Correlation between FTSE and DOW

[kwickwool]

All,

One of my methods of trading is the correlation between the FTSE and the DOW and have a question if anyone can answer in terms of the correlation between both markets.

How can what are a group of the biggest companies in each country be so related in their movement to almost an identical correlation at times? Logically you would expect some correlation but to be so spot on? Why are they so close?

Can understand movement based on sectors which would explain a lot but there must be individual movement lots of times based on so many other factors that are independant of that?

Can anyone answer that question? Not too important to my trading just really curious?

thanks all and G/L

Christian

 

[tomorton]

It's a self-fulfilling thing, a feedback loop. Partly driven by the fact that fund managers are measured against their peers, so it tends to drive them to do the same thing as each other at the same time. So, if some big shares are going up, they might like to buy some other big shares, but only if the FTSE is being driven up, and if the FTSE does go up, that drives some other buying and so on.

Same with the Dow as the leader for the FTSE's direction. If the Dow is going up, the FTSE will follow, so why be a seller?

 

[Mornington Crescent]

welcome to the world of the market maker

 

[kwickwool]

The trading world is basically full of sheep then.................thanks guys.

Oh to be the guys that decide the direction

 

[kwickwool]

Thats makes perfect sense as well as sometimes I see a small delay between the two with the FTSE just dragging behind by a few seconds which makes a pretty good set up for short term gains when you get in quickly in that time gap.

 

[isatrader]

It's not just the DOW and the FTSE. Here's a chart with a few more of the major indexes. Notice any similarities.

 

[jd1888]

It's not just the DOW and the FTSE. Here's a chart with a few more of the major indexes. Notice any similarities.

Nice picture shows exactly how correlated they are. What time frame are they?

 

[isatrader]

Nice picture shows exactly how correlated they are. What time frame are they?

It's a daily time frame on that chart

 

[kwickwool]

I follow avidly the FTSE and DOW and also eurusd and gbpusd and even sometimes the gbpusd will correlate almost spot on with the DOW, not always, but the similarities some days are there to be seen

 

[Martinghoul]

It's all about risk on/off.

 

[sunset1]

I follow avidly the FTSE and DOW and also eurusd and gbpusd and even sometimes the gbpusd will correlate almost spot on with the DOW, not always, but the similarities some days are there to be seen

Is the UK100 in ETX Capital the Ftse100 :?:

 

[Poem 101]

Is the UK100 in ETX Capital the Ftse100 :?:

It's probably their cash version. Be very careful trading something like that. If you must go via the bucket shops, you'd be better of trading their version of the futures (in this case it would be Z on the LIFE exchange), that way there's at least a real price that you can check.

 

[sunset1]

It's probably their cash version. Be very careful trading something like that. If you must go via the bucket shops, you'd be better of trading their version of the futures (in this case it would be Z on the LIFE exchange), that way there's at least a real price that you can check.

Poem101 what difference does it make between the UK 100-Daily Rolling and the UK 100-March Daily Future if my T.P. is only 20 pips:?:

 

[Poem 101]

Poem101 what difference does it make between the UK 100-Daily Rolling and the UK 100-March Daily Future if my T.P. is only 20 pips:?:

Well, their cash index is basically whatever they decide it to be. Like spot forex, if there's any monkey business you really can't complain, because who's to say what the real price is? Wit h something based on an actual thing like a futures contract traded on a proper exchange you can always check the real price with the CME or whatever and challenge it if the bucket shop takes the p1ss.