With the inaccuracies of PRT backtesting due to fixed spreads being used and limited time to backtest on I find myself drifting towards mid to long term trades based on daily or 4 hour charts. Holding trades from anything from a few hours with the possibility of holding overnight or up to a month or more. I trade using IG UK Spread Betting and so have to use DFB’s. I’d like to use forward or future instruments so that I can know what my trade costs are as there are no overnight fees just a bigger spread and price adjusted for future dividends at open and rollover. This however is not possible due to the lack of history to base a strategy on on future and forward instruments.
Has anyone got a work around to this problem or are we stuck with DFB’s?
EricParticipant
Master
The problem may be adjustment for dividends with price index?
with DAX as a total return index you could probably use the DFB to backtest and optimize on and then run it on the future
There is no history with a forward or future graph so there is no information for a strategy to use to make decisions. When a future or forward rolls over all history disappears.
EricParticipant
Master
ok thats a problem
its a long time since i had a look at the dax future and they seems to have changed something?
i think then its was something called “daily future” and was continious?
I assume this is because you have a spread betting account. I have a usual CFD-account and there is plenty of history (at least on daily bars) for most futures.
I had wondered if CFD’s were the answer. I have an IG CFD account as well as a spread bet account but have always used the latter as it is tax free in the UK (just in case I ever make that fortune!)
I’ve just taken a quick look at a FTSE future 4Hr chart on the CFD account and it shows data going back about four months – probably enough for most strategies to run on. The spread increases from 1 to 4 pips which is acceptable if there are no other costs. By comparison at the moment I can’t even get a futures chart to load any data on the spread betting account.
Looks like I might have to move my funds over to CFD’s. Bit of a pain because of the tax thing and the fact that I’ll have to export and import all my indicators and strategies from one platform to the other as they appear to not be linked in anyway – doh!
Any other disadvantages of going over to the dark side that anyone can warn me of?
I found this interesting analysis of spread betting and CFD comparisons
http://www.contracts-for-difference.com/compare/Skewed-spreads.html
One big disadvantage of CFD’s that I see is the currency issue. I have enough trouble working out whether one market is going to move in the direction that I want it to without having to then work out if the currency of the market is going to do the opposite.
I once bought eBay shares in $ with a £ trading account and every time the share price went up the exchange rate wiped out the gains. It was very stressful few months just trying to work out whether I was up or down at any one moment in time. Obviously I got fed up with the whole thing and sold for a small profit and of course after that everything went the right way!
How do you CFD users find dealing with this currency issue?
