21.11.201907:16 Forex Analysis & Reviews: Spread Trading on US and EU Indices

Long-term review

Tieto informácie poskytujeme retailovým a profesionálnym klientom ako súčasť marketingovej komunikácie. Neobsahujú investičné poradenstvo, investičné odporúčania, ponuku ani výzvu na vykonanie transakcie alebo použitie stratégie na finančných nástrojoch a ani by sa tak nemalo s nimi zaobchádzať. Minulá výkonnosť nie je zárukou ani predikciou budúceho výkonu. Spoločnosť Instant Trading EU Ltd. neručí a nepreberá žiadnu zodpovednosť za správnosť a úplnosť poskytovaných informácií ani za stratu, ktorá by vyplynula z akejkoľvek investície založenej na analýze, predpovedi alebo iných informáciách poskytnutých zamestnancom spoločnosti alebo iným spôsobom. Celé vylúčenie zodpovednosti nájdete tu.

After having seen the different performances among some US and EU indices, let's see it on a chart and briefly introduce a very important concept in trading: spread (or pairs) trading.

It's something that few retail traders use, preferring to go outright (taking a risk directional position); at the opposite, it's very uncommon that institutionals will work without having somehow covered their risk with a spread.

What you need to do is to find 2 securities that have some common characteristics (geographical area, sector, etc) and can show a somehow correlated trend in the long term. Ok, properly they should show co-integration, but let's keep statistics out of this for our purpose. Then you go long one and short the other, playing the spread.

Here you have a chart of the difference in the performance between SP500 and DAX, first one daily since the end of 2017, and second one on a 2h timeframe since Aug 2019.

I'm leaving up to you to think about it and which strategy you could imagine going forward.

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