Trading DOW for profit

Some time ago , I promised to put some thing together on Trading DOW intra-day.
Before one take a position on any trading day, he has to have a solid perception of the market. We want to know if the market is trending or oscillating. This is not difficult at all.
There are few signs
1) Look at the candle chart. If the high and low are near or near enough to close of each bar then the market is trending other wise consider it as a oscillating market

2) IF DOW is heavily over sold or overbought in different time frames especially on longer time frames such as daily or 30 minutes then consider the market as trending. Obviously if DOW is neither over sold or over bought the chances are DOW will oscillate for a while before break out.

Lets say you still not sure where DOW is heading! In another word there is a mixture of both modes. In this case assume the , market is oscillating and use your OB/OS indicators to get in and out.
Still not sure? Draw the line of best fit (regression line ) from the last reversal point and trade in that direction.
Still not sure? just look at the chart and see if you see 5 up bars without any down bar in between (in case of long) or 5 down bars(in case of short)without any up bar in between and trade in that direction.

Done that?
Now plot your bollinger band and set stop loss a tad below the lower BB. (in case of long) and a bit above the upper (in case of short)

Done that?
lets say your risk capital is £5000. Take 2% of that = 5000* 2%=100 quid
Lets say you are long DOW and it is trading at 9500 and your stop loss from bollinger bands is 9475. In another word you are prepared to allow 25 points loss. Then divide 100/25= £4 quid

Bet 4 quid /point and let your trade start

Done that?

Raise your stop loss as DOW trend so that at all times you only let DOW to fall 25 points (Trailing stop)

Done that?
learn and practice to trade in the direction of trend.
Do not exit until there is a solid evidence of change in trend

You are now a successful DOW trader

Hi Grey i enjoyed your post.Thanks for sharing it with us.

Hello Grey,
Thank you for your post. I assume you are trading DOW using spread bettors or cfds. I used to trade Dow futures by phone but found the illiquidity and delays annoying.
I currently trade nasdaq, S&P and ftse futures electronically and wonder if you might find S&P trading easier and faster with fewer airballs. If you use a real broker the spreads are tighter and the fills faster.
Thanks again for your interesting post
Richard

Welcome aboard Mr Charts! Nice to see you here. Some good stuff on trading the nasdaq as well on other threads.

Regards,

Thanks Roger,
There are certainly some smart cookies on these boards!
I just hope I can contribute something of use to others.
Richard

I have done Trading using CMC a while ago. I have also traded DOW using CMC, IG index for a colleague trader. Spread betting firms are NOT brokers. They are nothing to do with being a broker. They are market maker as they make you own prices based on real market prices which often lags by 5 points and on top of that they impose their own spread of often 5 points either way, which in total a trader is 15 points in red before making his own money (Most oscillations on DOW does not last more than 25 points on average, therefore 25- 15= 10 points gain if you had a crystal ball to call the EXACT TOP and BOTTOMS. 10 : 15 is less than 1:1 reward/risk ratio which is worth than coin toss up of 50/50, and consequently worth than gambling on roulette table).

Those who trade with Spread betting firms have no direct access to the floor prices and this puts them in great disadvantages to others. ONLY THOSE WHO ARE PREPARED TO CATCH THE LONG TERM TRENDS CAN MAKE MONEY FROM SB FIRMS. An average trader who counts on oscillations to make a living is sure a loser using Spread Betting firms. CATCH THE LONG TERM TREND OR LOSE ALL YOUR CASH TO SB FIRMS. I personally think they should not be given the license to operate and make their own market. My post above was to explain how to trade using the Trend to win the market. I how ever do not use SB firms to trade the market. I use a US direct access Platform which gives me access to TRUE real time prices and the spread can be as little of 1 point on Index futures. (often the cash quotes are very similar).

If you wish to trade for living I suggest all members of this BB and those who use the chat room to close their account with their Sb firm and open an account with www.easy2trade.com to trade the index futures than cash market.

Once done that , I will post couple of strategies to catch most oscillations trading the index future.

A trader is not a professional if he uses a SB firm. It is throwing good money after bad. I feel sorry for those who are excellent technicians but still lose to the market due to Traps sets by SB firms.

GET THE HELLLLLLLLLLLLLLLLLLL OUT

PS :- I am not on a commission.

Hi Grey.What a great reply.I totaly agree with you.Why short term Spread Betters cant see that theirs is a no win game over a period of time is beyond me.Maybe they're more gamblers than traders.

Direct access is the key.Thanks for that web address. I look forward to your future posts on stratergies to catch oscillations trading index futures.

Thanks for that Grey.

My perception is that CFD's thru a spreadbetter are a great service for swingtrades but less so for v. short term. At least you don't have to wait for a downtick to go short, and from my "ghosting" the manipulation seems less blatant on stocks than on indices. Also it seems like the best way to go short on UK stocks without the nausea of stampduty and T10 deadlines to close.

