future currency contract as an indicator

[cyberwiz]

Thanks for the input jasperforex. Any suggestion for a good place to check IMM?

Thanks,
Dimi

[jasperforex]

CMC's general news has it all on friday evening after the market shuts.

[united46]

Jasper

My reply was in relation to the comments about using futures in forex the same way as cyberwiz said they are used for trading stock i.e as a leading indicator to scalp on a 1 min chart.

Are you saying that this technique works in spot forex trading?

Always happy to hear new info if you have anything useful that you want to disclose.

Regards

DUFC

[jasperforex]

It works best when you get extreme speculation like this week in the canadian dollar. They were at a record 7 year high with something like 40000 longs as of Tuesday last week. This information came out on Friday after the close (you can get it from CMC's news on friday or MNI on monday) and you can see how it climbed monday. I was told to look for extremes and then a trigger event.

[united46]

Hey Jasper

You can ignore most of this. I think I misread/understood what you said. I think it was when you said long and said the market rose on Monday. I read that as long the cad. Of course, on the pair usd/cad, a rising market means a falling cad, just as predicted by futures data. Sorry for the confusion. Anyway, price action since then makes it look like we may have to wait a little longer!

I'm a bit confused now. Are you using the futures data to predict very short term action i.e hours to a few days or are you using them for longer term trends days to weeks.

I ask because when I look at the COT data on canadian, I see the commercials ( smart money) getting shorter and shorter and non commercials ( dumb money) getting longer and longer. When the differential gets to extreme, the commercials are usually correct.

I would thus use futures data to look for a chance to soon get long usd/cad i.e the opposite of your potential position.

Are you interpeting the data in a different way?
If so, I would be interested in knowing how you interpet it.

Thanks

DUFC

[Gamma_Jammer]

United 46

I don't think you can really use IMM ticks as a leading indicator for the spot market as the time lag is nowhere near enough (trust me, I've tried with a Reuters terminal and an EBS station and it's still not gonna work more than 1 time in 100 for the sort of trade you're talking about.)

S+P however does sometimes work pretty well, and for an exhorbitant fee you can even get a dial up line straight to the pit to get the price action live (big banks have this) but it hasn't worked any where near as well this year as it did a year or so ago. Just depends on what the market is looking at and at the moment geopolitics trumps equities.

But the one thing that you can do with IMM data (as has already been detailed in this post) is use the positioning data to skew your view on which side to trade from. The big players all look at this stuff and there are lots of stats out there. Some of the Custodian Banks also put out stats on their own clients' positioning (anonymous summaries only) as a proxy for the spot market in general. So they might for example say that their real money funds are net overweight EUR/JPy for example, but not which fund is doing what). for the big custodians thats a pretty reliable proxy for the real money portion of the market. but this kind of research is much harder to get hold of than the IMM stuff.

[united46]

Hi Gamma

I think our posts crossed in cyberspace!!!

No, that's the point I was making about futures as a leading indicator, it wouldn't work in my opinion ( although I've never tried it). In forex, it's totally different than s&p's where futures can work as a leading indicator although the last 12 months or so of lower volatility have even made this less reliable and you now take pennies rather than 10's, 20's etc.

Regards

DUFC

[Gamma_Jammer]

Exactly right.

I did however do something quite neat with the dax index many years ago (working at a small prop shop trading the futures on DTB)

We noticed that the index quote on our machine was pretty slow, as it was obviously calculated before it was sent out (probably same story for all the providers). As the dax only has 30 stocks or so, we simply took the individual stock feeds (which were much quicker to update), jammed them into a spreadsheet and updated the carry adjustment each morning to get a view on what the next tick in the futures was gonna be. Sometimes we'd know 3-5 seconds before our screens told us, that there was gonna be a big up or down tick in the dax cash index and hit the futures accordingly. Worked really well in slow markets, and not at all once the S+P pit opened in the afternoon.

Don't think it would work as well now as processor speeds are that much greater but was pretty cool at the time.