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Eurex Products Advice - FDAX/FDXM/FESX


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Eurex Products Advice - FDAX/FDXM/FESX

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  #1 (permalink)
Cardiff, UK
 
 
Posts: 30 since Oct 2020
Thanks: 21 given, 6 received

Good day,

I am new here and would very much appreciate some guidance in terms of trading Eurex products. I have read some previous posts on this area but some things within the threads I still wouldn't mind some clarification.

I am UK based so this market works well around my timeframes. I have been looking at the FDax, FDxm Mini Dax and FESX Euro 50.

My plan is as follows. With regards to my analysis: I am using Sierra charts and mostly looking at TPO/VPO/Footprint(Delta/C.Delta) to form some idea of bias.

Long-term this is not a lifestyle change but more a way to supplement my income (thats the plan anyway!).

In terms of execution I am using a broker to trade the CFD equivalent of the underlying exchange product so that I can reduce my risk to an acceptable level that I am happy with. The broker I am with currently seems to track the underlying instrument with its CFD Derivative quite accurately - although the charts track quite well but the actual point level of the CFD is slightly higher say 20points which I can't quite wrap my head around - perhaps someone could elaborate?


* In terms of DAX analysis does it matter if I use the FDAX or the FDXM. I know the FDAX has more volume and from what I have read here in some other posts that it forms a tracking basis for the underlying Mini? I.e the Mini sometimes moves without any trades on the DOM? Is this correct?

*I like the logic behind Delta/C.Delta and Absorption. Given this which would be the better instrument to trade.
- Is there anyone here doing this with much success?
- Would trading the FESX be a better option given its higher volume for this method of trading? (The CFD Equivalents for Euro 50 tend to have much higher spreads which is why I have been focusing on the DAX for now)

* With regards to CFD's I have always wondered how the underlying process works. I have read articles where the broker will hedge against the client sentiment on its CFD in the opposite direction on the actual underlying exchange - Is this true? or have I misunderstood something along the way here?

Finally, I wanted to discuss whether I am on the right track here with the plan above, or I am heading myself down the garden path in the wrong direction!

Any guidance, help and advice always taken with an open mind and gratefully appreciated! Thank you in advance!

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  #2 (permalink)
Switzerland
 
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Hi Dazzc,

just a comment to Cum Delta - keep in mind that this behaves in different markets very different. there are "thin" markets like the FDAX and much "thicker" markets like the FESX, I've read somewhere that CD not that usable in all of them. But I can't explain it correctly. You should do a lot backtesting when you transfer your FDAX ideas to FESX.

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  #3 (permalink)
Europe
 
Experience: Advanced
Platform: TradeNavigator, BookMap
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You mentioned that you see different prices if you compare futures and CFD's. This happens because most CFD-brokers will give you cash-prices and not futures-prices. So you have to compare the cash DAX with your CFD and not the FDAX (just an example). Another advice: if you want to trade the FDXM, you should always chart the FDAX.

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  #4 (permalink)
Cardiff, UK
 
 
Posts: 30 since Oct 2020
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askerix View Post
Hi Dazzc,

just a comment to Cum Delta - keep in mind that this behaves in different markets very different. there are "thin" markets like the FDAX and much "thicker" markets like the FESX, I've read somewhere that CD not that usable in all of them. But I can't explain it correctly. You should do a lot backtesting when you transfer your FDAX ideas to FESX.

Thanks for the info @askerix

I read somewhere that the GL Gold market seems to respond well to absorption and passive sellers/buyers but maybe someone else can elaborate more on the best markets for c.delta analysis. As well as my other queries

Thanks again.

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  #5 (permalink)
Cardiff, UK
 
 
Posts: 30 since Oct 2020
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tr8er View Post
You mentioned that you see different prices if you compare futures and CFD's. This happens because most CFD-brokers will give you cash-prices and not futures-prices. So you have to compare the cash DAX with your CFD and not the FDAX (just an example). Another advice: if you want to trade the FDXM, you should always chart the FDAX.

Thanks @tr8er

You are 100% correct the Futures CFD's tracks perfectly thank you. Although the spread on the Futures CFD is alot worse in the region of 30 compared to 6 if I traded the cash if I traded the same margin and made a market order. I guess it wouldn't make much difference if I still traded the cash equivalent (??) as long as I just added/subtracted the points difference between CFD Cash & CFD Futures and took into account this difference - as it tracks the same but obviously with a higher value.

Cheers again.

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  #6 (permalink)
Cardiff, UK
 
 
Posts: 30 since Oct 2020
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tr8er View Post
You mentioned that you see different prices if you compare futures and CFD's. This happens because most CFD-brokers will give you cash-prices and not futures-prices. So you have to compare the cash DAX with your CFD and not the FDAX (just an example). Another advice: if you want to trade the FDXM, you should always chart the FDAX.

Also I see so you mean now I.e. compare the "DAX Index Cash (DYY00)" to the Cash CFD. Cheers.

