Help with SB Bias

[ChartMan]

Oh no , not again.... Well, something to think about that seems so obvious to me, maybe others have not thought about it.... When trading an instrument, whatever it may be, take your queue from a real chart and NOT the current price offered by the SB. Example:-
You go long on the DOW, say, at 8300 on 1 min charts. You've seen that there has been 4 bottom bounces at 8290 and are confident that this time we go up.etc etc. Let's assume your stop is 20 points ( 8280). Sadly they hacked the bias , but you bought anyway at 8312. ( the real chart price was 8300). OK . Sounds familiar? What about the 20 point stop? Is your sell price gonna be 8292? NO way! it can't be. If on the next tick, we see a down move, the SB is gonna be quoting 8285/8291. We all know about this don't we...... Don't be tempted to close.. The price has only moved a couple of points against you. You need to wait to see what the REAL chart price does. Is this a tiny pullback to support again? Is this a failed breakout? You won't know until the real price hits 8290 and either goes back up, or drops. Trouble is, if it drops, you're now looking at a 40 point loss.....
What's the solution? Well, one way to play this is to halve your stake. That allows you more breathing space to take a 40 point hit with the same financial loss as a full stake and 20 point loss. With experience, skill and luck, you COULD try buying long on the way down....But you have to be damn sure....
Anyway, on the other side of the coin, you aren't gonna be making the bucks on the way up....So..... with your half stake and some small profit in the bag.... let's say we're at 8340 and have just had a pullback.... you could now add to your position, by going long again with the same half stake. Your stake is now at "normal" size, and you are STILL in profit, just, but with a stronger position in your favour. As the move progresses, consider selling HALF your stake when you think there is a peak in the price coming up- the SB will still be biased up, giving you a couple of extra points. Then ride the rest until you are comfortable that you are closing the remaining half near a top, or your target or whatever.
I know this is a contentious subject, but the point is, you should take what you see on the charts, and not the price that the SB's seem to want to force you to take. With time, you will get a feel for the SB price versus the chart price. Selling just before the price reaches a resistance point may well net you a few more points as the bias overshoots the real price.......

 

[options]

Good points and another way to play the sb's.

I had intended to post a proper chart and the sb chart or the prices to show the bias taking place, at some stage last week, but suffered all sorts of computer probs. so I couldn't do that.
(If anyone can capture it just as the sb's jump the price against the real price, I would appreciate it.)

It is also possible, in a fast moving market to 'see' when the sb price changes to the other direction; and this should be used as a 'safe' confirmation to yourself, because you have already changed direction or taken the trade on.

Options.

 

[mmillar]

'Oh no, not again...' I couldn't agree more

I completely agree with your analysis Chartman. It is the same point I was making in my post last week. http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=4564

Maybe the 'contentious' issue is your use of the word 'bias'. To me (and others) by using the word 'bias' you are implying that the SBs are moving their prices independently of the futures market. No-one has provided any evidence of this. What is happening is that the SBs are basing their 'cash' prices on the futures price +/- fair value. Futures prices are more volatile than the 'real' prices and often overshoot, or head off in a direction before the 'real' price can catch up. However, I would describe this as a 'difference' between futures and real prices not a 'bias'.

 

[cassiopeia]

When there isn't an underlying futures market, there is often significant bias for indices and less liquid stocks

 

[neil]

REPENT YOU SINNERS

Repent I say.

Put the evils of spread betting behind you; (Get thee behind me Deal4Free....and others ).

Cast the sins of bias into the outer darkness. Embrace Level Two trading. Too heady perhaps for many? Then join the noble army of futures traders and glory in narrow spreads, and instant fills.

Rejoice in earning enough to pay taxes. Walk in the shadow of support and resistance; shelter under a protective stop.

Nay, before you can enter the land of the Futures trader you must build up a stake and bring it with you to the gates.

Yea, bring with you a stake that will help you through times of famine, the familiar companion of the neophyte trader.

And do not bury your talents but use them to acquire more.

Seek not the holy grail for it is within you, and beware of the snakeoil man for like an empty barrel he makes much noise but has no substance.

Nor seek the easy path or expecteth knowledge to be handed to you on a platter. Work hard, seek out the company of the wise for this is the way to the land of profit.

For the ways of the market are not dictated by the likes of you.
It "is" , you would be wise to follow in its' footsteps.

here endeth the lesson.

(Well it is almost the week end)

 

[Helenqu]

That's wonderful Neil

 

[mmillar]

I think Neil has spent too much time surfing the web and has finally lost it.


cassiopeia - can you explain what you mean and give examples including the particular share/index, the date and time of this 'bias', whose charts you are comparing and the prices and spreads at the time of the 'bias'. It would be great if you could post the charts. thanks.