Spread Betting the Dow

Myrtle

Newbie
Having paper traded spread betting for the past few weeks I can see it is possible to make a profit at index spread betting.I have been practicing soly on the Dow. Does anyone have any experiences or references they could pass on. I have experience of option trading and prefer mathematical formula to charting but am happy to be taught new tricks.
 

Myrtle

Newbie
Reply to ZIGZAG. Sorry it was a bit of an open enden question - life, the universe and everything! sort it out for me!
I am having a problem entering the market at a correct point. I tune in to Bloomberg from about 1o'clock and have a look at the Wall Street preview on BBC 2 CEEFAX. I then know if the market is predicted up,down or unaccountable. This is 80% correct but at what point do other people enter the index. In at the wrong time and any advantage is eroded by the oscillations during the day. What tactics are used if on entering a person is quickly out of the money?(without resorting to the stop loss)
What is the average stop loss level on day trading the Dow.
I'm ok coming out, using a trailing stop loss of 20 points but getting in correctly is keeping my money in my pockets.
 

cassiopeia

Active member
<i>. This is 80% correct but at what point do other people enter the index.</i>

People don't enter the index, they enter the futures which are priced according to expectations. Are you sure it is 80% correct based on the futures opening price? Also I doubt if you can judge over a few weeks, you would need many months of data to be sure. Even then the reliability of various predictors vary over time.
 

ChowClown

Senior member
Myrtle

I SB the DOW using 30 and 60 minute charts - don't have time (yet) for intraday trading. I keep abreast of the news and futures and enter positions against Slow Stochastics and MACD - entries tend to be when stochastics are overbought/oversold (>80/<20 respectively) and a strong divergence appears on MACD once it signals - usually OK for solid moves ie 100+ points.

A good online Technical Analysis reference is http://www.incrediblecharts.com/technical/indicators.htm

Some interesting DOW commentry based on charting can be found at http://www.signalwatch.com/markets/markets-dow.asp

Good luck.
ChowClown
 

ZigZag

Active member
Mytle: May I suggest if you have difficulty in entering a trade you do not have confidence in your trading plan. Two weeks paper trading is insufficient.. As mentioned by CHOWCLOWN the spreadbetters use futures to determine the cash spread. I use D4F which has a spread of 5 points. However in a fast markets the bias can increase anything upto 15 points!!!!! It is imperative to check a live feed (i.e. Lycos quote. com) with the spread betters cash price. Check out your profit/loss using the formentioned. Do not trade the first 30 mins. To test your plan consider S&P 500 which has a 5 point spread which the cash price is not too far from the spread. Better still to test your trading plan and reduce your risk look at the DAX or even volatile uk stocks e.g. RBS with a 2 point spread. To get a good idea of the opening of the DOW visit the NASDAQ web site and locate the premarket window of the NASDQ 100. A reliable guide for all U.S. marketst. Use this as a guide and ignore T.V. sites. I was going to say good luck instead I will say happy researching seeking out a theme of PROBABITY ratios.
 

bonsai

Veteren member
Myrtle
I get the impression you are looking for a silver bullet ?
The dow is a ***** and will turn you inside out if you dont have
a fully detailed system to rely on.

if you cant yet decide when to enter I suspect you will in practice have great difficulty in pulling the trigger when you need to get out.

Your own system must be designed to tell you when to enter and when to get out.

a dose of Mark Douglas and 'the disciplined trader' might be of help ?
 

orchard

Active member
I am conducting a weird experiment on the S+P and NASDAQ.
I am paper trading entry at 12 noon in the direction at that time (using the Fins popular shares page). I note all the changes from 12.00 /1.00, 2.00/3.00, 4.00/5.00 then 7.00 to 7.30. It is facinating that the S+P and NAS, so far, have always gone in the same direction, not always in tandem, but always up and down. It is quite rare that one goes one way and the other in a different direction.
I know this is not the proper way to do it, but I do not have a live feed except on D4F, but I use the daily change colume on Fins as it is much easier, if not 100% accurate.
Not having done it for long, I do not have a definite pattern yet, but, so far, am in profit.
Only on one day, so far, has it totally reversed and, needless to say, were I trading for real I would have stops in place and keep an eye on what was happening and, hopefully, get out whilst the going was good.
OK you lot, now shoot me down :cheesy:
 
Hi folks,
just to add my 2ps worth...

