Index or stock trading?

[jabanico]

Hi.

I'm new to Australia (moved here from Singapore last year). I used to do a bit of longer term technical trading (weeks/months timeframe) of US indexes (S&P and Nasdaq) in 2008/2009 and stopped during early 2010 when the trends started getting choppier.

Now that I'm settled here, I'd like to get back on it again. I have around $26k to start off, but I just discovered that it is not easy/cheap to do US market trading from here.

I am comfortable with technical analysis and know little how to do fundamentals. (I find the amount of study required to make a decision fundamentally too daunting.)

Any recommendations on the direction I should take? Should I continue doing index trading (ASX or S&P/Nasdaq?), or try my hand at stock trading?

Another question. What free/low-cost tools are available for newbies like me? I like charts but I can't find a free one that has extensive technical analysis tools. I use ETrade and their charts are limited (can't even have multiple MAs in one screen).

Thanks!

 

[Mr Editor]

Since you aren't comfortable with fundamental analysis, stick with index trading. Stock trading requires a sound knowledge of individual companies so that wild swings in price that dOn't show up on the charts don't catch you off guard. Besides, there are ETFs for the major indexes, both of Australia and the rest of the world.

And check out Prorealtime.com, it's free and is one of the best charting software available online.

 

[LostMyShirt]

I have a question; how does one go about trading an index?

 

[tech/a]

Since you aren't comfortable with fundamental analysis, stick with index trading. Stock trading requires a sound knowledge of individual companies so that wild swings in price that dOn't show up on the charts don't catch you off guard. Besides, there are ETFs for the major indexes, both of Australia and the rest of the world.

And check out Prorealtime.com, it's free and is one of the best charting software available online.

Well I've traded stock technically for 17 hrs
The only thing I know about most of them is their code!!

I have a question; how does one go about trading an index?

Index Futs

 

[LostMyShirt]

Excellen I was hoping it was you who would reply.

I want to learn more about these "Index Futures"; I have no idea how to even buy them, what their price is etc etc. Can you direct me somewhere to read about it (I cant find a resource for the ASX in general) or perhaps briefly give me a run-down.

 

[tech/a]

Excellen I was hoping it was you who would reply.

I want to learn more about these "Index Futures"; I have no idea how to even buy them, what their price is etc etc. Can you direct me somewhere to read about it (I cant find a resource for the ASX in general) or perhaps briefly give me a run-down.

Google index futures
Pull up Interactive Brokers and search index Futures
You need margin of around 4k / contract on the SPI
And 5000£ or € / contract for FTSE and DAX

 

[Kryzz]

Excellen I was hoping it was you who would reply.

I want to learn more about these "Index Futures"; I have no idea how to even buy them, what their price is etc etc. Can you direct me somewhere to read about it (I cant find a resource for the ASX in general) or perhaps briefly give me a run-down.

http://www.mfglobal.com.au/futures-handbook.html

 

[LostMyShirt]

Ahh excellent thank you all!

 

[tollbridge]

I have a question; how does one go about trading an index?

Trading stock indexes / indices are incredibly easy to do and one of the best ways to learn how the basics of how CFDs work.

Generally speaking, trading indexes is one of the more easier securities to build a trading strategy around. In fact it's possible to make a profit just by working on the general theory that the ASX S&P200 follows the moves of overseas markets - especially when they have made a significant and consistent move during the previous trading session.

With the extreme turbulence we've seen in the markets on a global scale and constant fundamental news releases from the IMF and international reserves now would be a great time get involved as it's now almost common practice for the S&P500, Nasdaq, FTSE, and Nikkei to all experience significant losses and gains in a day.

On a personal note when I see a move of over or under 1% in both the US and EU I'll take a brief look at the charts and open a position risking at most 0.5% of my total trading capital. I actually started trading indexes in 2008 when the ASX had put a temporary stop on short selling individual equities in 2008 during the middle of the Global Financial Crisis. If you're going to trade indexes you need to expect massive volatility between 9:00am and 10:45am during the market pre-open and opening. This isn't the time to trade when you are not actively watching the charts at your trading desk. My current broker allows 24 hour trading of the ASX S&P200 and therefore by 8:00am it's extremely volatile based on speculation and offers a great opportunity to sniper short term highs and lows. I generally monitor the chart closely for at least an hour determining support and resistance lines and simply profit by scalping when the markets over-react. I'm in and out within 10 minutes at the maximum. I might enter 4 or 5 trades before I stop at 10:00am for the actual opening of the ASX. At 10:30am because the index now has an underlying market to base itself off my strategy changes considerably and I generally either take a very small contract in the direction I expect the market to go in which case I'll hold it until the pre-open of the LSE which occurs at around 3:00pm. Very frequently however the index at 10:30am has factored in the price which I personally expect the day to finish at and move on to securities.

MF Global, IG Markets, City Index all provide access to international index trading with their own respective fees and spreads. It's not terribly expensive when compared to that of other leveraged instruments and your broker should be providing you with access to detailed, free charts. Alternatively you can visit www.incrediblecharts.com which offers free charting software. As stated though because the Index is purely speculation and there is no underlying market prior to 10:00am - 10:20am (staggered market opening) an independent chart isn't going to help you. You need a chart directly from your broker.

It's important to know that when trading index contacts you are always trading against market-makers as it's physically impossible to trade an "index" on the open market. This of course brings with it all the associated negatives such as price changes when opening and closing a position, stops getting hit too early and the numerous other tactics utilised by market-makers and CFD providers to make a profit at our expense.

I know that many CFD providers in Australia including IG Markets and Interactive Brokers offer access to international stocks through the use of CFDs. Being from Singapore I'd love to have your insight on companies outside of Australia in order to expand my current knowledge and portfolio. I make it a rule to only trade companies I know and understand which although limits my options has probably saved me from some hefty losses through bad trades on a few occasions.

I am very surprised that you are finding access to the markets expensive considering you have $26,000.00 available capital. That indicates to me that you should look around at various Australian brokers, download their product disclosure statements and take a look at their fee structures. I began trading with less than half of what you have and found access to what I wanted to trade (CFDs, Foreign Exchange & Stocks) quite inexpensive and never had a problem accessing free fundamental news and detailed charts.

What brokers have you looked at so far and what have you found to put you off the idea?

You won't find anyone on here who'll be able to give you specific advice as to what you should or should not do regarding your own trading as in Australia anyone giving general or personal advice requires an AFSL licence and it's a guideline of Aussie Stock Forums that those who do hold such a licence cannot act in their capacity on this website.

Remember trading leveraged instruments isn't for everybody, contains a considerable amount of risk and losses can far exceed your initial deposit. What I have stated above is not advice and should not be considered as such.

Good Luck and keep me updated on how you go.

Alex