The influence of the DOW ?

[alanb41252]

I have been index trading the FTSE100, DAX and DOW with Financial Spreads for a couple of weeks now.

I have come to the conclusion that if you enter into a trade on the FTSE100 or DAX in the morning and this trade continues past about 11.30 am, the whole thing can be 'ripped apart" by what I assume is the influence of the DOW. ie. market perception of how and where the DOW will open.

Almost on a daily basis I have seen the bet prices on the FTSE and DAX become totally "unhinged" from reality and head far south while the market price remains in the north.

Being in profit and holding out for my target profit, I have frequently seen my trades turn around and go off to be stopped out at a vast rate of knots.

I have therefore concluded that if I enter a trade on the FTSE or DAX in the morning, then it is best to get out before noon - otherwise the American influence will, more than likely, have me stopped out.

Does anyone have any comments or advice on this ?

 

[oatman]

US still Rules

 

[stevet]

all markets will tend to trend together, with the greater markets obviously having the greater influence, and the sector make up of each of the main indicies again having an effect, and since Europe closes before the US, the US close will affect the European market the next morning, in concert with Asia, but since this is a delayed reaction, and the next morning is a brand new day, as the european day progresses from the open divergence can appear from the prior days US sentiment and with new US news

 

[Finlayson]

There is no doubt that the US markets have an influence on the European. The affect obviously depends on how the market has already traded i.e. if the market u r trading is already exhausted then a further influencing move wont have such a great affect , it will just further the trend u r already hopefully in.

it depends on your style of trading, but for me if I am already in a trade by the US open then is doesn't matter what US does, as market will either be heading for my 'exit', or I will be taken out with a protective stop.......which is the plan anyway.

For me I just find it wise to avoid entering a trade at this time because of the volatility, so any signals sometime before 2-30 & after the open for me is ok.

but yes I agree they r definitely influenced by the US, just pays to be aware & cautious at the open.......but if u already in & US goes your way....great

jay

 

[Trader333]

Check the US futures to give an indication of whether the US will open up, flat or down.

It is also possible that the spread is being manipulated to take out your stop and this is a discussion that has been had on here before.


Paul

 

[alanb41252]

Paul, I am aware that stops are manipulated but would they bother for a relatively small stake ?

I was only betting a pound a point.

But yes, I have been stopped out a few times when the market price is nowhere near my stop and I do get an uneasy feeling that somebody is going after my stop.

My imagination or not ?

 

[stevet]

can be good to remember that the US futures are going to move generaly in tandem with the european futures during the morning -so in fact even if the US is weak, if european markets rise strongly, the us furtures have to rise with them (mostly because of intermarket arb), even after a prior down US day, so going short at the first sign of weakness at the US open can be real good, and the other way round as well

it was possibe a while ago to move Europe by playing the market depth on the eminis - but thats pretty much a dead game now = there is never manipulation in the markets - just someone trying to make a buck!

 

[stevet]

blowing out stops is a key part of trading - have a think about it and next time go short at the same place u would normally plan to put your stops for a long position - and make a few dollars!

 

[alanb41252]

Thanks for the tip Stevet.

 

[TheBramble]

Influence of the DOW on the UK/EURO market? Yes, but...

The UK I feel does react differently to perhaps much of continental Europe.

Us Brits tend (as a general rule and perhaps us traders aren't the norm, but I suspect from FTSE action - we are) to prefer the 'glass half empty' point of view.

If the DOW's making new highs we MIGHT be tempted to follow, but only if it's early in the DOW's opening. If the DOW tops after the UK market closes, you will not often find us mirroring the U.S.'s 'exuberence' on our open the next day - it will be largely discounted.

However, should the DOW take a dive, in or out of UK hours, we'll plumment like a stone.

I believe we (Brits) are more 'ready' for bad news (shorts) than good.

 

[alanb41252]

Paul, what's a good time to check out the Dow futures to get a pretty clear indication of DOW strength or weakness ? Midday London time ?

 

[Trader333]

Alan,

You have said that at 11.30am things start going astray so I would check them at that time. I would also do an analysis of when these prices are a long way away from reality if the US does open in that direction or otherwise. If it doesnt then I would suspect spread manipulation. From what you have said there may well be an arbitrage opportunity in that if the FTSE is a long way South of the real price then I would be tempted to buy with Fins and sell with IB because at some point they should converge.

Cheers


Paul

 

[stevet]

unless you are a real experienced trader - it is always best to assume that all pricing is always correct and not try to second guess value - hundreds of millions of dollars are utilised everyday by the big companies arbing across all intermarket opportunites and these guys dont pay commision, get the tightest spreads, have robust and highly tuned trading programs and the fastest access to exchanges, and will arb for a cent - thats not to say you cant join the game - because you can - but if it looks too good to be true - assume it is first before you join the party

and the only people who think that pre-open US futures forecast market direction are the reporters on CNBC and Bloomberg!

 

[brumod]

ja, have you also noticed that DOW can affect it in a very positive way.
when I spread on the ftse100 i spend a lot of time reading up on news regarding the DOW so that when DOW opens I am Prepared by having already sold or hold onto it.

 

[Finlayson]

brumod

yes makes sense.

& if your chosen market has been range-bound all day the US market can often give it the 'kick' it needs to move out of that range.

i just find the open sometimes a little choppy so prefer to wait a while for a good signal........but if u r already in the right way...........fair play!

jay