Trading the S&P/DJIA spread

Discussion in 'Index Futures' started by esc_trader, Dec 22, 2002.

  1. I may close out the position if the price moves way above or below its moving average, or at 50% retracement (middle of BB), depending on a number of other conditions like the level of volatility and what the charts of other time frames look like.

    #91     Jan 29, 2003
  2. Esctrader,

    Thank you for your describing your innovative trading techniques which quite frankly I have not seen anywhere else. I think from what you described yesterday its fair to say that your exit is very discretional ie subjective. This sounds risky to me as in my experience human emotion can cause bad trading decisions. However only a month or so ago you mentioned the following:-

    "There is risk in this type of trading, but it is more execution risk than market direction risk. The proper way to trade this is to buy and sell the corresponding contracts simultaneously, so you have no market direction risk."

    Is the above still true with your strategy? Do you still believe that in theory you have no/little market direction risk even though you have a dicretionary exit? If I am wrong (perhaps due to lack of knowledge on my part) I would appreciate it if you would like to express your thoughts on why this is the case.

    Looking forward to hearing from you.
    #92     Jan 30, 2003
  3. Discretional, yes, although this could be made into a set of rules and automated, which would take out the human decision making process as I believe you suggest.

    ie Buy position at bottom of BB,
    Sell at top of BB OR
    if greater than 10% above Moving Avg OR
    at middle of BB ONLY IF in upper 50% of BB range on longer time frame chart

    What I meant by no directional risk is the position is not subject to the overall direction of the market, like for instance if you were just buying S&P futures.

    Our "leap of faith" is not that we have predicted the direction of the market, but that the two instruments are in fact correlated.
    If they are, then a trend in the spread price will not develop, and that is what we are betting on.
    #93     Jan 30, 2003
  4. That means its a very intelligent yet pragmatic approach to trading then because there little risk coupled with a possibilty of reasonable gain.

    Esctrader do you think you could say what period of moving average you look at at and also over what time frame (s) ie whether its say for example a 6 period moving average on 3 and 8 minute charts etc (you mentioned you employed a moving average in your previous message).

    Looking forward to hearing from you
    #94     Jan 31, 2003
  5. Esc trader,

    I'm have been reading this thread for a number of weeks and I have a question. How do the points translate into dollars?

    I mean if you buy at +20 and sell at +50; how much money have you made?

    Thanks in advance for you explanation.

    #95     Jan 31, 2003
  6. I prefer 1, 5, 15, 60 min, and daily charts and 5 and 15 period moving averages.

    Each point translates to a Dow point, which is $5 per contract on the YM future.

    So 20-50 is 30 points gain, putting on one contract each of the ES and YM - would be $150 gain.
    #96     Feb 1, 2003
  7. hold a position

    and is it possible to place stops in to leg out

    of the trade ...

    and do you have to watch the marketsat all times

    or are you able to place stops in the minis

    and limit orders to close out the positions

    and then have free time to do other things apart

    from trading ?
    #97     Feb 1, 2003
  8. :eek:
    #98     Feb 1, 2003
  9. Yes, this can be automated. My program will exit both legs of the spread at market when a predetermined price is hit. (I wrote this program myself, because I couldn't find a commercial program I liked that would do it), pretty easy in IB's API.

    Spread finally coming down, is about 67-69 premarket today.
    I'm going to hold tight, (Im short at about 59, was way underwater for a while there!, but looking a little better now)

    I am experimenting with different factors to try to find a suitable time frame, I am thinking longer time frames, so not so much activity on this thread lately. If anyone has First Alert, I'd like to get together and look at some charts on this. I think Realtick would do also..
    #99     Feb 4, 2003
  10. Realtick has a chart multiplier feature that plots your spread in realtime
    #100     Feb 4, 2003