DOW and FTSE relationship trading

[Da.DesiTrader]

Hi,

I have observed that Dow and FTSE move in tandem. Specially, with spreadbetting firms, as they build the futures price into their cash instruments when one market is close.

Question: Is there any strategy / setup to take factor previous day's Dow's close or moves into next day's FTSE open? Also vice versa, ie, strategy / setup to factor FTSE's close into the remainder of the Dow's session (on same day).

Will appreciate views from experienced traders.

Thanks

 

[Hoggums]

First thing to remember is you can't open a FTSE position at/before open at yesterdays close - otherwise it would be free money.

I've never tested any of these ideas - it's difficult to get the data to do this - so therefore I've never traded them - but I have a couple of simple ideas.

First is combining with the asian markets too - basically if FTSE & Dow are up then the asian markets will rise in the day. The futures will have already priced in a move but the markets tend to continue a little once trading has start. You could also trade FTSE in the same direction as Dow & Asian markets. Lastly if Asian and FTSE is up at lunchtime then go long on Dow etc.

Never tested it and it's difficult to trade as there's no obvious place to put a stop and using EOD data is useless as it doesn't give you the future price at open.

The only other strat I can think of is relying on the fact that the futures are slightly more sluggish when the market is closed - then go opposite directions on different markets hoping to profit from the difference in volatility. It requires you predicting the correct market direction so in my opinion you'd be better off just trading one. You could try exploiting it with daily options with a long/short straddle on different indices - but I can't see there being enough of a difference to make this profitable.

 

[barjon]

In general, longs are probably the better bet if FTSE is trading strong against DOW (better than 1 FTSE point for 2 DOW points and less than 1 for 2 on pullbacks) and vice versa if it's trading weak.

So, if DOW rises 100 points after FTSE close then FTSE should open around 50 points better IF (and it's sometimes a big if) US futures are indicating DOW will hold its closing level. Should FTSE open only 20 points (say) higher then it is likely to play catch up and trade strong against DOW (US futures or SB proxy DOW).

good trading

jon

 

[Da.DesiTrader]

Hoggums. Pls see this thread http://www.trade2win.com/boards/uk-indices/34406-ftse-dow-symbiosis.html

I have PM'ed Rav, but heard nothing back so far.

 

[barjon]

In general, longs are probably the better bet if FTSE is trading strong against DOW (better than 1 FTSE point for 2 DOW points and less than 1 for 2 on pullbacks) and vice versa if it's trading weak.

So, if DOW rises 100 points after FTSE close then FTSE should open around 50 points better IF (and it's sometimes a big if) US futures are indicating DOW will hold its closing level. Should FTSE open only 20 points (say) higher then it is likely to play catch up and trade strong against DOW (US futures or SB proxy DOW).

good trading

jon

should have added to the first sentence that you're basically doing your TA on the DOW (or US futures/SB proxy DOW) but trading the result on the FTSE - eg: there's no point looking for FTSE longs when DOW is dropping like a stone even if FTSE is reluctant to follow it down (ie: falling less than 1 for 2), but you should resist FTSE shorts in these circumstance since any DOW bounce is likely to be exaggerated on FTSE.

good trading

jon