Thursday, April 10, 2008

Trading the SPI

I'm beginning to focus on trading the Australian Share Price Index (SPI) futures and seem to be improving. This morning is pretty typical. Typical trades only last for 2-5 minutes. First I was short, then short again, then long, short, and finally long. All the trades made money. As soon as a trade goes in my favor I move my stop which is initially 5 to 10 points away to give a one point profit. I often get stopped out of those trades for a one point profit. If the move continues to go in my favor I start moving the stop to trail about 2 to 3 points from the current price. Often though I get out of the trade with a market order and then cancel the stop. All of this is pretty easy on IB's platform. One point is worth $A25 (a contract is currently $A137.5k of underlying value) and commission is $A5 either way. So a one point gain is a $A15 profit. We'll probably see plenty of these and $A10-35 losses as well as the $A40, $A65, and A$215 type of trades you see here and less common $A260 or so kinds of losses if my original stop is hit. The next challenge will be hanging on through 20 point or so moves. Yesterday I managed to hang on for 15 points. Of course, widening my trailing stop is the way that is going to happen... More risk for more gain.

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