Tuesday, October 23, 2007

Trading HSI

Thinking about trading HSI, the index of Hongkong shares traded on the HKFE. It's 50 HKD/tick which is about 7 USD/tick and it trades in 1 point increments. It used to be a great trading vehicle. Fast, but managable. But since August it is no longer that, it's just a wild animal.

On this chart each bar represents 25 ticks or 175$


That breakdown was worth 2240 USD, the following upswing range from the low another 1750 USD.

Problem is, it's so extremly thin, that it now has spreads of 30 or more ticks in a fast move, which was 2 to 8 ticks prior to August. By thin I mean the size flashed on the exchange. The volume itself isn't thin, just this volume is not displayed, which makes these break ups and downs so fast.

Still intraday you can handle it, if you are a fast finger trader, but what it did today might throw off even real good traders. Suppose you hold a short HSI over night and wake up with this:


Yes, that's a 850 point gap. In real money that's a 5950 USD Gap. And I can tell you it is a 50% chance that you get that one right, why?


On Monday it was 750 points down. Well...it seems it balances out over time:-)