DAX - easy ??

[alanb41252]

I read somewhere the other day that the DAX is easy to trade.

Is this true ?

Is it any easier to trade than any other index ?

If so, why ?

 

[TBS]

Dax is 'easier' in that it tends to be more volatile, as an example below are the overall ranges of three markets since the September futures contract started:

Stoxx50 : 170 points

FTSE100: 260 points

Dax: 350 points

However, volatility is a double edged sword. If you are trading futures - rather than spreadbetting.

Stoxx50: €10 per point

FTSE100: £10 per point

Dax: €25 per point

Basically, the Stoxx is a waste of time in terms of risk/reward, FTSE is a reasonable average and Dax can get a bit wild - depends on your apetite for risk, time frame and ability - nothing is 'easy'

 

[rglenn]

TBS

Don't let Helen hear you saying the Stoxxe is a waste of time!!

 

[DaxTrader]

TBS

That is a very simplistic viewpoint. Unless you are looking at percentage moves, points move measurements are meaningless.

a 1 % move in:

the Eurostox is roughly 25 points @ 2500

Dax is roughly 35 points etc etc

I trade both the Dax and the Eurostox, but trade the same Notional position size - and on average they balance out - in a move if I trade the Dax rather than the estox, and measure the profit made vs what was the same move in Estox, it is pretty much the same.

So, for example I trade 10 Eurostox contracts at €10 per point (ie €100 per point)which is roughly €250,000
and I will trade 3 Dax futures @€25 (€75 per point) which is also roughly €250,000.

Of course, they don't always move by same %, and the Dax has higher historical volatility than the Estox but it is near enough, especially since roughly 1/3 of the Estox constituents are in the Dax too.

The Dax has outperformed the Eurostox since March, which makes it look more attractive recently.

 

[TBS]

Don't let Helen hear you saying the Stoxxe is a waste of time!!

He he, she knows my views on it only too well

If you don't have the margin and are only looking to play the game with a chance of buying a fish supper once a month, then perhaps they have a place - otherwise, 50% less movement and 40% of the value per point accrued means you have to work 80% harder to get to the same place as a Dax contract.

Plus she is on her hols, so I should be safe for a week or so!

 

[TBS]

That is a very simplistic viewpoint. Unless you are looking at Notional contract value, points move measurements are meaningless.

Points moves are everything, your profits are measured in points accrued multiplied by the value of each point. Percentage moves are irrelevant, they have nothing to do with accrued profits.

So, for example I trade 10 Eurostox contracts at €10 per point (ie €100 per point)which is roughly €250,000
and I will trade 3 Dax futures @€25 (€75 per point) which is also roughly €250,000.

So you bump up the amount of lots to compensate and to give you the similar underlying value of 'stock', I understand that too, but, it does not cover the extra % of movement in the Dax versus the Stoxx on a trade by trade basis.

For the past 14 months, that I have been comparing the three indices, Stoxx has consistantly rated 60-70% of the points movement of the Dax - it has grown much worse in the past couple of months.

To maintain a balance, to bring your profits in line with each other you would need to be trading close to a ratio of 5 to 1 at the moment. Your example of 3.3 to 1 would have been sufficient form Sep to Jan, but since then the gap has been widening.

The main 'excuse' I hear for private investors trading Stoxx, is the initial margin - they can only afford to trade 1 or 2 lots maximum. 1 lot of stoxx is a waste of time and effort, unless you are either playing for fun or learning.

 

[DaxTrader]

"Points moves are everything, your profits are measured in points accrued multiplied by the value of each point. Percentage moves are irrelevant, they have nothing to do with accrued profits"

Of course profits are measured in points x amount per index point. Whether an exchange chooses to have their contracts at €10 or €25 is arbitary, or FTSE futures which were reduced from £25 down to £10. But in risk/reward assessment on a points basis needs:

1. similar position size
2. Adjustment , if needed, for relative difference in historical volatility (backward looking measure) ie you'd probably want to trade smaller notional size trading Nasdaq futures than SP..

Exchange minimum margin requirements take account of this, that is why the Eurostox has exactly 1/3 of the margin requirement of the Dax (overnight €3750 vs €11250)



"For the past 14 months, that I have been comparing the three indices, Stoxx has consistantly rated 60-70% of the movement of the Dax - it has grown much worse in the past couple of months"

Yes, well with the index value of the Estox being currently being 72% of the Dax that kinda fits in - the extra is the Dax out performance since March lows..... Dax has higher historical volatility, I know, but people get confused between points and position size - that is why lots of people start trading the Dow - lots of "big" moves.

