Trading three time zones

Discussion in 'Trading' started by Runningbear, Nov 29, 2002.

  1. I've been thinking about something lately that I believe holds promise for dramatically increasing trading returns.

    Profit potential is highly correlated to market volatility. Markets are the most volatile when they are open, and least volatile when they are closed.

    If you have a fairly robust daytrading system, or even better a mechanical daytrading system, you could trade the system in three different markets around the clock.

    First Asia, then the opening half of the European market, followed by the entire US trading day.

    If you had a daytrading system currently returning 50% per annum, and you then applied that system to another two markets, your annual return would jump to about 400% a year because of compounded profits.

    This assumes your daytrading system yields similar results across all markets.

    Now I know a lot of you are thinking that watching a screen 24 hours a day might get a little tiring, however, all you would need is one trader in each time zone to oversee the system during their session.

    You would do the same amount of work each day, however at the end of the year your returns would be 800% higher.

    With an IB account this is quite easy to do. Your data costs wouldn't really increase as esignal tend to throw in all the world markets anyway.

    And with a little bit of work you would even backtest a series of markets in parallel, to see how your system would have traded when jumping from one to the next.

    This may sound like a headache, but think of the possibilities. 100K returning 400% p.a over three years is a cool $6.4 million,

    Compared to only $337,500 at a 50% annual return over three years.

    I'm sure as automated trading technologies improve, more and more people will consider trading around the clock as another means of improving total annual returns.

    Runningbear
     
  2. I've actually been thinking about this a lot. Where I get stumped is finding liquid enough markets. I took a peek at Hong Kong eminis and the big contracts, but I really don't like the way the charts look. There is a lot of blank space. Any suggestions?
     
  3. def

    def Interactive Brokers

    HK charts - There is a lunch break every day. Make sure you took that into account. How much interest do you guys have in the N225? We could offer that if there is sufficient interest. (we trade it on our prop side and thus the infrastructure is in place).
     
  4. How am I supposed to compete against guys who think like this? I'm out here working and slaving, trying to keep it simple and remember the importance thereof... and my friend Runningbear steps up and posts this. Maaaaaan! It's no surprise though, you should see what he did with the Line in the Sand. Absolutely excellent.!!!

    And I am totally in his camp as well. If it's open, volatile and liquid, let's trade it. And Esignal can provide the charts. That is, for us US based US citizens. Everyone else seems to have a bevy of choices for the world markets.

    :)
     
  5. def,

    Could you please tell us what N225 and why do you trade it?
     
  6. I have been thinking about this a lot, esp. since eSignal offers FX quotes, and the FX markets are very 'technical'.


    My first thought was cheap office space and 3 people to call me if 'the internet is down' ;)

    For me it's scraping up enough capital to do it.. I can't yet quit my dayjob. Err, rather, I can't force myself to risk my life savings.

    Anyway, I'm playing around with neural nets and fuzzy logic (neuroshell). Maybe I can get there soon.

    Regards,

    Laz
     
  7. def

    def Interactive Brokers

    We'll trade anything electronic and Japanese markets are electronic.
     
  8. Contracts to trade would be as follows:

    The Australian SPI200 index contract is pretty good for smaller traders. Its completely electronic. Margin is about $1250 US per contract and the spread one point most of the trading day.

    Contract value of about $12 US a point. It can be traded through IB. Much like the eminis.

    You could trade the N225 which opens about the same time, however I'm not sure about margin requirements. From memory the contract size is very large.

    DJ Eurostoxx 50 index for Europe. This market opens not long after the Aussie market closes.

    Come lunch time in Europe, you exit the market, then re-enter the ES or NQ on open - trading the full US day.

    About two hours after the close of the US markets, the asian markets start their days sessions again.

    Runningbear
     
  9. ...and if you get the chance, remember to catch 40 winks every now and then.
     
  10. kalinka

    kalinka

    I´m swedish so I trade the swedish indexfutures.
    It´s acting like an exactly copy of the Est.
     
    #10     Dec 1, 2002