SB over Direct Access

[dazzam]

Hi Chaps,

I currently have a system for entry and exit for the Dow Cash that I trade through SB companies. Am I able to apply the same strategy to the Dow Futures market, i.e YM.

I use a mixture of EMA, MACD, RSI for my trade entries and wait for certain signals to show up on a 1 minute Chart.

The reason I ask is that I am wanting to do Direct Access but worried that my system will not work on that market.

Also if I want to trade £10 a point what will I have to enter in the futures trade to get the same exposure?

Any help greatly appreciated.

Daz

 

[stevet]

in theory the dow cash price that spreadbettors give would be based on the dow futures - they just use the cash name as a marketing thing or trying to keep it simple for spreadbettors

but in fact the dow futures are not used for the dow pricing - i aint gonna go into what is used - but it is not the dow

no full time traders trade the dow as you cannot get enough size on - and its too much of game with the dow futures market makers to make it worthwhile

if you want to be a trader - you got to get your head round the the s&p emiini and the nasdaq emini

there is no simple way to trade cash indicies - since even the tracking stocks, track the futures

the only way is to trade options on the index or buy baskets of stocks that make up indicies - but you might have a way to go in your learning before you get into these games

 

[dazzam]

Cheers

 

[FTSE Beater]

Hi Daz

The strategy should work better, unless you've magically found a way of getting around the spread that the spreadbetting companies put on

The best one to trade would be the E-mini Dow $5 contract as that is apparently the most liquid. To get £10 a point exposure you would need to trade 3 contracts. 3 x $5 = about £10

HTH

 

[dazzam]

Hi FTSE,

So if I trade 3 contracts, based on say 9800 how does it work for margin etc. i.e what capital would I require in the account??

 

[Trader333]

dazzam,

If you were going to switch to direct access then why not start at 1 contract which would limit your risk whilst you see if your strategy works ? this would be the equivalent of £3 per point.


Paul

 

[stevet]

dazzam

if you want to discover real pain - just start trading the dow futures with 3 contracts at a time!

i promise you that you will definetly feel you were well bent over when your system gives you the entry signals - and as for the exits!

 

[FTSE Beater]

Hi Daz

If your going through IB then the margin would be 3 x 1350 = $4k. If you were trading after (I think 8pm) then that would go up to 3 x 2700 = $8100.

As Paul says though. It's best to start with 1 contract and build up

 

[dazzam]

Thanks for pointers guys.

 

[FTSE Beater]

if you want to discover real pain - just start trading the dow futures with 3 contracts at a time!

Hi Stevet

Would you care to elaborate?
Surely there is enough volume there. Nearly 50k contracts traded yesterday. Surely that is enough?

 

[Trader333]

FB,

I agree with stevet, 50K contracts is low. Bear in mind that for trading of stocks you are looking for a minimum of 1 to 1.5 million which is 20 times that of the Dow. The S&P (and Emini) is much better and I also agree again with stevet in that this is where the really serious traders will trade.



Paul

 

[stevet]

FTSE Beater

50K is low - but you also have to remember how many are used by the guys in the pits for arbing etc and you are never gonna get in front of the queue to beat those guys for contracts - so you dont have access to the 50K as such anyway

 

[FTSE Beater]

Hi T333 & Stevet

Thanks for sharing that. I always thought the Emini Dow had enough volume, but obviously not

 

[stevet]

FTSE Beater

its best to assume that there is never enough volume - at least in indicies - because volume gets pulled on all products and you need an awful lot of size hanging around to give you a chance to get out or in

there is always volume when you dont need it ! which kind makes sense if you think about it

 

[Bigbusiness]

I suppose it would be a problem in a fast moving market but then you could use the ES to hedge the YM on the few occasions that there was likely to be not enough contracts.

I mentioned this to a person who trades the YM and he said a colleague of his trades 10 at a time and never gets more than 1 or 2 points slippage.

 

[stevem12]

Just to add my bit, volume on the YM ain`t that bad. To say no professional traders use the YM is just plain wrong. If you go on the CBOT web site for YM there are quite a few strategies posted by traders who use the YM.

Not all traders need 50-100 contracts filled in less than two seconds. Starting small on the YM has caused me no trouble at all for fills. By the time I get the funds to trade double figure contracts the volume will be a great deal more.

If you look at the volume you will see the average is going up very nicely. I find there`s less chance of stop running on the YM as a tick is one point, as opposed to 2.5 on the ES.
( Assuming one whole S+P point is really 10) The YM also reacts VERY slightly slower than ES, although this edge will probably go as volume increases, so you can easily trade the YM based on what the ES and NQ are doing.

Lastly I feel if the Market makers messed it about so much then it wouldn`t have a correlation of over 0.9
to the ES which has none.

But as I`ve said before that`s why there`s chocolate AND vanilla. :cheesy:

Steve

 

[stevet]

its not market makers messing it around - its market makers providing key size at the bid and ask

and if i wanted a true view of the ym - the cbot site might not be the right place to look as they are keen to push it and get their profile up for it

and no professional traders trade it - as there is only so much time in the day and professional traders need to be able to get size on and earn their salaries each day

sorry, but what was your correlation point?