As for trading Estox, why do you need an excuse ? It is the S&P e mini for europe, and ideal for people who start on a 1 lot in Estox or notional £17,000 odd, better than getting raped by the spreadbetters.

 

[TBS]

As for trading Estox, why do you need an excuse ? It is the S&P e mini for europe, and ideal for people who start on a 1 lot in Estox or notional £17,000 odd, better than getting raped by the spreadbetters.

Completely agree that it ideal as a learning ground and much better than spreadbetting, although I wouldn't consider it to be anywhere near the eminis - again because of the volatility issue.

It is the one index that the Euro denomiated hegies use to balance the books through the day, hence the volume traded and liquidity - although having quizzed a few of them why they use it rather than Dax - none of them can give a decent answer as they consider themselves to be hedging against % movements but when push comes to shove, they can never replicate the movement in their stock book without over egging the Stoxx positions.

Basicallly they consider it to be a hedge because it is europe wide rather than german-centric - and then get irritated when it doesn't do what thye want - gotta love those equity boys

 

[DaxTrader]

Hi TBS

SP500 more volatile than Eurostox 50 ?

have a look at the implied volatility figures, these are 1 yr implied figures:

http://www.tradinglab.co.uk/pdf/mail/strikeen_27062003.pdf

27th June

Dax 27.5%
Estox 24.2%
FTSE 21.25%
S&P 19.6%
Dow 19%

 

[oatman]

TBS, is "germancentric" a word? :cheesy:

 

[TBS]

Hi DT,

My fault, I havn't defined what I would consider to be 'volatility'. I don't regard the implied volatility of the overall indices to be relevant to the time frames that I trade over (basically day trading).

What I am looking for is the best window of opportunity in terms of intraday 'runs' and the opportunity that they present in terms of accruing points.

As a rough example, looking at yesterdays price action and the sort of runs, these are taken from top to bottom of the major runs, please don't think that I would consider myself - or anyone else good enough to trade from top to bottom!

Estoxx:
2460 - 2430 = 30 points
2430 - 2460 = 30 points
Total 60 points

FTSE:
4080 - 4030 = 50 points
4030 - 4080 = 50 points
Total 100 points

Dax:
3410 - 3330 = 80 points
3330 - 3380 = 50 points
Total 130 points

Mini SP
960 - 975 = 15 points
975 - 965 = 10 points
Total 25 points

Dow
8990 - 9110 = 120 points
9110 - 9030 = 80 points
Total = 200 points

So the maximum opportunity to make a return basis one lot of each product is:

Estoxx €600
FTSE £1,000
Dax €3250
Mini SP $1250
Dow $2000

Putting that into christian numbers and re-ordering

Estoxx £420
Mini SP £800
FTSE £1,000
Dow £1250
Dax £2275

Even if we levelled the playing field and traded 10 lots of Stoxx and 3 lots of Dax, the Stoxx falls way behind the opportunity window of the Dax in terms of maximum possible returns (plus your broker is quickly getting richer with every trade), and much more importantly, the range of the Stoxx at 30 points per 'run' versus the Dax at 80 and 50 points add a further reduction in tradeable opportunity.

Putting the issue of initial margins and 'learning to trade' to one side, for me, the Stoxx just doesn't cut it in terms of opportunity or absolute return, indeed the intraday runs are so constrained and therefore very unforgiving of errors, that I would expect people to make more trading mistakes.

In fact the more I think about it - other than initial margin requirements and low pointage value it isn't really a great market for newbie traders to cut their teeth on as they could become very frustrated very quickly with no returns and reduced market movement.

 

[TBS]

TBS, is "germancentric" a word? :cheesy:

It is certainly one that is used in the European Long/Short hedgfunds - I'm sure it looked impressive on their prosectuses

.. or should that be prospectae?

 

[oatman]

Nice one...octopussies even?

 

[DaxTrader]

I've traded the Dax since '99, and have traded Estox since late 2000, and must admit that I switch between the two.

Tend to look to see which has the clearer pattern, and go with that.

In breakout situations will go with whichever one gives me the most visible risk point (stop).

