Education in trading indices CFDs

[fallenangel22]

Hi,

I have just opened a demo account with ig and am educating myself to trade indices. Can anyone recommend any great books or resources that they have found useful? https://www.aussiestockforums.com/forums/images/smilies/smile.gif

 

[tech/a]

Trading an Index technically is like trading any chart.
Its a mattr of formulating a plan testing that its profitable and then trading it.

There are countless methods you could employ.
Learn how to trade a chart and you can trade most anything.

 

[fallenangel22]

yes tech I have been using a few methods firstly was using the macd on a line chart to identify very short frame trends simply buying or selling in and out- not so good. secondly stepping back to identify the longer term trend using a 1 - 5min candle chart looking for classic trend reversal candles and entering with a fairly wide stop of up to 15 pips (well thats a wide stop for me) that seemed to be a slightly more sucessful. The only prob is there is no volume indicator on the charts to give that extra confirmation of future direction and I use volume to gain entry when day trading stocks to great sucess. what is the one indicator that you find useful when trading indices?

 

[chops_a_must]

Trading an Index technically is like trading any chart.
Its a mattr of formulating a plan testing that its profitable and then trading it.

There are countless methods you could employ.
Learn how to trade a chart and you can trade most anything.

Indexes perform quite differently to stocks though I find...

 

[Wysiwyg]

Indexes perform quite differently to stocks though I find...

Absolutely, hard to exact rhyme nor reason though generalities can be observed i.e. trend direction.

 

[chops_a_must]

Absolutely, hard to exact rhyme nor reason though generalities can be observed i.e. trend direction.

It's just that you don't generally get the runaway extreme directional moves that you do in stocks.

You are better off going against these, whereas in stocks, there isn't as much value in it, you need to be going with it.

 

[Wysiwyg]

It's just that you don't generally get the runaway extreme directional moves that you do in stocks.

Sure, you think you`re sitting pretty on nice profit when suddenly there is a move in the opposite direction for some lame excuse like Ben Bernanke has spoken.

 

[tech/a]

Sure dont disagree.

Whats the index chart code? (Or a few).
Id be using VSA.
Short term certainly.
Long and short a bonus.

 

[mazzatelli1000]

Learn how to trade a chart and you can trade most anything.

I think this was all tech was trying to say - learn how to read a chart

The specifics of the underlying can be learnt later - e.g. index, stock, commodity, bonds

 

[MRC & Co]

Don't try using VSA on an index like the SPI on 1-2 minute timeframes, completely pointless IMO.

Big volume = big buyer/seller, that's about all you need to know.

 

[tech/a]

Don't try using VSA on an index like the SPI on 1-2 minute timeframes, completely pointless IMO.

How can you make a statement like that.
You trade with VSA?
You actually understand it?

Big volume = big buyer/seller, that's about all you need to know.

Depth is and can be misleading.
Orders at market dont even show.
When the big players move they dont sit in depth.
You could make that statement about anything, stock, index, future.
TH's way of trading isnt the only way to turn a profit on a chart short term.

To make a point.
Interested in your VSA analysis on this chart.
from the last BAR.
Say the analysis for the next 3 bars and perhaps you can tell me why the next 3.
That BIG Volume on the second last bar.
buyers or sellers?
Its an index chart

 

[MRC & Co]

How can you make a statement like that.
You trade with VSA?
You actually understand it?

Depth is and can be misleading.
Orders at market dont even show.
When the big players move they dont sit in depth.
You could make that statement about anything, stock, index, future.
TH's way of trading isnt the only way to turn a profit on a chart short term.

To make a point.
Interested in your VSA analysis on this chart.
from the last BAR.
Say the analysis for the next 3 bars and perhaps you can tell me why the next 3.
That BIG Volume on the second last bar.
buyers or sellers?
Its an index chart

I used to use VSA on stocks (obviously not to the extent you do), not tradeguider to the tee, but my own interpretation. Because I don't believe you can read into every bar or even close too it, nor see it on every chart, only in some instances when there is something of note happening. Don't use it at all at the moment, as I only trade SPI. On the chart, I would need more background, but looks weak to me. High vol after falling out of a range, but a low close. Bit of a pause before the selling continues, assuming the chart was in a downtrend beforehand? And I obviously can't tell you if it is selling or buying, as it is BOTH equally, only if the bears or bulls are taking control of the price action.

