why i believe ftse is a small market because there seems to be so
much more information available about dow and sp500 compared to
ftse 100. for example i couldn't find any source that provides ftse 100
intraday volumes. but for dow, even finance.yahoo.com provides
(10minute) volume bars. so i think even though dow is only 30 bluechip
companies. its better to trade dow than ftse.
right ?

 

[solentsurfer]

ftse, dax and others are all small markets.
reason why i believe ftse is a small market because there seems to be so
much more information available about dow and sp500 compared to
ftse 100. for example i couldn't find any source that provides ftse 100
intraday volumes. but for dow, even finance.yahoo.com provides
(10minute) volume bars. so i think even though dow is only 30 bluechip
companies. its better to trade dow than ftse.
right ?

Depends on your trading style. Intraday you can virtually guarantee the Dow's range will be around 100 points, quite often more. That alone makes the Dow more attractive to me. I tend not to worry too much about volumes, just go with what the price is telling me and setting a points target for the day. I find too much information can lead to drawing opinions on what you think should be happening rather than reacting to WHAT is happening. Others will probably disagree but aiming for 30 points per day on the Dow is, for me, more realistic than trying to get 10 out of the FTSE. Quite often you will not get much action out of the FTSE until Wall St opens anyway - that appears to be happening today, FTSE also followed the Dow yesterday.

 

[dcarrigan]

have found the footsie very profitable the past two weeks. the smaller swings make it easier to profit.
when trading with cmc i found it hard to make a constant profit due to there there spread on dow and footsie. with the spread ,and them taken a position ,it can sometimes be 16points off the true future price. i know you can take there daily price where the spread is closer but it becomes expensive to take longs over the weekend. i think it was about 7points. now i have found sb company with .48 spread the footsie and 2 the dow i feel more confident .

 

[countryroads]

Question for Johnny T [If Trading the FTSE is for Mugs , then why are you wasting your precious time reading a purely FTSE based thread ?

 

[bootsyjam]

FTSE intraday volume

ftse, dax and others are all small markets.
reason why i believe ftse is a small market because there seems to be so
much more information available about dow and sp500 compared to
ftse 100. for example i couldn't find any source that provides ftse 100
intraday volumes. but for dow, even finance.yahoo.com provides
(10minute) volume bars. so i think even though dow is only 30 bluechip
companies. its better to trade dow than ftse.
right ?

I have found the same problem r.e. FTSE volume. I think Sharescope may have this capability on charts-will need to check though.
Day trading on the indexes through spreadbetters is useless i think-the spread wipes you out. Is twowayfutures or Interactive Brokers for me-just find the price structuring of the latter very confusing indeed-both on their site and the MASSIVE thread somewhere on this board.

 

[dcarrigan]

I have found the same problem r.e. FTSE volume. I think Sharescope may have this capability on charts-will need to check though.
Day trading on the indexes through spreadbetters is useless i think-the spread wipes you out. Is twowayfutures or Interactive Brokers for me-just find the price structuring of the latter very confusing indeed-both on their site and the MASSIVE thread somewhere on this board.

think you will find there is no volume for ftse as it is not a tradable product. volume available for ftse futures.

 

[bootsyjam]

Two way futures don't supply it-sharescope do I believe-am getting the month trial today so will repost.
Esignal had vol for DJIA, and that is not tradeable (so to speak) either.
Not sure of Interactivr Brokers charting/vol capability-know they have the level 2 etc like 2 way futures

 

[bootsyjam]

Two way futures don't supply it-sharescope do I believe-am getting the month trial today so will repost.
Esignal had vol for DJIA, and that is not tradeable (so to speak) either.
Not sure of Interactivr Brokers charting/vol capability-know they have the level 2 etc like 2 way futures

Yep sharescope have volume-can switch between screens to see the 2 different formats-volume by trade, and volume by period-both are very helpful indeed.