When market gets very volatile, tend to trade more Estox as I find I get shaken out of the Dax often with false moves.
When less volatile trade more Dax for the better moves when Estox is sticky.

 

[TBS]

Hi DT,

A sensible strategy, I've only been involved with the Dax in the past couple of years, have been trading FTSE for about the past 8 years or so. They all have their merits and pitfalls, at the end of the day it is whatever suits your 'style'.

Cheers

 

[mma]

the dax is not as easy as it was 2 / 3 years ago . then I was whacking left right and centre , getting 100 - 180 points per winner .

But over the last year or so , I see the action being a lot more choppier . I believe this is due to the increased number of traders on the dax . IOW there's more competition and fewer mugs these days .

 

[Van88Guy]

Estoxx 50 Raw Data

DAX,

I think the European trading is directed by the American closing prices, but I'm not sure how strong this relationship actually is. Therefore, I'm putting together a correlative study between the ESTOXX 50 daily prices and the closing price of the S&P 500 for the previous session.

Have any idea where I can download OHLC data on the ESTOXX 50 over the past year?

Thanks for whatever ideas you may have.



Van88Guy

Hi TBS

SP500 more volatile than Eurostox 50 ?

have a look at the implied volatility figures, these are 1 yr implied figures:

http://www.tradinglab.co.uk/pdf/mail/strikeen_27062003.pdf

27th June

Dax 27.5%
Estox 24.2%
FTSE 21.25%
S&P 19.6%
Dow 19%

 

[peto]

DAX,
I think the European trading is directed by the American closing prices, but I'm not sure how strong this relationship actually is. Therefore, I'm putting together a correlative study between the ESTOXX 50 daily prices and the closing price of the S&P 500 for the previous session.
Have any idea where I can download OHLC data on the ESTOXX 50 over the past year?
Thanks for whatever ideas you may have.
Van88Guy

Eurex sells that data for the last 20days only at http://www.eurexchange.com/data/statistics/market/offline.html

Futuresource.com provide charts of the future you could extract data from free. http://www.futuresource.com/charts/charts.jsp?s=DSXZ05&o=&a=V:60&z=610x300&d=medium&b=bar&st=

I'm sure there's a very strong relationship with USA prices, but Eurostox isn't waiting around for the closing prices, it's moving tick by tick with the USA most afternoons. Then the next morning if there has been overnight movement in the USA then you are likely to get a gap opening..Consequently I'd be interested to know how you feel that might help you to trade profitably.

 

[Van88Guy]

S&P 500 and ESTOXX50

I looked at the correlation of the closing S&P500 and the Estoxx50 mid-price of the following day. For the 52 trading days up to November (and I know that isn't a big enough sample), the correlation was 87%. That means the average Estoxx price today follows the S&P quite closely.

Now I want to look at a 5 day ROC on the S&P500, and compare the larger moves with movement on the Estoxx. My feeling is that the larger moves have an exagerated impact on the Estoxx, whereas the smaller moves are discounted as noise by people that play the European index.

I know that the minis trade on the Globex, however, the volumes are relatively thin.

Perhaps it isn't a very innovate concept, buy I am trying to find ways of leveraging the American data to get an advanced reading on how Europe is going to unfold the next day. I need every edge I can get because I'm following both markets from Manila, with all the inherent time zone difference that implies.

Thanks for your input on the data sources.

Regards,

Van88Guy :|

Eurex sells that data for the last 20days only at http://www.eurexchange.com/data/statistics/market/offline.html

Futuresource.com provide charts of the future you could extract data from free. http://www.futuresource.com/charts/charts.jsp?s=DSXZ05&o=&a=V:60&z=610x300&d=medium&b=bar&st=

I'm sure there's a very strong relationship with USA prices, but Eurostox isn't waiting around for the closing prices, it's moving tick by tick with the USA most afternoons. Then the next morning if there has been overnight movement in the USA then you are likely to get a gap opening..Consequently I'd be interested to know how you feel that might help you to trade profitably.

 

[jiggly]

the dax along with any index or instrument is not 'easy' to trade

what makes them 'easier' is your ability to read the market and feel comfortable with the contract and the price action.

it is your confidence and belief which may lead you to beleive it is easier, it is just psychology at work.

nothing is easy, it just becomes easier with a winning mind set and a proven approach over many months of hard work and screen time.

good luck and kind regards