Dow Volatility and Spreadbetting

[simcom]

Hi

I am in the process of devising a simple strategy for trading the Dow intra-day (entry on market open, exit either stoploss/profit target/market close).

My problem is that whilst the system works well on the cash index data (such as that freely available from Yahoo Finance), it isn't anywhere near as good on the spreadbet data (I have backtested with data from IG Index and a couple of other big-name firms). This is primarily because the system relies on large intra-day ranges, and whilst the Wall Street Daily Cash market with the SB firms closely mimics the open and close, it is considerably less volatile during the day.

I realise that SB firms derive their quotations from the futures market as the cash market can't be directly traded for obvious reasons, but does anyone know of a way to more closely mimic the minute-by-minute movement of the cash index? I've looked at tracker funds but these only seem to be about as volatile as the SB Daily Cash markets.

I doubt it's possible, but worth an ask! Thanks in advance.

 

[breadman]

it could be that yahoo finance prices are wrong as no one is trading on these prices they can print whatever prices they like.

 

[simcom]

Thanks for your reply. I realise that nobody is actually trading at those prices, as the quote is for an essentially untradable index, but their quotes do seem consistent with the large news sources (Bloomberg etc.) which show higher volatility Dow movements than the SB firms and their cash index.

I was just wondering whether it was possible to replicate the high intraday volatility in any way, instead of just the open/close.

 

[Lightning McQueen]

This link will explain what is going on here and that you will in all probability not find a tradeable instrument that mimics the daily movement you see on the data from yahoo.

http://www.trade2win.com/boards/mec...-system-cantor-should-put-me-commision-3.html

If you are going to devise strategies it is my honest opinion to use like with like. If you intend spread betting then devise a method with their data, on their platform, don't expect to even see the same results on different charting platforms with the same data source eg metastock vs tradestation. I have wasted countless hours down that route.

Most spread betting platforms now have marvelous charting facilities these days, finspreads the exception as that's pants and way behind their competitors.

IG charts rock! you cannot beat top of range ITFinance charts for clarity and function.

 

[simcom]

Thanks very much - that's a great help!

Shame to have the inevitable confirmed, although as you said I guess it is a valuable lesson to ensure that I use like-for-like data in the future and don't get my hopes up with irrelevant sources

 

[simcom]

I've just read the entire thread you pointed me to - didn't realise that the Yahoo Dow data was completely and utterly useless for backtesting on and you've saved me countless more hours trying it.

From now on I'll stick to more accurate Yahoo data which I've compared with the SB data or just the IG charts. :smart:

 

[Lightning McQueen]

Glad to assist in passing on wise words that I recieved from another long standing mod when I first started posting on this site.

Happy testing

 

[Trader333]

Can I just clarify what is being said here and that is the Dow historical data from Yahoo is wrong ?


Paul

 

[Lightning McQueen]

Hi T333

As best as I can recall when I last looked at this, the open and close are ok compared to other providers but the high and the low of the day on the Dow are the suspect parts of the data with yahoo.

I'm sure I posted example charts a while back comparing charts comprising of yahoo data and data from quote.com with tradestation, I will search for them, I cannot recreate them as the PC that had that data and programs burned a short time ago ...quite literally

 

[simcom]

Hi T333

As best as I can recall when I last looked at this, the open and close are ok compared to other providers but the high and the low of the day on the Dow are the suspect parts of the data with yahoo.

Yes, that's the impression I got after reading that thread you referred me to and a couple of others regarding Yahoo Dow data.

Something to do with the calculation being based on the assumption that all of the component stocks reached their daily high/low points at the same time (a method used a long time in the past which has been carried forward by Yahoo for the sake of consistency).

 

[dcraig1]

Your closest approximation from Yahoo might be DIA.

Quotes for DIA - Yahoo! Finance

 

[simcom]

Excellent, thanks! Hadn't thought of using tracker fund data for some reason, but looks promising. I'll compare it to some of the IG data I have, fingers crossed.

 

[Trader333]

Thanks everyone. The consistency issue is about data going back before we had computerisation. It was assumed that the high and low of all stocks that make up the Dow happened at the same time for reasons of consistency. Yahoo must be doing the same I guess.


Paul