Trading FTSE based on Dow close

Wideboy

Well-known member
489 1
Have a look at this extremely simple strategy.
Backtested since the beginning of the year shows a worthwhile return.

Method:
Place a binary bet on FTSE to finish in the direction of the previous Dow close. ie. if Dow closed -ve yesterday then 'buy' FTSE to finish down.

The figures I have used are very conservative, basing the results on a 50/50 price. ie entering my binary trade at 50. In reality it is often quite easy to get a better price therefore improving the risk reward to say 40/60 or 30/70.
Basically the backtest figures show -150 for a loss and +150 for a win, but in reality could be around -90 / +210 etc. This figures are in pounds using the minimum £3/point bet on IG.

Employing size positioning could have increased return further by upping the £/point after £1000 gain perhaps.

Just some food for thought.

Wideboy
 

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animal8

Newbie
7 0
Interesting idea!

I'm not sure I understand your figures...
when backtested, what is the ratio of wins to losses?
 

wins71

Junior member
17 0
i am quite new to trading and do not quite understand what u mean by a binary bet. plaese explain further as it does sound like quite a simple and low risk way to trade
 

Glenn

Experienced member
1,040 118
The FTSE can gap or fly up or down at the open.
So seems you would have to enter a position after FTSE closes to take advantage, and then the SB co's would be moving their quotes to account for Dow movement after FTSE close.

Otherwise the gap points have to be subtracted from projected profits.
Glenn
 

Wideboy

Well-known member
489 1
A good time to consider entering a trade is around 2:45pm after the US has opened.
By this time even if the FTSE is relatively unchanged(say +/- 10 points) the quotes offered by IG may be around 35/65 due to the short length of time left till expiry.
As we all know the US has a direct impact on the FTSE, so if you feel a tank or rally is gonna happen across the pond then jump in on the FTSE at a good price and you could be looking at a risk / reward of 3:1 ish.

Wideboy
 

bbmac

Veteren member
3,584 787
hi,
what is your winning day strike rate for your system? ie no. of winning days, no of losing days, and your longest losing run?

taking a quick look at your chart it seems to be that it has made money in every month but one. I wonder wether there are any possibilities with other fixed odds betting, betonmarkets.com perhaps.

cheers,
bbmac.
 

Bigbusiness

Experienced member
1,408 23
I suppose if the Dow closes positive but has pulled back from the time the FTSE closed, it would be possible to buy the binary bet for less than 50.

I am just thinking out loud here but it often seems that when the Dow closes near the high of the day, the FTSE opens up but then falls. Today is a good example. So buying a down binary bet after the open might be a good idea. I will have to do some research to see if this observation is correct.
 

Wideboy

Well-known member
489 1
That is exactly what I meant earlier Bb.
The are opportunities for some gains when there are gaps.
For example FTSE opened down this morning so I placed a FTSE UP bet at 13 points this morning.
Relatively low risk (max loss=13*£3=39, max win=87*£3=261)
If the FTSE pulls back sometime today, the quote will have moved nicely in my favour.

In response to bbmac, from the start of the year, there has been 31 more winning days than losing days. Last week was bad, 4 losses and just 1 win. This may not seem a lot but the key to this is placing trades at a good price (at least below 50) so that when you win, it will cancel out at least 2 or more loseing trades.
The chart I attached earlier is based on 50/50 trades and still shows a profit, so by trading at a lower than 50 price profits can be much better.

Worst drawdown was from April 15th to 6th May which had 12 losses to just 4 wins.

Wideboy
 

Bigbusiness

Experienced member
1,408 23
The only real way to find out if it works is to trade it. It looks sensible to take the bet when the quote is below 50 but the % chance of success from these trades might be lower. Without intra-day data for the IG quotes, it is impossible to work this out. It is a shame that the spread bet companies don't provide intra-day data for their quotes. I suppose they realise it would give the clients an advantage.
 

bbmac

Veteren member
3,584 787
hi wideboy thanks for the additional info, on the ig binary bets do you counter trade in the opposite direction, or close our early, if your trade is obviousely going against you, to minimise losses?

cheers
bbmac
 

Wideboy

Well-known member
489 1
Depends really, one of my systems in test is to let the trade run till close. Normally I buy at a relatively good price, circa 30 or below hence losses are fairly minimal.
With volatile days, you can often make a few points on reversals, eg Dow at 2:45pm & 7:30pm etc.
 

Wideboy

Well-known member
489 1
Yesterday trade started the week off nicely with a winner, however due to the big gap down in the morning, was nigh on imposssible to get a good entry price.
Best was around 75 which was a bit risky for my liking.
If it had all gone pearshaped that would have been a hefty loss - not worth the risk.
As I have said before, any price below 50 to stick to the system, never trade above 50.
 
 
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