Aussie Rules
The Aussie 200 is ideal for practicing and building your day time investing abilities. Once you have a good understanding and feel of where the market is expected to move in a session and have your keyboard skills down pat you’ll be on your way.
CMC’s Aussie 200 is based on the Sydney Futures Exchange (SFE) Share Price Index futures contract, known as the SPI.
In turn the SPI is based off the S&P ASX 200 also known as the Cash Market. If you’re going to trade the Aussie 200 then you need an understanding of its underlying markets. Theoretically the SPI will trade above the cash market because of interests and less costs. If the SPI price is below the cash market we may see larger traders sell off large stocks and buy the cheaper index futures.
The SPI has 4 contracts per year and you would need to roll over your futures contracts, whereas the Aussie 200 just trades straight and there’s no need to roll over the contracts. Nonetheless you have to be aware that in the rollover week in the SPI market (third Thursday each four months) there is a lot of open interest being closed out that can lead to things becoming really erratic for a while.
A benefit of the Aussie 200 CFD is that you can buy one contract costing around $50 and that contract is equal to $1 per point on the index. This is perfect for practicing the psychology of moving in and out of the market. The Aussie 200 is more cost effective than the SPI in terms of margin requirements. As rough example one SPI futures contract would cost around $4,000 whereas the equal to that would be 25 Aussie contracts totaling $1,250 – 70% cheaper.
Understanding market movement
The SPI and the Aussie 200 are operating all through the US evening and the price tag will be affected by offshore traders who are entering during their daytime buying and selling hrs.
A usual days quantity for our SPI would be 10,000 contracts and a big day 20,000 during the evening hrs. Close to 1,000 contracts are traded and the spread will widen and stops ought to be adjusted. These evening markets at times can leave investing gaps from a single working day to the following and traders must be aware of these gaps as the SPI has a very powerful tendency to cover them.
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The Dow Jones and S&P 500 affect our night markets, creating trading gaps the following day but how far the Dow moves in points, may or may not affect our trading day: if the Dow moved under 100 points our market may not necessarily move in the same direction; 150 and 200 points have different effects also and depending on our opening we would or wouldn’t take the opening trade in that direction.
Essentially each market has its own identity. During our trading day it may be more important to look for a lead via BHP and study its market depth, to see who’s in control. Where is the wholesale money – large orders: are there any undisclosed orders sitting on the bid or ask? Undisclosed orders in BHP can create buy or sell orders in the SPI and in turn affect the Aussie 200 all at the same time! And if you’re day trading, the cash market is a smoother read as the Aussie and the SPI tend to be slightly erratic.
Understanding session attributes
When the SPI and Aussie open at 9.50am they normally move around 10 points in 10 minutes until the ASX opens at 10am – the ASX opening range is about 15 minutes; the market takes 15 minutes to fully open from A to Z (USA opens in 90 seconds), so we can expect the Aussie to start finding a trend between 10.10am to 10.20am. Using a mechanical system, I like to take the breakout of the fourth 5 minute bar either side and have a target of 5 points, then exit. This is just a simple mechanical system with a little logic behind it, but there are many little mechanical systems you can apply at different times of the day depending how much volume is flowing into the market.
Size will dictate what time frame I will view the industry in – two, five, or 10 minute bars, to filter out the noise. If the quantity on the SPI is a medium working day the amount is only 5,000 contracts prior to lunch. I don’t start trades in between 11.30am to 2:30pm – the long lunch periods have fewer trades and can be choppy. For me there is the morning session and the afternoon session and I see them totally differently. The morning session for me is broken up into three parts: the very first ten minutes, the following 15 minutes then the morning run till lunch.
I will treat and buy and sell all of them separately, for instance if the industry has opened high simply because of the night market it might attract new buyers in the first 20 minutes – the industry has a habit of relocating down strongly getting out stops close to 15/20 points before relocating up for the day, say 30 points – then I discover a easy mechanised technique functions finest, as it comes with all the principles for investing set in spot,- entry stop, trailing stop and reversal. Even though I have a reasonable feel for the market, I nevertheless use a physical procedure with trading principles for day time investing. I also use my Investing Levels, that is the Fibonacci numbers, as price tag.
TradingLounge.com.au and the TradingLevels Analysis Service have been developed by Peter Mathers to meet a growing demand for accessible, sensible education and his TradingLevels-based analysis. Delivering high quality analysis and trades recommendations for shares, CFDs, forex trading, indices, commodity, the TradingLounge has been in strong demand growing from strength to strength. Peter is author of “Trading CFDs in Today’s Markets”.
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