# Index traders please explain the following....



## Allegre (7 March 2011)

I need this info specific for the AUS200 index cfd provided by IG Markets.

How exactly do they derive their prices for this product? it seems to be a combination of the SPI futures contract and the ASX200 index depending on the time of day. Also how do the forwards differ? are they cfd's of the futures contract?

I wondered how they could provide a product which allows you to trade an index seeing as an index is moved by the buying and selling of it's make up stocks rather than the buying and selling of the instrument itself like the futures. I was livid when  I found the 10.00am open price was practically never the same as the underlying index open and was sometimes ludicrously different. And here i've been sitting thinking "what happened to the usual morning run that i rely on to make money"

The conclusion I came to is despite claiming DMA service these products seem to me in fact, synthetic and market made.

This raises a problem seeing as the prices are derived rather than made by market forces. This is further compounded if IG is the counter party because they have the advantage of seeing and hedging the real prices in the futures and the underlying index while quoting you some inaccurate made up price. I have come to the conclusion that these index cfd's represent a negative edge for the trader.

Comments anyone

also I would like to hear input on trading the minis as a way of practicing pulling the trigger as I still have problems with this.

The moral of all this is never assume with the info these providers give you. Make sure you know exactly what you are dealing with and how it works. If you are looking for the sucker in the room and can't find 'em, it's YOU.


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## skc (7 March 2011)

I have responded to you in another thread. Yes they are market-made.

The real XJO has a staggered openning. If IG's index match the XJO at 10am (when noly A-B stocks are open) then anyone can be a billionaire in 2 weeks.

Has IG actually said anywhere that their their index products are DMA?


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## Allegre (7 March 2011)

cheers. what is the title of the thread so i can have a look see. 

IG is a DMA cfd provider so i was fool enough to assume that the AUS200 is a cfd of a futures contract. They probably don't make that claim.


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## skc (7 March 2011)

Allegre said:


> cheers. what is the title of the thread so i can have a look see.
> 
> IG is a DMA cfd provider so i was fool enough to assume that the AUS200 is a cfd of a futures contract. They probably don't make that claim.




The thread where you asked the question!

They are DMA equities. Not DMA everything as you know now...


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## Lone Wolf (7 March 2011)

Allegre said:


> IG is a DMA cfd provider so i was fool enough to assume that the AUS200 is a cfd of a futures contract. They probably don't make that claim.




From their website on the subject of stock indices:
____
Our price is based on the level of the underlying index, but has the added benefit of moving with the liquidity of a futures markets. We offer standard and mini CFD contracts, as well as the flexibility to trade in fractions of a contract.
____

On the subject of index futures:
____
We offer trades on a range of contract months, often quoting prices for months which are not quoted in the equivalent futures market. Our minimum contract sizes are also usually smaller than the minimum transaction size of the equivalent future.
____

Watch the futures and the index alongside the IG markets CFD until you understand how it moves.


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## Allegre (7 March 2011)

right the other question in the other thread. I thought you had addressed all this previously.

So that's solved and that leaves us with the forwards.They have expiry listed ie march, sept, dec so they are cfd's on futures. But how are the prices derived

Are the prices exact mirrors of the underlying futures contract?


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## Lone Wolf (7 March 2011)

Allegre said:


> hat leaves us with the forwards.They have expiry listed ie march, sept, dec so they are cfd's on futures. But how are the prices derived
> 
> Are the prices exact mirrors of the underlying futures contract?




If you compare the SPI as seen through Interactive Brokers with the AUS200 forward as seen through IG. No, they are not exact mirrors, but pretty close. Refer to the screenshots below. I took the SPI screenshot a few minutes before the IG one.


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## Lone Wolf (7 March 2011)

I should also mention that the IB chart is a print of the last trade. The IG chart I think from memory shows the midpoint. So the price you see on the IG chart is neither the bid nor the ask price. An important point to remember when setting your stops. They may widen the spread momentarily and the actual traded price will not match what you see on the chart.


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## Allegre (7 March 2011)

So who is the counter party with regard to:

IG Markets AUS200 - IG or other traders?
IG MARKETS AUS200 Forwards - IG or other traders?
Same products with Interactive brokers

This is most important so i know where i stand


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## skc (7 March 2011)

Allegre said:


> So who is the counter party with regard to:
> 
> IG Markets AUS200 - IG or other traders?
> IG MARKETS AUS200 Forwards - IG or other traders?
> ...




IG
IG
Real futures market i.e. other traders


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## So_Cynical (7 March 2011)

Market maker = Bookie, and bookies don't give away money, they have the house edge and your betting against them.


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## Allegre (9 March 2011)

That's what I'm talking about with the negative edge. You are placing your bet with them at the same time you are betting against them 'cause they have taken the opposite position. So you are not taking another participants money, you are taking "their" money, so it's in their best interest to see you lose. There is absolutely nothing to stop them from muscling your position with their market maker power. If you use stops even more so 'cause now they see your hand.Theoretically they can use their position in the scheme of things to basically "rob" you. 

