Hi All:
I have been trading the ALSI 40 (The South African All Share Index) for some time and would like to share a little of what I have been up to as well as invite input around this cunning yet rewarding 'little' index.
I'll kick off by giving anyone actually reading this an overview of the chart itself, why for me its been a moderate success and a few of my own observations and insights gained over the last several months.
This is by no means exhaustive, but its my take on the instrument.
The index is made up of the top 40 South African companies by market capitalisation. What I find particularly exciting is it comprises a blend of well-resourced, frequently internationally recognised brands, in pretty much all the exciting arenas. There is SAB (Peroni/Millers anyone?), Billiton (Minerals), Anglo (Diamonds), Richemont (Luxury goods/Cartier etc) and Sasol (the first company to turn Coal into Oil). This makes it comparatively volatile, as its segments to my mind are made up of industry sectors which do move and are frequently sensitive to political/geographic/fundamental influences.
So what?
The question you are likely to be asking at his point is obvious. So what. By a simple process of logical deduction, the team that I trade with are constantly scanning the market for high Average Daily Range charts. We take a number of variables into consideration (which I won't drill into too much right now) the most important initially being how much does this chart actually move on average every day. By proxy, if I want 30 pips/points/ticks per day as a target, its unlikely a chart like NZDCAD is going to give this to me as its moving an average of less than 100 a day at the moment.
The ALSI moves by as much as 1,000 ticks a day. It suggests my odds of hitting a reasonable target with an opportunity of 1,000 vs 100 is better with chart 1 right?
I am based here in London so the next step was the choice of broker. I may deal with this in a separate post but the South African banking system is ranked/rated very high in terms of security and reliability etc. The short version is to open a non-resident account in SA (all done online) with one of the large banks. Many are affiliated with banks locally in the UK (ABSA/Barclays) so its 'easy'. The reason I suggest this is there are no good European brokers who offer the ALSI as an option, and the one I am aware of (IG) can charge as much as a 30 pip spread. (I am going to refer to the values in pips for purposes of consistency.) In hours trading, the index is open from 8:30 to 17:30 GMT + 2, this does drop to closer to 8 pips but quotes are frequently well off the live price and of course you need fill, which can widen this gap significantly. Going with a local broker can be as competitive as 1 pip per side and a 1 pip fee/cost, making a round trip/spread of only 3 pips. Not bad. Anyone wanting more detail can ping me directly, I don't wish to be accused of promoting a commercial agenda. Remember of course your nominated currency will then be in Rands, meaning you have to out-trade the fluctuations in the rate of exchange with your home currency, but I have had a few instances where a deposit a week ago has grown by several % based purely on the change in the FX rate.
I'll end this post here and begin a new one outlining the more technical elements of the chart.
As aways, questions/comments welcome. And try to play nice.
I have been trading the ALSI 40 (The South African All Share Index) for some time and would like to share a little of what I have been up to as well as invite input around this cunning yet rewarding 'little' index.
I'll kick off by giving anyone actually reading this an overview of the chart itself, why for me its been a moderate success and a few of my own observations and insights gained over the last several months.
This is by no means exhaustive, but its my take on the instrument.
The index is made up of the top 40 South African companies by market capitalisation. What I find particularly exciting is it comprises a blend of well-resourced, frequently internationally recognised brands, in pretty much all the exciting arenas. There is SAB (Peroni/Millers anyone?), Billiton (Minerals), Anglo (Diamonds), Richemont (Luxury goods/Cartier etc) and Sasol (the first company to turn Coal into Oil). This makes it comparatively volatile, as its segments to my mind are made up of industry sectors which do move and are frequently sensitive to political/geographic/fundamental influences.
So what?
The question you are likely to be asking at his point is obvious. So what. By a simple process of logical deduction, the team that I trade with are constantly scanning the market for high Average Daily Range charts. We take a number of variables into consideration (which I won't drill into too much right now) the most important initially being how much does this chart actually move on average every day. By proxy, if I want 30 pips/points/ticks per day as a target, its unlikely a chart like NZDCAD is going to give this to me as its moving an average of less than 100 a day at the moment.
The ALSI moves by as much as 1,000 ticks a day. It suggests my odds of hitting a reasonable target with an opportunity of 1,000 vs 100 is better with chart 1 right?
I am based here in London so the next step was the choice of broker. I may deal with this in a separate post but the South African banking system is ranked/rated very high in terms of security and reliability etc. The short version is to open a non-resident account in SA (all done online) with one of the large banks. Many are affiliated with banks locally in the UK (ABSA/Barclays) so its 'easy'. The reason I suggest this is there are no good European brokers who offer the ALSI as an option, and the one I am aware of (IG) can charge as much as a 30 pip spread. (I am going to refer to the values in pips for purposes of consistency.) In hours trading, the index is open from 8:30 to 17:30 GMT + 2, this does drop to closer to 8 pips but quotes are frequently well off the live price and of course you need fill, which can widen this gap significantly. Going with a local broker can be as competitive as 1 pip per side and a 1 pip fee/cost, making a round trip/spread of only 3 pips. Not bad. Anyone wanting more detail can ping me directly, I don't wish to be accused of promoting a commercial agenda. Remember of course your nominated currency will then be in Rands, meaning you have to out-trade the fluctuations in the rate of exchange with your home currency, but I have had a few instances where a deposit a week ago has grown by several % based purely on the change in the FX rate.
I'll end this post here and begin a new one outlining the more technical elements of the chart.
As aways, questions/comments welcome. And try to play nice.
In life you get 3 types of people, those who can count and those who can't.