The FTSE is compiled from price movements of its constituents. These are driven by supply and demand. As the FTSE is a proxy for supply and demand for the whole group of 100, it must be subject to TA as a predictive technique.
But surely it loses relaibility in practice because it is a weighted index? Much of the recent FTSE action has been driven by BP, which is fine if a trader balances their exposure based on the weighting of BP but isn't what we do in practice. At other times, commodites and banks have been over-influential on the index. Doesn't make life easy.
But surely it loses relaibility in practice because it is a weighted index? Much of the recent FTSE action has been driven by BP, which is fine if a trader balances their exposure based on the weighting of BP but isn't what we do in practice. At other times, commodites and banks have been over-influential on the index. Doesn't make life easy.
timsk
Legendary member
- Messages
- 8,714
- Likes
- 3,417
Mornin' Jon,
Well, the FTSE reflects what is happening in the two markets which are governed by supply and demand: the 100 constituent stocks and the FTSE futures respectively. Ditto with the DJIA, it reflects the supply and demand picture in the 30 constituent stocks and the DOW futures instruments. As a proxy for what is going on in the equities and futures markets, I think the cash indices serve their purpose pretty well. However, IMO, they need to be handled with great care in the very short term.
I trade the DOW futures (YM), but I'm aware that it's equities who wear the trousers in the relationship so, I keep a watch on two other charts: the DJIA and the NYSE $Tick. The former is good for keeping me on the right side of the trend, but it's weakness is that it represents just 30 companies. (Tom outlines the problem with this in his post, above.) It's the NYSE $Tick that I watch like a hawk as it provides a (virtually) instant snapshot of the complete supply and demand picture across the entire exchange. Opportunity knocks when this is out of kilter with either the DJIA cash index or the YM futures.
Tim.
Well, the FTSE reflects what is happening in the two markets which are governed by supply and demand: the 100 constituent stocks and the FTSE futures respectively. Ditto with the DJIA, it reflects the supply and demand picture in the 30 constituent stocks and the DOW futures instruments. As a proxy for what is going on in the equities and futures markets, I think the cash indices serve their purpose pretty well. However, IMO, they need to be handled with great care in the very short term.
I trade the DOW futures (YM), but I'm aware that it's equities who wear the trousers in the relationship so, I keep a watch on two other charts: the DJIA and the NYSE $Tick. The former is good for keeping me on the right side of the trend, but it's weakness is that it represents just 30 companies. (Tom outlines the problem with this in his post, above.) It's the NYSE $Tick that I watch like a hawk as it provides a (virtually) instant snapshot of the complete supply and demand picture across the entire exchange. Opportunity knocks when this is out of kilter with either the DJIA cash index or the YM futures.
Tim.
Last edited:
N Rothschild
Legendary member
- Messages
- 5,296
- Likes
- 603
well if your trading ftse futures there IS supply and demand.
barjon
Legendary member
- Messages
- 10,752
- Likes
- 1,863
don't disagree with any of all that
mind you, when the supply and demand in the constituents of the index can vary by extreme degrees it seems that to place reliance on what is in effect the aggregate shown up by the index is a touch "iffy" when dealing with precise numbers - eg: "there's support at 5174" or whatever.
jon
mind you, when the supply and demand in the constituents of the index can vary by extreme degrees it seems that to place reliance on what is in effect the aggregate shown up by the index is a touch "iffy" when dealing with precise numbers - eg: "there's support at 5174" or whatever.
jon
0007
Senior member
- Messages
- 2,377
- Likes
- 664
TA can also be based on analysis of cycles which, when present, apparent and deducible, can be used to trade successfully short & long term. In this respect FTSE is little different to any other instrument.
timsk
Legendary member
- Messages
- 8,714
- Likes
- 3,417
Agreed Jon, extremely 'iffy' if you're trying to scalp the index using a SB platform. But, for a swing trader using E0D charts and a reasonably wide stop, I would have thought it would be okay. That said, it's yonks since I traded that way and I wasn't very good at it when I did!
timsk
Legendary member
- Messages
- 8,714
- Likes
- 3,417
Hi 0007,
Are you referring to Hurst or some other form of cycle analysis? Every once in a while I read a post such as yours and think I ought to investigate it and quickly reach the conclusion that I'm in a cul-de-sac. It would be great to get an insight from someone who uses cycle successfully to provide some pointers with examples. Hint, hint!