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  #7 (permalink)
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Wiltshire, United Kingdom
 
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I wouldn't use market orders in a thin product like the DAX as you are automatically trading on the expensive side of the spread and probably going to get slippage too. It depends how actively you intend to trade. If short term trading with a fair few trades a day that spread can get very expensive and wipe out any potential profit.
One of the reasons people trade futures is because they are traded on a single exchange and everybody sees the same price. Also the trading platforms allow you to place an order anywhere on the Depth of Market (DOM), so you can try and enter on the favourable side of the spread.
On the otherhand, although I have never traded CFDs, I believe they are like spot forex markets, no central exchange so the brokerage you trade with sets the price. Therefore they are a market maker and do take the opposite side of your trade to facilitate instant trade. So you trade against your broker who is making up the prices you have to trade at. (CFDs are banned in the US).
If interested in shorter term trading then when I was interested in spot forex quite a few years back, the platforms were all commission free to attract traders who wanted to "trade for free". They made their money setting the spread. So when you buy you buy at the high price of the spread (and your broker sells it to you), and vice versa for selling. So they always profit on the spread and you can't. I presume CFD brokers are the same.

Some people like thick markets some like thin. The FESX and the DAX are thick and thin as Askerix said. Thin markets are move fast, thick markets move more slowly relatively. Depending on how you intend to try trading you are likely to favour one over the other.

The initial CFD DAX market you looked at will be a different price to the futures FDAX because it is a continuous contract. The futures contracts rollover every three months. The current FDX contract is December 2020 and looking at the Eurex website, priced at 12,536. The next contract is March 2021 priced at 12,640. These prices will come a lot closer together as we get to rollover date which I guess is in December like the US equity index futures.

If trading on a longer time frame use FDAX data for charting and vol profile, footprint etc then enter the trades in the cash market equivalent CFD with the lower spread. As Tr8er says if you want to trade the mini Dax, still chart the FDAX as it has much more volume so will be much better for your volume analysis compared to charting the FDXM which will probably give you very 'lumpy' looking footprint charts for example due to less volume.

No particular conclusion. Just some comments.

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  #8 (permalink)
Bamberg, Germany
 
Experience: Beginner
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Dazzc View Post

I am UK based so this market works well around my timeframes. I have been looking at the FDax, FDxm Mini Dax and FESX Euro 50.

My plan is as follows. With regards to my analysis: I am using Sierra charts and mostly looking at TPO/VPO/Footprint(Delta/C.Delta) to form some idea of bias.

Ive traded the FDXM and it has a lot of nice set-ups in the European morning. Have you considered the ES / MES at the same time frame? they have a lot more volume than the FDAX/FDXM, which might be beneficial for your methodology. There are also CFDs for the ES.

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  #9 (permalink)
Cambridge, UK
 
 
Posts: 23 since Jun 2012
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Dazzc View Post
Also I see so you mean now I.e. compare the "DAX Index Cash (DYY00)" to the Cash CFD. Cheers.

An American Broker like "TradeStation" "AMP" etc would allow you to trade Micro Futures - would that help ?

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  #10 (permalink)
Cardiff, UK
 
 
Posts: 30 since Oct 2020
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Thanks very much for the info @matthew28

Apologies for any daft questions but I am trying to learn.


matthew28 View Post
I wouldn't use market orders in a thin product like the DAX as you are automatically trading on the expensive side of the spread and probably going to get slippage too.

Would I be right in thinking if I am trading a CFD I guess I am always paying a min. small spread regardless of whether a market buy or limit buy is placed? for instance If I was to place a limit order with a CFD would that execute when the "market buy" price hits the limit order therefore I would always be paying some kind of spread or would it be the mid point between the buy/sell.




matthew28 View Post
On the otherhand, although I have never traded CFDs, I believe they are like spot forex markets, no central exchange so the brokerage you trade with sets the price. Therefore they are a market maker and do take the opposite side of your trade to facilitate instant trade. So you trade against your broker who is making up the prices you have to trade at. (CFDs are banned in the US).
If interested in shorter term trading then when I was interested in spot forex quite a few years back, the platforms were all commission free to attract traders who wanted to "trade for free". They made their money setting the spread. So when you buy you buy at the high price of the spread (and your broker sells it to you), and vice versa for selling. So they always profit on the spread and you can't. I presume CFD brokers are the same.

I've read a few articles re this but could never quite 100% understand the process - In terms of when when the broker sells to you when you "market buy" within their product. Are they actually placing a trade within the actual exchange or just offering liquidity in house?

I could never quite understand if this was true then why do their CFD's track exactly how the underlying index tracks. So they sell to you and just hope that you are wrong as even though they are a market maker their product is driven off the underlying indices.




matthew28 View Post
If trading on a longer time frame use FDAX data for charting and vol profile, footprint etc then enter the trades in the cash market equivalent CFD with the lower spread. As Tr8er says if you want to trade the mini Dax, still chart the FDAX as it has much more volume so will be much better for your volume analysis compared to charting the FDXM which will probably give you very 'lumpy' looking footprint charts for example due to less volume.

This is how I am looking to go - cheers.



matthew28 View Post
No particular conclusion. Just some comments.

Even so, Thanks for the comments!

Finally forgive the nosiness but I notice you are UK trader trading ES. I'm wondering what setup you use to get the best data/platform and broker in terms of cost effectiveness.

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