Index futures, cash and TA

[grantx]

If you trade index futures - FTSE, DAX, DOW, etc - do you apply your TA to the future or cash, or both?

My interest is the Stoxx future with DAX cash, and I use TA on the future with mixed results. I'm wondering if the cash may be better for TA buy/sell signals.

The question of which leads is common. In my experience, the DAX cash determines direction but the Stoxx future anticipates it, ie the future will move before the cash but will not go against it (in a normal market).

However, it is the future which determines your profit/loss. Confused.

Any replies appreciated.

Grant.

 

[Trader333]

Personally, I apply it to the future itself.


Paul

 

[BSD]

Yup, same here.

KISS all the way.

When I'm trading the DAX future I only look at that, at support, resistance and trend on that.

 

[Rhody Trader]

I would say that it depends on the timeframe in which you're dealing. If it's intraday or short-term, then I defininitely favor the futures. Your levels will be more precises. If you're looking longer-term, then I go with the index because as you go back in time the futures become less meaningful when they aren't the front month - and there's also the consideration of contract rolling.

 

[grantx]

Paul, BSD,

I think you're right. Using 1-minute bars for both Stoxx future/DOW cash today there was little discernible short-term trend/movement for either (unlike the Stoxx/DAX prior to New York open). However, for short-term moves, again the Stoxx anticipated the DOW very well.

RT,

That's a good point re cash vs futures for long-term trends - it's probably even relevant on a daily basis.

Re historical futures data, I've never looked but often wondered if there is a jump from when front-month future expires and the new takes over - front-month converges with spot (no time value) then the new month has three month's premium.

Grant.

 

[Rhody Trader]

Re historical futures data, I've never looked but often wondered if there is a jump from when front-month future expires and the new takes over - front-month converges with spot (no time value) then the new month has three month's premium.

It depends on the data vendor. Some just shift to the next front contract and you can see clear price breaks - especially in commodities. Others normalize things in different ways to smooth those transitions out. For example, they could price adjust the whole prior data to account for the roll-over spread.