This is probably where the 95% failure rate of traders comes from.


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## skc (9 March 2011)

Allegre said:


> That's what I'm talking about with the negative edge. You are placing your bet with them at the same time you are betting against them 'cause they have taken the opposite position. So you are not taking another participants money, you are taking "their" money, so it's in their best interest to see you lose. There is absolutely nothing to stop them from muscling your position with their market maker power. If you use stops even more so 'cause now they see your hand.Theoretically they can use their position in the scheme of things to basically "rob" you.
> 
> This is probably where the 95% failure rate of traders comes from.




That is correct. 95% of traders fail because they look to blame their broker rather than look to their own strategy...


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## sinner (9 March 2011)

Reading this thread, you might be forgiven for getting the impression that the market making broker is literally standing behind you with a gun to your head *forcing* you to take their bid/ask.

Oh wait...


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## Wysiwyg (9 March 2011)

skc said:


> That is correct. 95% of traders fail because they look to blame their broker rather than look to their own strategy...






sinner said:


> Reading this thread, you might be forgiven for getting the impression that the market making broker is literally standing behind you with a gun to your head *forcing* you to take their bid/ask.
> 
> Oh wait...



I think our friend would like to trade on a level playing field. From my experience with CFD I know exactly what he means. The amount of times I got stopped out of a trade to the exact point used to peeve me no end. I could almost hear the other end gloating with delight as if in a game of battleships and they sunk another of my destroyers. : Better success on manual exits. Eliminates paranoia when no one knows when you're going to exit, be it in loss or profit. 

Note : - Far from the world's best trader but know when there's a hand in pocket.


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## Lone Wolf (9 March 2011)

To say that the 95% failure rate in trading is largely due to broker manipulation is stretching it a bit. I haven't seen too many proven cases on this forum of broker price manipulation. Most accusations I've seen turn out to be spikes in the real market, stops in a bad position or the trader not understanding that the spread widens overnight. If it's so common shouldn't we be seeing more screenshots of fake price spikes stopping traders out? Wasn't there a thread somewhere on here where people were asked to submit evidence of price manipulation?

Everyone dealing with the same broker gets the same data, so they can't manipulate it too much. One mans stop may be another's take profit. I'm not trying to suggest it doesn't happen, I'm sure they do manipulate the price a little, or momentarily widen the spread a little. But most of the time a trader loses because they made a bad trade. Well it is for me at least. I've only traded with IG, but I've come within a point of my stop without being hit a few times. And by the time the price gets that close to my stop it's probably not going the way I want anyway.

Besides, forgetting about the broker, in the real market you'd get price manipulators trying to push price to a level where they hope to trap people in or stop them out. It's all part of the game isn't it? And I don't remember being told the game was fair. I get stopped out to the point all the time in forex and that's just a demo account. :

Having said all that - Trade the real market where possible and avoid any chance of broker manipulation.


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## Market Depth (9 March 2011)

At the end of the day we all need someone to broker our trades. I've used IG and found them good. I use CMC and also found them quite OK, I do get the odd requote every now and again, but in saying that I've actually had requotes in my favour at times, so that levels things out IMHO. I also don't carry postions overnight and don't use stop loss orders. I watch the trade like a hawk. So I can't comment on stop hunting as many claim. I prefer to just trade the dips and rallies, during the intraday, but I've been known to stay awake for 3 days whilst holding a postion, for me it's just the cost of doing business in the trading game, but then again I don't call my job 'Normal'


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## Wysiwyg (9 March 2011)

Lone Wolf said:


> I'm not trying to suggest it doesn't happen, I'm sure they do manipulate the price a little, or momentarily widen the spread a little.



This is true but the widening of spreads is the trick. Why spreads created by the "dealer/broker" don't remain constant has never been revealed to me. This screenshot from an IG CFD & MT4 dealer of "buy price" created bars (circle) shows a difference which is dealer/broker spread factor. IG CFD opens lower and rises while MT4 opens higher and drops lower at the open of a 15 min. bar. After 15 min. bar is printed (elongated) they are very similar. Spread pip is the jam and a (mug ) traders bank is the cream.


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## Lone Wolf (10 March 2011)

Wysiwyg said:


> This screenshot from an IG CFD & MT4 dealer of "buy price" created bars (circle) shows a difference which is dealer/broker spread factor. IG CFD opens lower and rises while MT4 opens higher and drops lower at the open of a 15 min. bar.




How much difference are we really talking about here? 

Considering the bar you have circled:
On IG the previous bar closed at 1.38825 and the bar in question opened at 1.38824.
On FXPro MT4 the previous bar closed at 1.38824 and the bar in question opened at 1.38825.

