Trading Global Indices (S&P500 and DOW) on NSE

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NSE is launching two new contracts to trade S&P500 and DOW Jones futures from India.

All Indian residents are allowed to trade on them. It is as simple as selecting the right contract name and placing order for that. That is the easiest part of trading (and probably the biggest root cause of such a high of failure rate). More important is to understand the instrument that you are trading and their price behavior, before risking your money on it.

I trade S&P500 e-mini contract regularly hence I can share my experience on it. Here are some of my observations

  • Majority of trading in S&P and DOW futures is during US market hours. During Asian and European session hardly 10 to 15% of trading gets done.
  • During asian session, price generally remains in a range. Hence one of the strategy traded by European traders is  “Breakout of Asian Range”.  As our market hours overlaps with these 2 sessions, probably it will be good idea to look out for breakout of asian range during Europe open.
  • On the days where there is important news announcement is due in US, price movement gets very range bound on these indices.
  • Almost 80% of trading on them is controlled by algorithms, computers, trading robots etc.
  • They are more sensitive to economic news announcements in Europe /US and show great correlation (+ive or -ive) with other asset  class like oil, gold, bond, currencies etc.
  • There have quarterly expiry cycle. It expires on 3rd Friday of Mar,Jun,Sept and Dec.
  • In general, S&P is very sluggish instrument where price can remain in 2 to 3 tick range for 20 to 30 minutes. So better to watch.
  • These instrument can be a good hedging instrument, to protect the portfolio against overnight risk of events in US /Europe market after our market close.  Currently, these events result in Gap open in our market and hence players are exposed to the risk of GAP.

These are some of my observations at this time. I am certainly going to monitor the way trading picks-up in these instruments.

Please feel free to post a comment below or raise a question if you want to ask anything to me.

Happy Trading

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