10 tips from my own
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hello,
I’m trading stocks since more than 10 years and have been trading Indexes as independant trader for the past year, and I wanted to share with you some observations. Not that I have found the magic recipe but I think I may have some good insights:
1. You don’t trade stocks like you trade FX or indexes. Each asset has their own cycle, their own triggers etc.
2. Indicators don’t work when there are big gaps, it’s why it’s pointless to use indicators to trade stocks, unless the indicator it’s price related or volume related (vwap)
3. Would say it’s difficult to do somethings below 5min TF in FX, 15min is more the norm. For Dax and Dow min TF is now more 2min, 1min is difficult. Tick timeframe are better, especially when there is very low vol for system staying invested overnight, or when there is a lot of vol, but still not available in auto trading. Anyway tick data in cfd are not the same as in future, huge difference.
2. Dax and dow are the most traded indexes by retail independant trader because very directional and low spread, altough it’s the SP&500 the biggest traded index in the world. Dax is acting very choppy as soon as dow opens, even in manual trading it’s difficult to trade. Best time to trade dax is from 08h to 13h, with sub cycles. Dax is actually waking up around 07h30. If you want to trade a reversal from current trend, best time is to wait min 11h, or 11h30. Dow follow the dax in the morning and only really become independant as from 14h30. From 18h to 20h is rather slow. From 21h45 to 22h15 big trends can happen.
3. CFD data are inaccurate, especially if you try to develop system based on candlestick.
4. Most important levels to watch for any asset is the open, the close from the previous day and the vwap. The rest is dependent on the way you draw, calculate etc.
5. Index are quoted 24h/24h in cfd, but what matters is level reached during cash session. The close is the close at 17h35 for the Dax, not the midnight price etc.
6. Lot of debate around the calculation of pivot points. Should it be calculated on the cash session, the future session, etc?. Pivot points are used on the 1h, 4h, daily, weekly, monthly. I would say 1h and 4h only the pivot point is important (not s1 s2 etc). Weekly and monthly are not really working I would say, unless you have some convergence in various TF. Daily Pivot points based on cash session are the best in my opinion, especially on Dow.
7. What really matters, is not really the signal but rather the level of price where you get your signal. So any successful systems should incorporate a way to define price zones, which can be fixed or moving. Avoid trading something in the middle of the bollinger bands in your TF, RR is not in your favor.
8. Target price should be tailored to the situation. Some trades are good but their potential are limited, and it’s not just about volatility (cycle, price level etc). I would say that if you trade in the trend your target can be bigger. Against the trend, the target should be smaller, unless it’s moving very rapidly in your Favour.
9. Any indicator which is not based on price, but on price derivative (moving average etc) are lagging. So please when I see a system based on the crossover of two moving average, it means your are doubling down on the lag.
10. I think it’s almost impossible to have one system which works during all period on one asset. You should have different systems, which can be based on the same core principle, but which work one different TF, with different SL and TP in fonction of the volatility and the momentum.
Hope it helps,
S.
Hello jebus,
In attachment the Dax on 100tick early this morning. On the left, the CFD data, on the right the Future data. When the market is slow, difference is small, but when the market moves, difference is growing.
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Now same screen, but in TF 5min. Look carefully, candle are not the same. To be fair, there is also the factor of the minimum quotation step, which for the the full Dax Future is 0.5pt, and for the mini Dax Future is 1pt, while CFD can be moved by 0.1 increment. That also creates some small differences. But for me the biggest difference comes from the fact that CFD brokers try to frontrun the move of Future prices. If there is a small spike you will always pay 1pt more that the actual price. Anyway, that means that you should keep that in mind when you code…
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