I didn't say VSA won't work on an index, because it will, I said on the SPI. A big trader can simply be covering, which won't mean a thing and you will read something into it, as I did when I started trading the SPI. It only got me into trouble.

Depth is not misleading, it is what it is. And you can clearly see who is hitting market, what are you talking about? The spread is crossed. Simple as that. And yes, some big players DO sit in depth, watch the SPI rally Friday afternoon and you can see a clear buyer sitting in there, chasing it up. Not even pulling bids and trying to give the illusion he has gone and getting better fills. You also see them come in to defend levels and this is where you get strong support or resistance levels. I think a week back, it bounced off the same level about 3 times in 3 days and set the low for the day.

There is no TH way of trading, I am sure I take completely different set-ups to him many times a day. We probably exchange contracts on the other side half the time!

 

[MRC & Co]

I didn't say VSA won't work on an index, because it will, I said on the SPI. A big trader can simply be covering, which won't mean a thing and you will read something into it, as I did when I started trading the SPI. It only got me into trouble.

I'll give an example.

A guy hits a 60 lot in the ask, betting price will move up in the next couple minutes, as it does, he has resting orders on the asks and scales out. You will get a spike in volume on that 1 minute candle when he crosses the spread and hits the ask, does it mean price will go up? Is he going to do any more buying? No, doesn't mean a thing. Only that that particular trader, is betting on price going up so he can scale out.

Why is he hitting that 60 lot? Perhaps because he thinks the big 40 lot behind is a spoof and will disappear, traders will then attack the ask and push price up, forcing the big spoofer of the initial 60 lot which got clipped, which was infront of the 40 lot, to cover. He will then cover into this. Sometimes, once the 60 lot on the ask is hit, algo bots will pull the bids, as it was their bids and spoof on the ask you see, to beach the trader who hit the 60 lot and try get him covering. Yes, this kind of thing DOES happen. How will you read that real-time with VSA?

Now that is an order book pattern you may watch out for. How are you going to trade that? Be the first to attack the ask once they start retreating after the initial large spoof was hit. Just hope the algos don't get you!

 

[tech/a]

Perhaps this VSA video will be of help.
NO Market depth mentioned.

http://www.youtube.com/user/TradeGuider

 

[chops_a_must]

Tech... I think if you are going to use VSA on indices, it is probably much better value using tick charts, not minute bars.

Because with that chart there, you can't tell if stops are being chewed just below support, and will result in an eventual sharp snap back, or if it is determined selling though the support, and may continue to lead to a runaway breakdown.

With tick charts, I reckon you could eventually tell the difference between the two.

 

[MRC & Co]

Perhaps this VSA video will be of help.
NO Market depth mentioned.

http://www.youtube.com/user/TradeGuider

But that doesn't answer my SPI questions, which is what this entire thing was in relation too!?

And what point were you trying to make by the VSA exercise?

I'm far from saying you need market depth to trade SPI intraday, but it can confuse VSA on this instrument, THAT was my point.

 

[tech/a]

OK

I'll have to have a look at VSA on the SPI.
Frankly without doing that I cant speak from experience.
I'll have a look make some observations and get back to this.

 

[MRC & Co]

Ok.

VSA was my favourite tool for stocks, but unfortunately, I couldn't make it work consistently (enough to have an edge trading the SPI), and these above were some of my conclusions.

I'm sure you can find examples of it working, but trading it live based on VSA, with a consistent edge, would be an extremelly hard ask IMHO.

If someone is simply hitting market with big/or growing volume and moving it in that direction, then you probably have something which will remain for at least a few more minutes (with many flicks and squeezes within each candle, that you may not see once they are printed, along the way). Some of these moves were clearly evident a few weeks back, when most days we would rally and then fall off, or just fall off from the beginning, form a base, and rally with some decent or growing volume into the close.

Cheers

 

[skyQuake]

Think that he meant that theres no Volume data on IG charts.

Anyways, I've traded with IG and would not recommend scalping when you start off. Firstly the 2 tick spread will kill most scalpers, as will the slow order execution. Trying to catch bigger trends would be a better alternative. eg. a 15 min uptrend after lunch session.

 

[wayneL]

I'm not au fait with VSA, but I'd confirm that trading indices is different to trading stocks. Maybe VSA could be used on daily bars, but risk reward is not favourable swing trading indices... and certainly not as good R/R as swing trading stocks.

IMO, for indices, go intraday or trade options volatility.