Tim.
wackypete2
Legendary member
- Messages
- 10,211
- Likes
- 2,058
I disagree with this. If you can buy or sell the index or the futures then there certainly is supply and demand. the FTSE or any market index is not just made up of its components price...it works both ways. If a very large player buys or sells thousands of index contracts at a time then the price of the components will move to reflect the supply or demand of the index.
Peter
barjon
Legendary member
- Messages
- 10,752
- Likes
- 1,863
pete,
Well, you can't buy or sell the index except by proxy can you? So there's no direct supply and demand.
You can buy and sell futures directly, so there is a clear relationship 'twixt supply and demand there.
jon
N Rothschild
Legendary member
- Messages
- 5,296
- Likes
- 603
in most cases the ES will move the S&P individual stocks. So the supply and demand of the ES will set the supply and demand of the underlying stocks in the S&P500.
timsk
Legendary member
- Messages
- 8,714
- Likes
- 3,417
Roth',
Your comment implies that it's the tail that wags the dog, as there is much larger participation and liquidity in the equities markets than in the futures markets. IMO, for the most part (not always), where equities go - futures follow. If you watch the ES alongside the NYSE $Tick, you'll observe this most of the day, every day.
Tim.
N Rothschild
Legendary member
- Messages
- 5,296
- Likes
- 603
i disagree. the ES trades about 100billion a day in notional value. the average stock price on the s&p500 would need to be 100$ then considering about a billion shares a day are traded. And tick is for all NYSE stocks, not just those in the s&p500
Last edited:
0007
Senior member
- Messages
- 2,377
- Likes
- 664
Hi Tim,
As an experienced hand most of this will be old hat to you but it may possibly be also of interest to others.
Hurst's work is comprehensive and the basic principles are reasonably straightforward even if some of the details are not. Millard has developed it and his book "Channels & Cycles" is excellent. His work on moving averages is outstanding and an order of magnitude above their commonly perceived usefulness. However, some say that the book's maths makes it difficult (Millard was a Phd statistician) though in my opinion it's well within the capabilities of anyone who has reached reached the old GCE "0" level maths standard. However, for me cycles are icing on the timeless cake of the basics: support / resistance / trend / price action / money management and discipline.
I use cycles primarily to confirm a trend and then trade within it. Rather than take a small number of instruments or eg. say just one index and apply my system to that (where the temptation is to make it fit), I look at many instruments or a collection some of whose constituents may display an appropriate set-up and take it from there. Having used this system for some time I think I could now probably get almost as good results without the cycles - just the basics and trends. It took me a while to realise that there's no magic formula - you just need to understand the charts. I think it aslo helps if you are good at pattern-matching since some charts just ask you to climb on board while others send you running for the proverbial bargepole. Whether this comes from experience or is a natural aptitude I can't say. As Simon from Cap Spreads has recently stated - his win/loser split is 20/80 (which incidentally fits the Pareto principle quite nicely) - so I am quite ready to believe that a proportion of people (for whatever reason) are not capable of trading successfully and maybe they are flogging a dead horse?
I've tried my methods on the major fx pairs (why is fx so popular?) and when it works it's great, but oh! the wait for the right setups - can't be doing with it when I can usually find at least 2 or 3 on the Nasdaq100 every day. And when I get fed up with that there are thousands of other instruments.
My advice to anyone interested in this is to read Millard's book(s) and then Hurst's if you get hooked. It will involve you in a load of hard work, you won't get rich overnight if at all and there's every chance it won't suit your temperament or objectives. Over the years I've studied many books of systems and methods - many of them really excellent (You can do a lot worse than Captain Currency's 3 Ducks - made loads of dosh for me) - but it all takes time patience and determination. In this game you have to kiss a lot of frogs before you meet Prince Charming!
timsk
Legendary member
- Messages
- 8,714
- Likes
- 3,417
Aha, an important word and, I suspect, therein lies the difference in our respective opinions!
arabianights
Legendary member
- Messages
- 6,721
- Likes
- 1,380
This debate assumes that TA has any value on FTSE.
N Rothschild
Legendary member
- Messages
- 5,296
- Likes
- 603
well think about how many shares you have to buy of a stock to equal the tick value of an ES future? alot..
N Rothschild
Legendary member
- Messages
- 5,296
- Likes
- 603
