Level 2 and Indices

[DGC]

Hi,

I’m relatively new to trading; I’d class myself as an apprentice at this stage. I’ve bought and sold shares conventionally in the past, but only really with long term investment in mind. A few months ago I opened a Finspreads spread betting account and have been trading the FTSE-100 rolling contract on and off ever since, making a bit and losing a bit; it’s all part of the learning curve. I’d appreciate any help or guidance from experienced traders on the following: -

Finspreads platform gives you a real-time chart so you can see which way the price is going, but you’re quite blind really, you have no idea of volume, waiting orders, etc. Would I benefit from having a level 2 access account when trading an index i.e. would I be able to see real-time volume and buy/sell waiting orders for the index as a whole or only the constituents. Another thought I had was that If I can only see single shares in level 2 could I glean the volume/price information for the index by watching an EFT for the index (iShares, for example)?

I’ve been looking at ‘Quotestream’ from Interactive Investor as it’s reasonably priced. Thoughts please?

Any help gratefully received.

Thanks,
DGC.

 

[Jack o'Clubs]

You can't trade an index, only a derivative of it whether that's a spreadbet bookmaker's price, or a future or an ETF, so there's no Level II information for an 'index', only for the traded derivatives. Personally I'd trade the future rather than the ETF, but both should work as long as they're sufficiently liquid. Plenty of people trade the QQQQ or other US index-tracking stocks, not sure how liquid the FTSE tracking ETF is though. Personally I'd trade the FTSE-future which is plenty liquid enough and has good market depth data available.

 

[DGC]

Thanks Jack O'Clubs, appreciate the help.

How would I find market depth for FTSE-futures. Are they in level 2? Is there a LSE symbol for them?

 

[Jack o'Clubs]

No, you'll need a futures trading account with someone like Interactive Brokers (or many others), or the right data permissions with a chart provider like eSignal. The futures are traded on LIFFE, not LSE.

 

[maxima]

Jack can you please give me an idea - is it possible to trade FTSE future contracts in series of short trades (20..40 sec) for 3-4pt gain per trade [I understand it is what people call 'scalping']?

I mean through leveraged products (if I could buy 20 contracts 60K each for cash then I wont need to trade)...

I started with IG index SB but I was not happy with price spikes (I treat them as suspicious). I just found this forum and read that SB providers extremily unhappy with scalping.. Also read that CFD companies can scew the price as well...

Can you just give me a hint - how can I implement scalping on FTSE investing no more than 100K. (I dont need free financial advice or your know-hows or your system/strategy etc - just what way to go - direction).

Thanks

P.S. I dont need much of profit. Just want to replace my day job. Getting fed up of London's rat race.

 

[grantx]

Maxima,

With £100k you don't need to go through an SB - they're all bent, anyway and will rip you off. Better to go through a broker via Direct Market Access. And invest in some decent books and study.

With your money I would also consider paying fc £5000 for a 3-month course with a prop shop.

Grant.

 

[maxima]

Thanks Grant.

But my point is a little bit different. I dont want (yet) to be a traider at any cost. I found something what I believe a successful way to trade for me (as long as there are no artificial obstacles on this way).

Therefore I would like to invest in something I know I can do.

The way you offer is not known to me. Investing in that (for me) is no better than buying 50% stake in Jumbo Biogenetech-mbwange from Zimbabve.



Offtopic.
100k is not my pocket money. so I cannot risk with them.

To successfully scalp on FTSE directly I need 1.5 mil in cash to start (and better buy a place on the trading floor - cant imagine how much it cost). And to have decent money management it is gonna be 7.5 mil. Give me 1 mil I promise to retire same day I am not ambitious. I am professional and if I will have to completely change my lifestyle - it is gonna be 100% reliable move. Otherwise I dont move.

 

[maxima]

SB - they're all bent, anyway and will rip you off

Is there any hope in CFD providers?

 

[grantx]

Maxima,

No. If your scalping you may as well trade the underlying.

Grant.

 

[maxima]

Sorry I dont understand. Underlying market for what I can trade OK is FTSE 100 Future contracts. One contract costs 60k to buy/sell. So ultimately I can scalp 3-4 pound in a trade.

It is much healthier to work in library for that kind of money.

 

[nine]

If you are awake for european hours (as you guys are) then instead of trading ftse choose something that has a good price per point and plenty of liquidity.


estx50 (eurostoxx)
gbl (bund)
dax (dax )


I doubt that it costs 60k to buy and sell ... you just have to cover the margin

FYI opening day margin on ftse 100 with ib is 2500 (gbp?). Bund is 1100 and estx50 is 2200 (euro).

 

[maxima]

I never really looked further than SB/CFD products. Somehow I missed the point there are margin trades.

Need to go back to school then :smart:

Thanks for the tip

 

[grantx]

Maxima,

The full nominal value of FTSE future is Future level x £10. However, you do not pay this when you trade. You only pay the difference between your buying price and selling price. For example, if you buy the FTSE future at 6500 and sell it later at 6550, you will make a profit 6550 - 6500 x £10 = £500. However, you will need to provide what is known as "margin" (I guess around £3000 for the FTSE) which is similar to a cash deposit for every contract you wish to trade at any one time.

Grant.

 

[maxima]

So in other words I need a broker who deals with you through automated platform, on margin, provides good DMA service, good charts and takes modest fees.

Do they exist?

 

[nine]

Interactive Brokers with Sierra Chart as a front end and chart based order entry tool is my choice.

 

[maxima]

Interactive Brokers with Sierra Chart as a front end and chart based order entry tool is my choice.

Yeah am looking at IB right now. Thank you.. This 'chart based order entry tool' - is it part of IB or Sierra software?

I am having bad feeling about this aproach though - 'scalping' or what I've done before - is pretty hard way to make money. With fees and interest on margin this kind of activity now become seeming like a complete suicide :S

 

[maxima]

For example, if you buy the FTSE future at 6500 and sell it later at 6550, you will make a profit 6550 - 6500 x £10 = £500.

I've loocked on IB website. They charge 3.4 per contract (round-trip). To trade 20 contracts at a time you pay £68. If you are lucky you get 4pt per trade which is £80. 80% expenses per trade...

 

[grantx]

Maxima,

Can't do anything about percentage expenses (it's not the way to look at it), but you will also be making a net £800.

Grant.

 

[maxima]

you are absolutely right and I am being stupid... Thank you...

need some time to adjust my mindset from SB calcs to real world ones

 

[maxima]

Interactive Brokers with Sierra Chart as a front end and chart based order entry tool is my choice.

how can you profitably scalp paying 3.4 in commissions? or am I missing something ?