After trading the DAX, I moved to the Eurostoxx 50 due to less volatility of the index. As every trader, forecasting is somewhat of the only added value we have. Besides, many online "forecasts" to me sound more like horoscopes. After studying its dynamics, I still have not 100 % figured the best way to forecast this index. A) Technical vs Fundamental analysis? B) Do you consider the VIX?
What factors do you use to forecast the Eurostoxx 50?
- Thread starter andreasjkoenig
- Start date
The Eurostoxx 50 is highly correlated with the S&P 500 (presently sitting at around 0.96 by my math). So any technique used for forecasting the S&P should work similarly on the Eurostoxx 50. The correlation can diverge, and does, so you need to be aware of that. Perhaps there is some edge in the divergence via a pairs trade.
So how did you trade the DAX? You apparently do not see much value in forecasting (which I don't find surprising). And why do you think that you need to treat the ESTX50 differently than the DAX?
By the way, if you feel that the ESTX50 is still too concentrated (only 50 companies in the index versus 30 in the DAX), you could consdider to take a look at the Euro STOXX 600 (https://www.eurexchange.com/exchang...ture?hiddenSetMaturityDate=201912&timeSpan=3M). It behaves very similar to ESTX50 but consists of 600 European companies. Also, the futures contract size is smaller and thus the value volatility of one contract is smaller.
MattZ
Sponsor
You can develop a long term view on an index (albeit it's difficult), but you need to also develop a risk management program that is quite technical in nature. Leveraged products are hard to trade fundamentally unless you are well-capitalized and have truly know how to interpret overwheling and repetitive amount of news.