It's only 0.1 pip difference. It just looks to me like the bar open/close times are slightly different on IG compared to MT4 and that's causing the bars to print differently. But I don't see an issue with the data itself.

Refer to the attached pic. I did an ask chart on IG and got the Open, High, Low, and Close of the bar in question. I then made a bid chart and did the same thing. Comparing the two shows us the spread at the time of open, high, low and close. As you can see, the spread at these times was never more than two pips. 

Then I got the open, high, low and close for the FXPro MT4 bid chart. Compared to the IG bid chart the difference is never more than 0.4 pips. I wouldn't complain about that.

Of course it's late and I might have completely missed your point. But I don't see much manipulation going on here. For the record, I don't have any love for IG and I'm quite happy for someone to show evidence of manipulation.


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## Wysiwyg (16 March 2011)

Can someone please confirm with a chart if the S&P/ASX 200 spiked down to 4470 points at 9.55 am this morning.


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## Wysiwyg (16 March 2011)

Anyone please? That one bar stopped me out before the market went positive. I telephoned IG and they said the Futures market is what they derive their price from outside market times. 9.55 it happened according to them.

This is exactly what I mean about being blatantly ripped off.


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## professor_frink (16 March 2011)

you can get a chart of the futures here to check these things out:

http://futuresource.quote.com/quote...450&chartDensity=MEDIUM&userStudies=&x=47&y=5

4468 was the low print on march futs this morning.

Perhaps stop placement was the issue here and not being "ripped off"


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## Wysiwyg (16 March 2011)

professor_frink said:


> you can get a chart of the futures here to check these things out:
> 
> http://futuresource.quote.com/quote...450&chartDensity=MEDIUM&userStudies=&x=47&y=5
> 
> ...



Thanks for the confirmation. No I don't think so, have placed stop outside LL & HH and been taken out many times too. It's only one price spike that does it and I am content now with the knowledge it is part of the game. Thanks again for your confirmation.

Next.


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## skc (16 March 2011)

Wysiwyg said:


> Thanks for the confirmation. No I don't think so, have placed stop outside LL & HH and been taken out many times too. It's only one price spike that does it and I am content now with the knowledge it is part of the game. Thanks again for your confirmation.
> 
> Next.




Lol that spike down was my take profit


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## skyQuake (16 March 2011)

Huge volume on the SPI there, maybe fat finger? Ridiculous move that snapped right back..

SKC you gotta stop hitting market with those orders


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## skc (16 March 2011)

skyQuake said:


> Huge volume on the SPI there, maybe fat finger? Ridiculous move that snapped right back..
> 
> SKC you gotta stop hitting market with those orders




Lol. Sry I just wanted 2 contracts but accidentally got 200. Oh well, what's $5K a tick anyway.


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## operandi (1 April 2011)

U guys and ur SPI


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## Wysiwyg (1 April 2011)

skc said:


> Lol that spike down was my take profit



4500 would have been a good long entry. Maybe some mates had to be picked up before the rise starting that very morning. Still suss how 'they' spike anything close before the run. Comeuppance due there.


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## Uncle Festivus (5 November 2011)

Anyone know where I can find the daily ASX index dividend adjustment in points ie the number of index points calculated by the ASX? or S&P? corresponding to the value of index dividends?

I had a single short Australia 200 $5 mini with IG Markets who then charged me $55 as dividend, which equates to 11 points as dividend adjustment. So how is this 11 points derived? They advised me that it was an ASX function, but can't find anything on the ASX site for this??


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## Wysiwyg (5 November 2011)

Uncle Festivus said:


> I had a single short Australia 200 $5 mini with IG Markets who then charged me $55 as dividend, which equates to 11 points as dividend adjustment. So how is this 11 points derived? They advised me that it was an ASX function, but can't find anything on the ASX site for this??



The dividend calculation is a grey area for sure reflected in that it was an ASX function. Biggest slug I had was AUD560 for an overnight hold which turned a profit into a loss. These two trades were same day and I was slugged too.  
Works the other way too if you don't get spiked off.


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## tech/a (5 November 2011)

Why don't you trade SPI futures?

None of these problems and you can set condition buy or sell stop orders
If O/N


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## Uncle Festivus (5 November 2011)

tech/a said:


> Why don't you trade SPI futures?
> 
> None of these problems and you can set condition buy or sell stop orders
> If O/N




Too lazy I suppose - who do you trade with? So dividends aren't a factor with futures?

I'd still like to know how they derive these things.....


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## tech/a (6 November 2011)

IB
$5 each way
For FTSE £10 a tick
Margin/ contract approx 5000
you need $15000 to open an IB account

You can trade anything that is listed in any place in the world.
The platform is second to none.


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## rezabd (6 November 2011)

tech/a said:


> IB
> $5 each way
> For FTSE £10 a tick
> Margin/ contract approx 5000
> ...





Can I trade DSE (Dhaka stock exchange) listed stocks in Bangladesh?


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