1) I'd recommend signalwatch whole heartedly
2) The Dow Naz & S&P will nearly always head in the same direction. One good reason for this is that they share the some of the same components...There is a post by TBS on this somewhere in the arcives of the indices section..
3) Having traded the Dow for years I would not want to do so without streaming charts and indicators...
Quote.com are affordable(under $10 a month) and give you a 14 day free trial.
Chartman postings are top quality with his use of ema's being eyeopening to me...
Personally, may favourite approach is the use of MACD over several timeframes but especially 5 and 30 mins to spot the trends and turning points where these trends clash and resolve...
4) otherwise if you want some realtime discusion join realtime traders in the chatroom...

All the Best

Neil
 

Myrtle

Newbie
Many,many thanks for everyones comments. The obvious direction is not to trade with money for a while - I've already given myself a paper target to hit before trading for real. Zigzag is correct I am nowhere near ready and thanks to ChowClown for the directions to the two sites. I'm going to do as suggested and paper trade the S&P as well - some very interesting concepts there. Once again thanks to all, it all helps when trying to build a successful trading format.
 

ZigZag

Active member
ORCHARD. Spot on. I use the NASDAQ as a leading indicator for the DOW and S&P. Using 5min & 1 MIN charts I mark support and resistance lines on the NASDAQ. For realtive positioning I also use ema10 on the 3 indexes. If the NASDAQ is out of sync with the other two I stay out.
 

orchard

Active member
Further to my post re the S+P and Nasdaq, I have just done a bit of analysis.

The importance of stops is really emphasised.

Only 9 days data but,

Points in profit without stops 21
Points in profit with stops 45.4

Doing this really brings it home.
 

china white

Established member
Mytle, hello mate, I am an option trader myself, did OTC and prop, mostly on S&P. I know it is not an easy thing to start day-trading after derivatives, since the mentality of option-trading is hugely different.

Fire away any queries u may have. I'd be glad to take u thru all the troubles I had when I started day-trading, and save u some headache (and money!) :)

u can post a reply here or go to my private mail at [email protected]
 

reactor

Member
rumour has it that the spreadbetting companies quote prices individually, rather than giving the same price to everyone, depending on your position. if they bias the spread on both sides of the trade, you're actually looking at twice the quoted spread that you have to over come before you make any money. you really need to capture some big moves.


have a dabble by all means, but like it says in the small print, only risk money you can lose!

a good test to see if you really can accept losing your money, is imagine that you have X amount of money (the same amount that you want to trade with), a lighter and you're butt naked in the artic. would you burn that money to keep you warm?
 

Naz

Experienced member
ZigZag said:
ORCHARD. Spot on. I use the NASDAQ as a leading indicator for the DOW and S&P. If the NASDAQ is out of sync with the other two I stay out.

Zig Zag,

i believe your right.The Nasdaq leads and the world follows.MSFT and INTC are worth watching as they are the $ndx leaders.How do you watch them at key levels? On a level 2 Nasdaq screen.So if you follow this argument through you could say that the best people who have a feel for the US markets are Nasdaq traders.

Reactor,

I have heard the same rumour as you about sb companies quoting prices individually.I have heard this from traders of different calibers trading in the same room and trying to enter a stock position at the same time.

The answer.Use a Nasdaq level 2 direct access screen and see the true market action and work your own order.
 
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philhackett

Active member
Why not to trade the Dow

Ppare trading teaches you very little. If you do not have emotional invovement, and a balance at the end of a trade, you have no idea how well you really would have done.

