Correlation algos on index futures trading - question

Discussion in 'Index Futures' started by Leopard9, Sep 28, 2019.

  1. Leopard9

    Leopard9

    Hi guys. I have something on my mind that impacts my trading somewhat due to conflict. It's a little hard to explain but can a pre market index future impact the direction of an open session index future?
    I always expect the closed session index to "auto pilot" under the leading open more liquid index. Can I assume that this is not always the case?

    Thanks
     
  2. 2rosy

    2rosy

    Isn't the pre market future the same thing as the open session future
     
  3. Leopard9

    Leopard9

    There, its fixed.

    Hi guys. I have something on my mind that impacts my trading somewhat due to conflict. It's a little hard to explain but can a LOW LIQUIDITY index future impact the direction of an open session index future?
    I always expect the LOW LIQUIDITY session index to "auto pilot" under the leading open more liquid index. Can I assume that this is not always the case?
     
    Last edited: Sep 28, 2019
  4. Real Money

    Real Money

    You need to give an example of this. You are being too vague.

    You could be talking about the NIKKEI 225 or the FTSE 100 for all we know. The cash session in the US is hugely influential on global indices but they still do affect each other.

    For example, if there is volatility in DAX and FTSE then it may very well effect the US indexes during the cash session.
     
  5. Leopard9

    Leopard9

    OK, a good reply. Thanks! OK a concrete example. Yesterday dax was in beast mode as it has been for a while now. NASDAQ was aproaching hard resistance at 7815. I was faced with a choice of shorting the NASDAQ at that level or be afraid the beasty dax would cause it to overcome that resistance in an easy fashion as it often does. Turned out both retraced. This impacts my trading a lot as I need to understand if a lower liquidity index can impact a full blown open index to change course.
     
  6. Real Money

    Real Money

    The reason these indexes affect each other is because of two things.

    Some of the biggest funds are invested in all of the indices at the same time. They also hold positions in all of the bond markets at the same time.

    This means that the bonds will move together and the indices will move together.

    Also, big money is trading the indexes against each other. This is called an index spread. If you carefully compare the index performance then you will see these details.

    For example, traders will

    buy ES / sell NKD
    buy NQ / sell FDAX
    buy YM / sell FTSE 100

    This means that when performance between indexes diverges, the traders take profit and the divergence in performance is affected.
     
  7. Leopard9

    Leopard9

    OK makes sense and its true but my question goes more on a micro level auto pilot algorithmical trading. Not talking about relative strenght or weakness, or big money but when indices are correlating directly at a micro level.

    Its hard to explain. Maybe a scalper with a deep knowledge of algorithmic trading knows more about this.
     
  8. wrbtrader

    wrbtrader

    Maybe someone in the algorithmic trading section can answer your question @ https://www.elitetrader.com/et/forums/automated-trading.48/

    wrbtrader
     
  9. 2rosy

    2rosy

    seems like you're looking for causality or lead/lag. you might want to get some data and find out. but off the cuff, yes indexes are correlated
     
    tommcginnis likes this.