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Re: HELP NEEDED - $SPX as proxy for SP and ES Futures



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> Currently, I am using the S&P500 index as a proxy for the SP and
> e-mini futures in my tests of daytrading systems. Would the results
> be valid? 

It's possible to profitably trade a system written on the SPX.  
HOWEVER you will not see the same results you see in your system.

The SPX is smooth and "clean" and gives much prettier results than 
SP.  The futures whip around a lot more, moving sooner and farther 
than the SPX, making it a much "noisier" signal.  For example when 
the SPX does a smooth move up 0.5 handles, the futures might spike 
1.0-1.5, and they will do it sooner than the SPX's move.  If you had 
an entry stop at that 0.5 level, you might find that the SPX system 
reports an entry at 1234.50, but you actually got filled at 1235.0 or 
1235.5.  So, especially if you enter/exit on stops, your entry 
(assuming you enter at the moment when the system signals) will be 
significantly worse than the system reports.

I haven't traded a system using the SPX as a proxy, so I don't have 
solid stats on the change in the SPX-SP "spread" on upmoves and 
downmoves.  There is no way in TS4 (as far as I know) to run a system 
on the index and report actual fills on the future.  I suggest you 
develop your system, then try running it in realtime on the SPX with 
the SP displayed in a 1-min chart.  When your SPX system fires, look 
at the worst tick in the next 1-min bar.  (That's assuming you have a 
fast broker or electronic entry.  If you have a slow broker, better 
look at the next several minutes.)

Track the system like this for a while, and get a feel for the 
difference between your paper profits on the SP vs. the reported 
system profits on the SPX.  That will give you an idea of whether 
your system is viable.

I generally like to see a per-trade profit of at least $500 or so for 
a good system.  If you trade on the SPX, as a rough guess I'd say you 
should probably look for a per-trade profit of $1000 or more to allow 
for the "slippage" from the SPX-SP spread.

Gary