The Dow is too volatile, annd will lose you money, fast, if you spread bet company is slow (D4F) to react, and will not let you in, or out when you wan.

SP500 moves slower, and in tenths.

At the start of the day, 1430, wait until the candles have breached the previous high/ low, and start with a small amount, £1 say, until you are comfortable.

If you feel an adrenaline rush/ fear, do not trade. You must be totally cool, and accept you will make a loss until you settle down.

IG have wider spreads, compensated for by letting you in, or out when you want to.

D4Free has a good tradeing platform, with good charts. Run a chart with MACD below set to 5 minutes. Deep and high MACD with good gaps, indicates buy/sell.

Set well above 1 minute, or you will trade the noise. Aim for 40% of available trades, and you will do well.

Apart from the software, D4Free are to be avoided, I recommend.

Phil :rolleyes:
 

The Beyonder

Active member
Hi All,

I'm relatively new on this site and have found the arguments/comments very informative.

I currently SB the Dow using IG Index with some success.

If I can add my tuppence worth. I agree with Phil that the Dow is volatile but surely that's what we need? The up and down swings is what I rely on. Just the other day I made a 30 pt gain in 20 mins (though it was pure sweaty palms!).

If that's too wild then by all means trade something like the S&P but remember that the minimum bet will probably be higher so the overall monetary movement per tick might be just as bad, or worse. You might have to trade more than £1 per point.

I've looked at MACD but personally prefer Stochastics, a crossover above 80 or below 20 is quite reliable(ish), and yes a 5 min chart, 1 min is for scalpers.

Can I ask you something Phil (or anyone who knows). As you've said, IG's spread is wide (8 pts on the daily Dow) so I've sent off for D4F's demo disc to give that a whirl, because their spreads are supposed to be better. You say avoid. Why is that?

Thx
 

philhackett

Active member
Steal 4 Free

I, and many of my associates have experienced D4Free delaying our entry to fast, and profitable trades, and then keeping us in while our money disappears before our eyes. They are apparently being investigated by the FSA.

A favourite trick, is to assure you that you are flat out of the market, whilst actually leaving your stops in place. Your stops then take you in and out of the market, against your wishes, You pay! Please feel free to find out for yourself.

I have made an honest dealing mistake with IG, contacted them to explain, and coureously had the problem rectified by them. Superb customer service!

The best traders trade the slower, and just as lucrative indices like S&P. If you are chasing volatility, you are chasing the money, and you will be burnt when it moves dramatically against you.Never have your account visible, it will terrify you. Only intend to catch 40% of a move, and be pleasantly surprised when you hit 60%.

Use Intraday Software like Xpertrader 01843-295566 which has a superb Kagi Plot. Set at 0.5 parameter and 2 minute refresh in a trending market will keep you in very profitable moves, whilst allowing you to take a minute or three to confirm the developing entry point. The Gold version is not expensive, and support is outstanding.

All The Best

Phil :rolleyes:
 

rossored

Senior member
I'd have to disagree with Phil here and say that I dont feel the Dow is too volatile, it just depends on your perception. Personally I cant get on with the other indices because for one thing they bore me to tears.

If you're trying to take trades on an intraday basis with the dow, then the speed of execution is most important, imo. Personally, I run with 1min, 5min and 15min charts concurrently, use IG as my broker (the speed of the execution is normally worth 1 or 2 points anyway), 1min / 5min /15min macd and stochastics and find this a good setup - however, each to their own and I do think you have to find your own style, find which indicators work for you (ie which ones you can understand and read clearly) and trade a market that you enjoy trading, because if you're not enjoying it then you probably shouldnt be doing it!

If you dont come into the chatroom, you should try popping in there one afternoon after the opening bell, and have a listen to the sort of conversations that go on - Chartman, for example, is an absolute legend in his own time and gives some very useful information and opinions throughout the day, as do several of the other regular traders in there (although I hasten to add that I dont include myself in that - most of my input is based around getting a laugh and a rise from the other members!)

Good luck anyway,

RR
 
 
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