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Been working on this same concept for the past 3 months. If
anyone has done any type of extensive research on this subject
It would be most appreciated if you could post some info.
Does the SPX give more of a true indication of the direction of the
SP? Without false movements created by the Pit.
Does the SPX move first or does it follow the SP?
Does anyone trade the SP using signals generated by the SPX?
How about different time frames? 1 min for SPX...3 min for SP etc.
or vice versa.
Is the TRIN and VIX too far behind to use as a filter to trade the
SP?
Anyone with good research on these subjects? Please post.
Many thanks in advance.
Frank
Frank Cerrone
cerrone@xxxxxxxxxxx
-----Original Message-----
From: Gary Fritz [mailto:fritz@xxxxxxxx]
Sent: Saturday, July 10, 1999 3:10 PM
To: axiom1@xxxxxxxxx
Cc: 'Omega List'
Subject: Re: HELP NEEDED - $SPX as proxy for SP and ES Futures
> 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
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