Does anyone trade Indices?

Sharky

Admin
5,493 272
#1
I was just wondering if any of our members actively trades indices or financial derivatives.

I'm quite interested in spread betting of indices. Since you don't have to pay stamp duty and your winnings aren't taxed.

Can anyone offer any insights into this type of trading, or indeed how to get into trading currency, options or even commodoties?

Pigsy.
 

face

Newbie
7 0
#2
yes pigsy I've been watching the daily dow very closely now for several months and devising a trading system.

I'm convinced that it is possible to make good money on a regular daily basis by spreadbetting the swings.

My paper trading shows that it is possible to make 100 - 200 points per day on a regular basis.

The drawbacks are the fact that you need to watch the index practically all day (2.30pm till 9.00) depemnding on whether you have a trade open. This can be exhausting. Also the 10 point spread has to be covered on every deal.

The big benefit is the profits are tax free.

The alternative of trading the qqq is possible but only with cfds and taxable.

The dow is ideal because the swings tend to be greater than the nasdaq.

Just my views, hope it helps.

All other
 

SP23

Member
54 0
#3
I'm with face on this one

> Face

You can get a smaller spread with CMC - not sure what though

It's 4 points on the NAS


The thing I like about the Dow is that at ~10000 there are more points in a certain % than say the NAS.

This means that you don't - in theory - need it to move much to make money
 
#5
Hi all - my first post on the board - hello everyone!

I do a limited amount of spread betting on the Dow and FTSE.
Details of my last few months efforts can be found on my website.
It's small scale and I'm very much learning the ropes. Still consider myself an amateur at the spread betting game but I agree with Face - there is the opportunity to make money given the movement of the indices.
I would be very interested in what you are looking at as the basis of your trades - I too have been trying to develop a trading system.
Tim
 

spock

Junior member
36 0
#6
Trading indices

Hi folks,
I have been trading various indices for about five years now and have developed my own trading systems for each of them as I have found that certain systems work better on some markets than others.Also the systems may need fine -tuning over time as the characteristics of a market change-from trending to range bound or to very volatile periods for instance.
My systems give me an average success rate of about 75% with the best about 85%(for the S&P) and the worst about 65%(for the FTSE) and all give quite high % returns on draw-down.My actual returns are less than these figures because I have to pay the spreads when dealing but still a satisfactory return.
The biggest problem I have found is to keep to the discipline of the systems-only trade when they tell you,take your losses when they tell you,take your profits when they tell you and I also find I get impatient waiting for the moves and may over-trade.As any really good trader will tell you,you must find a system that suits your
personal traits so that you are comfortable with it.
Having had my best-ever year last year my New Year resolution is now written above my computer: DISCIPLINE AND PATIENCE!!
Good luck to you all.

[Edited by spock on 28-01-2001 at 07:39 AM]
 
#7
This is what I like about these boards - re Spocks reply - I am sitting in front of my monitor which has a one post it note on it saying one word - PATIENCE.

Concur with all you say. One problem with my initial attempts at developing a trading system was that it gave very infrequent buy and sell signals so I kept dabbling in between - it was those bets that generally lost me the most money.

While my readings of the markets last year were generally good my behaviour in them was often poor. I spent a lot of time over Christmas reading about the psychology of trading in an attempt to change this.
I know where my weakness's are and am trying to remove them from the trading equation - as you say whatever you do has to suit your personal traits.

I broke even to the penny on my indices betting over the last five months of last year when I started in earnest, four small success's on the FTSE so far this year, one on the CAC and one on the NAS - my best month so far.
(Probably means I'll give all away in Feb!)
I'm still near the bottom of a long learning curve though.

Tim
Currently looking at Candlestick charting.
 

CHARTY

Active member
119 1
#8
I have seen this thread only now. I only trade indeces and futures! And I only do this with spreadbetting firms. Why?

1) Spreads are narrower than on normal stocks.
2) Futures have always been more technical than other securities
3) You can go short and long (or do nothing..most of the time this is the best choice!!!)
 
#9
It's nice to hear from somebody who does this.

I have been paper trading for a while and had a dabble recently. I found that while I am reasonable able to forecast direction using TA it was not straght forward betting on futures where the price moved around a lot not necessarily in the prevailing direction of the daily index.

can you offer any advice about trading indedx futures vs. daiiy index and rolling over?

Are there any good books that describe the differences between stocks and futures that you can recoemmend?

Thanks.
 

