Is it Possible to pick Bottoms or Tops - consistently?

[Valued]

There wouldn't be overnight gapping though since the OTC CFD cash indices can be traded overnight. It's open 24 hours. For example, I shorted at 1783 and covered at 1746 pre-market. The market then shot up to 1755 after open. I did not suffer that gapping risk. The prices seem to be based on the futures market since that's how IG must be hedging the positions. It's true that the OTC cash indices track the actual index. The only way they can be at a premium or discount to the last close is based on the futures market (but not the same prices, it's normally a specific distance away). They get marked to market though and track the underlying index directly.

You idea sounds interesting but I trade EOD. I am liking OTC CFDs for indices though since I can sleep on decisions, I can enter and exit even when the underlying market is closed, often at superior prices due to fluctuations in futures over night, and since my stop is active during market close, I can be safe from overnight gapping if the futures crash. Of course, there is always weekend risk.

I actually don't know if CFD futures or CFD cash is better in a general sense. I need to try and understand a bit more about futures pricing. Right now I am using the futures pricing though as somewhat of a leading indicator to confirm my original analysis. If I am thinking of going long but the futures are tanking, I will hold off and wait until market open. I also go through and look at individual stocks in the index I want to trade and see if they look bullish/bearish. These are all leading indicators of cash index direction.

BTW it could have been the rain dance I did, but S&P 500 is sitting at 1765 now.

 

[wayneL]

Sorry, I just can't view intraday pivot reversals as tops and bottoms.

FWIW these ARE tradeable. I'm not particularly adept at it, but have watched enough intraday traders (via IRC) do it with consistent success.

A top or bottom to me is on much higher time scales.

 

[kid hustlr]

BUT ....

(There's always a "but", isn't there?)

If what I'm reading from above is right, there's a very simple way to "pick tops and bottoms" intraday in the context of these posts. it is to open a realtime chart of the XJO and the SPI (or your choice of CFD proxy) side-by-side on your screen, and trade only when the numbers cross (ie:- the premium or discount of the futures to the physical index approaches zero).

The premium or discount can change due to a number of factors - mkt expectations of dividends, short term cash rates, time to contract expiry + a number of other factors. I don't believe 'approaches zero' is the correct terminology.

The foundation of the SPI is that it should lead the physical index. In the example above, the futures traded almost all session today (now yesterday) at a premium to the physical, which indicated that the physical was likely to continue rising. As it did.

I'm not sure you can make this statement.

The people who are capable of moving the ASX will always stake out a derivative position ahead of transacting any significant business in the physical market, and if their client instructions are index-moving, that position will generally be in the SPI rather than individual options, because it's cheaper. So, tracking the SPI (or individual option/futures components of it if you can be bothered and have the resources) will always provide some good guidance to the imminent movement in the physical and thus (I assume) the proxy CFD.

Agree with the bolded, If I knew i had a large amount of flow coming to market and wanted to make a quick buck front running it via the futures would be a good way to do it, not sure if it happens 'always'

That might sound like a formula for instant and limitless profits and you would be correct to discard it as a theory if I was trying to sell it as that. I'm not. The sad truth is that most of the index movement on the ASX over time is achieved in the gapping between yesterday's close and today's open, so what you do intraday in Oz is largely irrelevant:- hence my earlier post about trading the SPI overnight. Not only that, but it's expensive and again over time, the rewards don't really stack up vs the investment in time and energy, let alone factoring in losses from unexpected intraday moves (eg:- surprise economic data, news, political shenanigans or whatever). The latter doesn't happen often, but when it does it can cripple an open day-trade and erode weeks or months of tiny gains.

Like most, if not all, pearls of theoretical wisdom, the devil is in the detail. In this case, it is execution and actually making some money from the plan as opposed to just being able to claim "being right" at the next dinner party.

FWIW
Snap

I think overall I agree/understand your comments and the idea is interesting, but I would be gobsmacked if one can make gains using this approach in this day and age.

 

[skc]

I'm assuming your CFD tracks the physical index rather than the SPI - is that true?

No that is NOT true. The "cash" CFD is a synthatic creation which simply tracks the SPI tick by tick through the day, and makes one-off adjustments to accont for stuff like dividends and interests at 4pm (IIRC).

So unfortunately everything you've said cannot be fulfilled. There's no arb opportunity between the "cash" CFD and SPI.