I agree that the case for an online US broker is compelling, but I see CFDs as a complimentary service rather than competition. And if the online service to your US broker goes down because of a failure of his trading platform the telephones are likely to be jammed, so an equal and opposite trade using a CFD would at least give you an approximately flat position in an emergency.

Regards,

...... and I feel it in my water that Mr Charts could have something constructive to add to this!!

I use a US direct access Platform

Hi Grey, Do you have to watch out for the US (IRS) withholding tax for us Non-resident aliens

Paul

TraderKing said:

I use a US direct access Platform

Hi Grey, Do you have to watch out for the US (IRS) withholding tax for us Non-resident aliens

Paul

Click to expand...

you fill out a (W-8BEN) form ,

Grey said:

Some time ago , I promised to put some thing together on Trading DOW intra-day.
Before one take a position on any trading day, he has to have a solid perception of the market. We want to know if the market is trending or oscillating. This is not difficult at all.
There are few signs
1) Look at the candle chart. If the high and low are near or near enough to close of each bar then the market is trending other wise consider it as a oscillating market

2) IF DOW is heavily over sold or overbought in different time frames especially on longer time frames such as daily or 30 minutes then consider the market as trending. Obviously if DOW is neither over sold or over bought the chances are DOW will oscillate for a while before break out.

Lets say you still not sure where DOW is heading! In another word there is a mixture of both modes. In this case assume the , market is oscillating and use your OB/OS indicators to get in and out.
Still not sure? Draw the line of best fit (regression line ) from the last reversal point and trade in that direction.
Still not sure? just look at the chart and see if you see 5 up bars without any down bar in between (in case of long) or 5 down bars(in case of short)without any up bar in between and trade in that direction.

Done that?
Now plot your bollinger band and set stop loss a tad below the lower BB. (in case of long) and a bit above the upper (in case of short)

Done that?
lets say your risk capital is £5000. Take 2% of that = 5000* 2%=100 quid
Lets say you are long DOW and it is trading at 9500 and your stop loss from bollinger bands is 9475. In another word you are prepared to allow 25 points loss. Then divide 100/25= £4 quid

Bet 4 quid /point and let your trade start

Done that?

Raise your stop loss as DOW trend so that at all times you only let DOW to fall 25 points (Trailing stop)

Done that?
learn and practice to trade in the direction of trend.
Do not exit until there is a solid evidence of change in trend

You are now a successful DOW trader

Click to expand...

Bloody excellent post

If you want-to claim exemption (W-8ECI)

Agree completely with the posts on spreadbetters and their dodgy dealing with trading indices. I traded the dow based on intraday cash prices but using a s bet as the tool. No one had told me that their quote was actually based on future prices which move first and i lost constantly until i figured this out. My strategy was not bad, just the tool I was using was magnifying my losses. I plan to begin trading futures in the near term. Bottom line is, spreadbetting can be great for stocks as they tend to mirror cash prices but indices intraday are a big no no.

If only I had found trade to win earlier!!!

Super

The Best way to trade the Dow is with YM futures (Dow e-mini)

Plenty of liquidity (at least for small non-millionaire traders) and great swings when compared to the SP500 futures..

YM is one of the best index for daytrading because of the great intraday swings that can easily be caught (swings with 10/20 points with just 1 point in the spread is sweet).

Ertai said:

YM ... great intraday swings that can easily be caught

Click to expand...

Hi Ertail, would you mind elaborating on how the swings can be "easily" caught? Many thanks.

Search Facility on these boards

Piperlad said:

We've been trading for around a year now using various SB firms, recently found these boards (and glad we did). it would appear that Direct Access is the way forward in terms of the £££'s we've thrown at SB firms - can anybody recommend any DA firms to deal through?

Many thanks!!!!

Click to expand...

Look under "Resources" above

blackcab said:

Hi Ertail, would you mind elaborating on how the swings can be "easily" caught? Many thanks.

Click to expand...

By saying easily I mean the points that make up a swing..

While in the ES you get 1 or 2 points inside a range to trade with a spread of 1/4 of a point.

In the YM you get 10 or 20 point swings with just 1 point spread..


But its daytrading... as hard as you can expect, use Technical Analysis and read books and practise...

I guess thats the million dollar question

Hi Grey,
If the Dow is oscillating in a 25 point band, this does not represent a good risk/reward ratio for a spread bet. This characteristic frequently occurs within the first 2 hours following which the market usually begins to trend. Provided you get in on the trend early you can reasonably expect 50 click moves or more right to the end of the session or up to about 20:00 GMT. I take your point and agree entirely that 20 point oscillations are best avoided for spread betting. Finspreads spread on the Dow Daily Cash is currently only 4 clicks. If you got burnt spreadbetting, as the vast majority of people do, I can understand you wanting to put distance between yourself and spreadbetting firms. [/I]Once bitten twice shy !
All the best with your trading. Peter36