CHARTY

Active member
119 1
#10
I would not be able to recommend any book in particular. Everything I learn, I learnt it "on the field". I have never traded daily futures. The only difference which comes in my mind is that with normal futures you have a bit more of time to allow the market to move in the direction of your position. I went short the Dow few days ago and it took it a while before falling. Does this help?
 

Uncle

Established member
671 2
#11
A book I would recommend for anyone thinking about trading derivitives is "The Way to Trade" by John Piper published by Financial Times Pitman Publishing.

The content is about discovering your Trading Personality then applying rules consitently, as mentioned in some the posts above.

Best wishes to all

John
 
#12
Thanks for the book recommendation. It looks interesting - one of the (many) reasons I'm reluctant to become a full time trader is the possibility that I would experience additional pressure to succeed whereas now it's just for fun and profit comes second.

A search of amazon.co.uk also turns up:

The Futures Game; Richard Teweles, et al
Trading for a Living; Alexander Elder
How I Trade for a Living; Gary Smith

Somewhere (on this thread?) someone was saying that index trading is more technical than ordinary shares. I can see that there is less in the way of fundamental analysis (news flow, p/e, peg, earnings forecasts etc) to concern an index so you have to trade on a t.a basis. However my recent preference has been to trade shares on a completely technical basis too.

With indices I have found success on paper using a combination of ma's, rsi, stochastics, charts and candles.

Apart from that just watch out for when Greenspan changes the rules of the game!
 
#13
It is possible to trade the daily dow, ftse, dax etc. online at finspreads.com. Trading as low as 1p. Stop orders must be placed by phone at the cost of #2 and limit orders are being introduced soon. I think you might also be able to spread bet on shares online, but the spreads are several pence. At the moment, however, I only trade daily indices. Margin is 250 times stake for DOW and 150 times stake for FTSE and the spreads are 8 for DOW and 6 for FTSE, so it is technically possible to make a few percent profit every day (or even in an hour). Of course, in practice . . . It's very addictive though.
 
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#14
By the way, what kind of things do you mean when you say trading systems. I know TA stuff and for example notice that 200 day moving average is very strong resistance for FTSE and that the DOW often settles at the end of the day at critical support or resistance levels such as 10 900 today and finally that 1:30 is often when the action starts on the DOW as people come back from lunch. Is this the kind of thing? Or is it more complicated using several indicators, computer etc. as well?

I was thinking some time back, that surely a computer would be able to trade the indices much better than a human being once fed with all important turning points and figuring out ones of its own. Furthermore, staring at numbers for a few hours every day is boring (although exciting for other reasons) and makes me feel a little sick about how I spend my time. Surely a simple program would work on the currencies which would involve simply buying when prices are cheap and selling 50 points later. Since the currencies oscillate so much, this will almost always turn in a profit eventually with a sufficiently healthy balance to start with .... The problem is: isn't that the same with everything? You risk the big losses, but I somehow prefer the idea of high percent win as opposed to maximizing size of wins. It feels safer somehow. Of course it isn't! These are also the sort of trades which you stand over and look after. I need to try and learn to come to a decision only place a small bet on it, and go away confident that the decision will be more often right than not. Does anyone out there just trade on a day-to-day basis? Trading the DOW on a day-to-day basis is a scary prospect. The FTSE on the other hand is much less predictable intraday, but seems to behanve more sanely in the medium term. Any comments?

About futures, they have to cling to prices. So even if everyone thinks the index is going to go up, the future will not rise by too much above the price, or people would sell the future and buy the underlying index for a guaranteed profit. What I seem to find is that the future is a prediction of what the price is going to be in a few minutes time. If the market starts falling, the future will fall faster which is slightly annoying if you are long. The difference which does exist between future and price is to counteract the loss of value of your capital as it waits for the future to expire (no interest etc.) One thing I don't get is this:

Why is DOW future _above_ DOW price, but NASDAQ future _below_ NASDAQ price? The latter does not make sense to me. We all know the NASDAQ has a bad name, but still!

Any help or advice on above much appreciated!

Anyhow, it's getting late! See ya!
 
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#15
My view (and I'm not a seasoned index trader) is that a system built around m.a's, rsi and stochastics will indicate the major turning points quite well.

A computer system eg. Sharescope, Omnitrader, AIQ, metastock can assist in this process - however the indices are quite volatile in themselves and the futures move around more that you might expect.

This means that you certainly need stops - probably quite wide and need to enter a trade at major turning points.

A computer is no substitute for experience or constnantly being in touch with the market.

At the end of the day a lot of effort is involved to be successful in this area and prudence/risk control are critical elements.
 

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