 

[Valued]

I did another rain dance before shorting the Nikkei (cash CFD) on open... confirmation bias FTW:

I am sure this top and bottom picking will stop working soon though. I did pretty well shorting the US markets and then going long, taking me back into the black for this year after some losing trades in January. I actually ended up giving a bit of profit back though but it's hard to be right all the time.

I was also wrong on the EUR/AUD. I was shorting that before it spiked on a massive breakout this morning. That surprised me. At least I have been right on the Nikkei so far. I have an unfilled order to short the DAX. I am shorting the cash CFD since it offered me a slightly better R:R ratio than the futures plus I can do it in AUD so I don't have currency exchange risk or exchange fees (although you have to trust your broker to have a fair market). The currency exchange risk actually hurt a little bit recently... not to mention my lousy forex trade.

 

[Wysiwyg]

I am shorting the cash CFD since it offered me a slightly better R:R ratio than the futures plus I can do it in AUD so I don't have currency exchange risk or exchange fees (although you have to trust your broker to have a fair market). The currency exchange risk actually hurt a little bit recently... not to mention my lousy forex trade.

Apologies for being off topic a bit.

Hello. A question if you don't mind. It seems you hold longer than a session so I am wondering what impact negative dividends have on your trading? For instance I had 2 ($2 per point) shorts on the CFD DOW30 and for holding one day past the daily changeover time I was deducted $85 ex-dividend. I still have 2 ($2 per point) longs from 5057.5 on the CFD ASX200 and have received only $7 in dividends credit total. The ex dividend today for ASX200 was 16 cents. Stuff all credits for the ASX200 long hold. Do you (anyone can reply) experience the same? Proof of my integrity below.
View attachment 56797 View attachment 56796
View attachment 56798

 

[DrapSnagon]

No that is NOT true. The "cash" CFD is a synthatic creation which simply tracks the SPI tick by tick through the day, and makes one-off adjustments to accont for stuff like dividends and interests at 4pm (IIRC).

So unfortunately everything you've said cannot be fulfilled. There's no arb opportunity between the "cash" CFD and SPI.

Hey there skc,

OK, point taken on the proprietary CFDs:- I know little about them. However, I was thinking specifically about the IQ instrument - the ASX CFD. I believe that tracks the XJO, although the spreads can be awful, the liquidity even worse, and the market maker often goes to sleep during a session and is often slow to wake up after the opening auction. I'm not saying it's tradeable per se, and certainly not suggesting there's any reliable arb opportunity.

I guess the point I was trying to make, in the context of this thread, is that if the very narrow interpretation of "picking tops & bottoms" is really "timing intra-session swings", then looking at the premium or discount of the SPI to the actual XJO and how it changes through the day can yield some guidance about when a market-wide trend change is imminent. Put another way:- a "top or bottom". Even if it's only transient.

The assumption is that anyone with a SPI feed and futures broker is paying handsomely for the privilege and probably won't be reading this thread. Everyone else will be able to get access to a CFD feed of some sort, probably for free, and it ought to be a reasonable proxy for the SPI. The XJO itself is, of course, readily available in real time.

I'm also not suggesting this is any sort of basis for intra-session scalping. It's really just another tool for somebody who takes a CFD position on the index: finds themselves on the right side of the trade: and is looking for guidance as to when to close it. It's obviously no substitute for a well-constructed trailing stop, but can provide some early warning as to when such a thing might be triggered.

Cheers
Snap

 

[Valued]

Apologies for being off topic a bit.

Hello. A question if you don't mind. It seems you hold longer than a session so I am wondering what impact negative dividends have on your trading? For instance I had 2 ($2 per point) shorts on the CFD DOW30 and for holding one day past the daily changeover time I was deducted $85 ex-dividend. I still have 2 ($2 per point) longs from 5057.5 on the CFD ASX200 and have received only $7 in dividends credit total. The ex dividend today for ASX200 was 16 cents. Stuff all credits for the ASX200 long hold. Do you (anyone can reply) experience the same? Proof of my integrity below.
View attachment 56797 View attachment 56796
View attachment 56798

None of the attachments worked for me.

The DOW 30 is the Dow Jones Industrial Index and as the name suggests only contains 30 stocks. If a large portion of these 30 stocks go ex-dividend on the same day (or even just a few of them) you could be up for a bit. $85 sounds like a lot though for just two mini contracts. The reason you get less on the ASX is that there are more stocks so any particular stock that goes ex-dividend does not have a large impact. When I short the S&P 500 it's pennies due to how large the index is.

