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Trading indices 2


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To expand on my previous post.

I have a number of set beliefs:

1) Indexes move in unison (the ones I know of) DAX goes up, Mib40 goes up, Wall Street goes up and vice-versa.

2) The afternoon European session is influenced by the going of the US market (Wall Street) as for example yesterday when after a good European morning session Wall Street opened and started moving down and DAX and MIB followed (giving me some serious anxiety)

3) There must be a way to have some corroborative (?) information that will indicate how the indexes will move. i.e. the Asian session of the previous night might indicate how the European session will move (but that was not the case today so far). I don't have those information.

 

I don't feel I have a real grasp of what is really moving the indexes behind a kind of personal belief system (they will continue up fulfilling the end of year customary rally).

I am now not sure there will be a pull back (10:27) . Now what do I do?

Any comment will be welcome

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Hi .  Quite right, the indices do often move in unison but there is a inter-connectivity between all markets, especially between currency and index and don't forget news events and data releases that may be specific to the country or to their trading partners  (fundamentals).

 

Also don't forget the technicals, in the case of the Dax price is approaching an area that has seen strong selling since early November so the buyers are getting cautious. Price has reversed here in the past so be prepared, there may well be more sellers waiting.

 

Whether it breaks up or down from here could also be determined by US data today (unemployment claims) affecting USD > Euro > Dax. 

 

GER30(£)H13011.png     

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Thanks Caseynotes for your two replies,

Regarding the first one I agree it is a big discussion with philosophical nuances, (i.e. aren't all traders really gamblers at hearth? And aren't good gamblers real experts in risk management?). Personally I would struggle to argue that a successful poker player is really that different than a trader. Both have to make use of strategies underpinned by information gathered on an ongoing basis and their own experience, which lead to decisions. I am open to continue this discussion.

Thank you also for the info on the DAX and the correlation between indices and Currencies. I suppose it means that when an index moves the relative currency also moves in the same direction or in the opposite one as it might be. So if I checked the Euro when the Dax moves I might see a trend?

Regarding news and fundamentals I think I struggle, since I tend to "induce" what will happen from a piece of data or a piece of news and I often get it wrong anyway. In that sense I feel like I am a bit of a gambler, sceptical about news being very useful for someone like me. To make it into a bit of a joke, news are that "one in four of us will get cancer", which can be useful in order to decide what life-style and habits to take up. But it would be much more useful to know which one of the four will actually be the unlucky one.

I think technicals are much more graspable and I do keep an eye to that in the belief that price and trend are the only real news.

Thanks again for the advice and if you can point me to where I can get the various Data releases in real time I will be very grateful.

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Hi ,  No, I replied to only one, someone else must have posted the other? 

 

Casinos win because they have an edge, successful traders are not gamblers because they also have an edge. Successful poker players are successful because they have an edge.

 

The best thing to do for news events is to know when they are to occur, check the econ calendar daily, the dailyfx one is excellent and included in James's Morning Brief' posted on this forum every day.  Waitout the actual news event, there will be the usual whipsawing as the big contracts are exchanged, then look for a range expansion phase. That's when a mismatch develops between buyers and sellers and price must move on to a new level to restore buyer/seller equilibrium. You want to try to hitch a ride.

 

Even the fundamentalist big guns when looking to place orders consult the charts and consider the technicals. The fundamentals may goven the direction of price but the technicals determine how, when and how far.

 

 

 

 

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Trading is a multidisciplinary game I don't think the best could win or survive long term using purely technical analysis if they didn't first do their homework and create a book of stats that give them the edge. Think about it, If anybody is trying to create and sell something commercial that works they have got to prove it with stats.

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Off the peg stat books and websites you may like / equityclock.com / jeffhirsch.tumblr.com (stock traders almanac) / stockmarketalmanac.co.uk. Obviously the best traders keep their proprietary/custom made stats to themselves.

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Quite right ,  stats maketh the edge, without an ongoing journal you will never know if you are winning or losing. A trader must know basic statistics because any trade can only ever be either win or lose. If the 'edge' (strategy) is good the stats will bare that out (over time) but statistical analysis also tells us to expect a substantial run of losers even if the strategy is good over 1000 trades.

 

Also important is win/loss ratio against risk/reward ratio. Soros is said to have a 30% win rate , Paul Tudor Jones 20%, Peter Brandt admits to 42%. So you don't actually need to be winning all the time if your RRR is sufficient to compensate.

 

But they all use technical analysis based on fundamentals to work their strategy. Arbitrage tells us the market will soon neutralise any profitable anomaly.  

 

 

 

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Use technical analysis for entry , use fundamental drivers for picking trades.

 

As an example :If expected interest rates are set to increase, buy the instrument on forex.

 

https://www.google.co.uk/search?q=technical+anylysis+useless+junk+science&oq=technical+anylysis+useless+junk+science&aqs=chrome..69i57.15969j0j8&sourceid=chrome&ie=UTF-8

 

junk science

 

technical analysis useless is  junk science

 

You think George Sorros was looking at technical analysis, when he shorted  the pound?

 

 

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Casey

 

Casinos win because they have an edge, successful traders are not gamblers because they also have an edge. Successful poker players are successful because they have an edge.

 

Traders win, because they have a mental edge and a very simple system  K I S S 

 

 

 

http://profitabletrading1.blogspot.co.uk/2017/10/successful-profitable-and-professional.html

 

 

Develop Your Mental Edge video by Dr. Andrew Menaker

 

 

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