Trading the ASX 200 index following movement in the DOW

[Mrmooo]

Hi, I'm new here and looking for advice on a strategy which seems kind of obvious, so I'm looking for the catch. I used to trade Forex so I'm used to fast trades. Since pronounced movements in the Dow Jones index are usually followed by similar movements on ASX200 what is wrong with entering the market long or short to take advantage of a fairly predictable movement either up or down? For example, if the DOW went up by 80 points, perhaps go long on XJO for 40, with a stop loss at -25? And vice versa in a bear market? Where there is no clear direction I would stay out.

Also, what would be the best instrument for this kind of trade - index mini? And can you exit within minutes like on Forex?

 

[CanOz]

Re: Trading the ASX200 index following movement in the DOW

Hi, I'm new here and looking for advice on a strategy which seems kind of obvious, so I'm looking for the catch. I used to trade Forex so I'm used to fast trades. Since pronounced movements in the Dow Jones index are usually followed by similar movements on ASX200 what is wrong with entering the market long or short to take advantage of a fairly predictable movement either up or down? For example, if the DOW went up by 80 points, perhaps go long on XJO for 40, with a stop loss at -25? And vice versa in a bear market? Where there is no clear direction I would stay out.

Also, what would be the best instrument for this kind of trade - index mini? And can you exit within minutes like on Forex?

You want to trade a CFD product to do this? So you'd be paying spread?

 

[skyQuake]

Re: Trading the ASX200 index following movement in the DOW

Because the futures have already factored in the overnight move. If the dow is +200pts overnight, the SPI will be up 75pts when the night session closes at 6am, and when the SPI reopens at 9:50am it'll still be +75 or thereabouts.

Also look up staggered open. Will help explain why it "looks" like the market is taking its time to follow the dow move.

 

[cbc]

Yer Mrmooo,

Sadly this cannot be done, there is no way of waking up in the morning and profiting from the US up day.

The only way of catching this is by buying in the night before...... but then that just turned things into a coin toss..

What about this morning? The dow and the SPI were both down and the market opened up? Welcome to the market.....

 

[CanOz]

but then that just turned things into a coin toss..

50/50 is good enough for me....

 

[Joules MM1]

Hi, I'm new here and looking for advice on a strategy which seems kind of obvious, so I'm looking for the catch. I used to trade Forex so I'm used to fast trades. Since pronounced movements in the Dow Jones index are usually followed by similar movements on ASX200 what is wrong with entering the market long or short to take advantage of a fairly predictable movement either up or down? For example, if the DOW went up by 80 points, perhaps go long on XJO for 40, with a stop loss at -25? And vice versa in a bear market? Where there is no clear direction I would stay out.

Also, what would be the best instrument for this kind of trade - index mini? And can you exit within minutes like on Forex?

first, if a strat was obvious, you would have read it here already

second, if you plan on using trend as an indicator or bias just focus on the index you're trading not thru a filter of an external index, either trade the dow/spx or trade the xjo/spi exclusively, have exclusive focus on price for a single index/instrument

third, some days pros are done and Shangers kicks the SPI in the teeth...so are you watching the right index?

fourth, "fairly predictable" is not a measure, losing 200 bux on a thereabouts trade is an exact measure that comes out of you pocket and you are going to use the same strategy to put the money back in your pocket....

fifth, the spx/dow might be heavy on the 'news opportunity' (great for those traders over there)and the locals here open up well into yesterdays trading range, which itself, was already in a value zone and they were buying, so, how do you know (if) when the locals here open 30 down that the index here isn't going straight up because all the buying that didn't get done yesterday can be done now? you'd be surprised how often that happens and vice-versa for price direction!

six, if the dow was up 10 points on a 30 point swing day how does that pre-judge the extent of price swing on the local index, how wide and which way?

......there's a swag more against the "obvious" play.....actually i'm typing this to avoid friggin with my gold short atm.....lulz

in brief, the answer to all the questions is no, no and no

 

[Mrmooo]

Well, thanks to everyone for your sound advice. I knew there would have to be a catch otherwise none of us would have to work At least I learned the easy way without losing a cent. Happy trading!