What is supposed to happen (but check with your broker) is that they mark the price of the market they create down by an amount equal to the dividend. If you paid $85 in dividends the market should have been marked down $85 to compensate you on your short positions (it might not be the exact same amount, I am not sure). The reverse is true of long positions - you lose the money when you get marked down but gain the dividend. In a very strong stock you would get the dividend and even though it gets marked down because the stock has so much momentum the market rallies right through any reduction.

All in all, don't worry too much about the dividend issue. The only reason it may cause a problem is if somehow you didn't have enough cash in your account to cover the dividends.

 

[CanOz]

Speaking of tops, Gold's recent power thrust seems to have settled into a bracket for those wanting something to watch...

BTW - when this PB is over, i reckon we could go to 1032

 

[Wysiwyg]

All in all, don't worry too much about the dividend issue.

Thank you for the reply. I sought explanation directly with the broker and was told they had to look deeper into it and would contact me. No contact yet but your explanation makes sense to me. Good luck with it all. Ciao

 

[Boggo]

Good, thanks, Boggo. Will you update us with the confirmation?

That has triggered a new signal this week Julia. Seems to be a few sellers around 1.50, like to see it clear ~1.60 for blue skies.

Original post...
https://www.aussiestockforums.com/f...t=27977&page=4&p=812368&viewfull=1#post812368

 

[Wysiwyg]

As far as picking trend reversals (bottom), short covering rallies are worth a look like this one "developing" (loose terminology) on the DOW now. The bears should be well fed and the bulls mighty peeved after the recent selling spree. Does this happen consistently? The market makers would not like that because everyone would know when to enter. Remembering the market exists because 90% of traders fail to profit consistently.

Gosh this bottom pick turned out fantastic. Nice of the team to keep plowing on and am looking forward to 6000 points before mid year.
Proof of purchase 05/02/2014.

 

[So_Cynical]

(4th-February-2014) Re above comments by others about picking a bottom, the present correction might be an opportunity to show the forum how this can work? Anyone up for doing this?

(4th-February-2014) Ok Bought some Graincorp today 7.59, already missed the very bottom time will tell all.

43 Days later and i have completed my GNC trade for a profit of 10.93% exiting at $8.48, the 52 week low ($7.50) bottom came a couple of days after i entered so i missed the bottom by a little under 1.2%

As for showing the forum how this can work - as i have previously stated in this thread, its dumb luck, calculated (calculated is probably to strong a word) dumb luck....i say calculated because i did spend an hour or 2 looking at GNC, mostly comparing the company and conditions now with the company and conditions then, the last time GNC traded at that price.

I came away from that look with the strong conviction that GNC was very cheap so i better buy it straight away and did so, a few things i have noticed over the years that i have been buying bottoms.

• Holding low cost shares lowers your average holding price on re-entry at a higher price.
• Holding low cost shares makes your ROC (dividend yield) look much better than the current yield.
• Double bottoms are a great (low cost) buy indicator.
• As a consequence of trying to buy bottom you end up buying cheap enough that i really doesn't matter.

`

 

[Abyss]

Does this count?

 

[Wysiwyg]

Does this count?

What? Pick an arrow and win a prize? Gizmo is about as useful as a wing wong for a goose's bridle. :bad:

 

[Abyss]

What? Pick an arrow and win a prize? Gizmo is about as useful as a wing wong for a goose's bridle. :bad:

Well obviously its a little too complex for you, let me help...its the first arrow on the right...

 

[Wysiwyg]

Well obviously its a little too complex for you, let me help...its the first arrow on the right...

You're good.

 

[Abyss]

Very kind of you, I must admit, I struggled to keep it civil there for a beer or two, but managed to get through.
I must be getting old..........errrrrrrr

 

[Porper]

Does this count?

View attachment 57404

Using a Stochastic or indicator like your "Gizmo" for buys & sells doesn't work Abyss. They have been proven through backtesting to be unprofitable. You will go broke solely using them that way. At best use them as confirmation signals used in conjunction with other technical analysis tools.

 

[Abyss]

Using a Stochastic or indicator like your "Gizmo" for buys & sells doesn't work Abyss. They have been proven through backtesting to be unprofitable. You will go broke solely using them that way. At best use them as confirmation signals used in conjunction with other technical analysis tools.

True, I have backtested it personally, it is used as part of the confirmation process, works better in some situations than others and definitely not to be used on its own. This backtest was just done with same code, although not spectacular, on its own it makes money OOS.