Backtest comparison between FDAX future and the underlying DAX index

[Callethyou]

Hi,
I know it seems illogical to test on the underlying index’s / asset’s (DAX index) tick data when I have the traded instrument’s (FDAX future) tick data but still I am curious about the massive difference between the two data series when backtesting.

Simply put my main question is: do you have any idea why there is such a massive difference result wise between the FDAX Future versus the DAX index (total net result 1100 points versus 4500 points) when backtesting utilizing tick data based price bars (SIBackTestRenko, Range Bars etc.) when the strategy applied and other settings are all identical between the two backtests - just changing Data Series – from 2000 ticks DAX to 40 ticks FDAX?

What I can optically see in the charts when comparing is that the FDAX future chart generates more price bars, more signals and the price seems to be more volatile relative the DAX index.
Any underlying logic for this “behaviour” according to you?

Thanks//

//TB

[NinjaTrader_DaveI]

Hello,

I would expect exactly that kind of result in this particular setup. Since the DAX and FDAX are different instruments, they can be expected to have different market prices, which would affect backtest results. Also, since you are using different bar intervals, the strategy has much different bars data to work with, which affects order submission timing, and can affect your strategy conditions.

When you backtest over the same time period with a 2000 tick interval and a 40 tick interval, it would be expected that there would be a much larger number of 40 tick bars within that timeframe, as well.

[Callethyou]

Hi,

the thing is though that changing from 2000 ticks DAX to 40 ticks FDAX means the same Range bar size - 20 points in the charts.
The DAX index tick size is 0,01. Take 0,01 times 2000 = 20 DAX points.
The FDAX future tick size is 0,5. Take 0,5 times 40 = 20 FDAX points.
So to me the starting point is the same - Range bars of a 20 points size in both charts.
Then the DAX index is the underlying asset for the FDAX future which means that the price movements for the DAX index and the FDAX future should be pretty
much the same - right or wrong?

If you say yes on the above question then I am still puzzled and still not clear about what exactly causes the massive difference in the backtest results?

Is there any way to translate the DAX index setup into the FDAX future setup if my current DAX index setup is not applicable/equal for one reason or the other
so the backtest result of the FDAX future will somewhat replicate the DAX index backtest result?

Thanks//

//TB

[NinjaTrader_DaveI]

Hello,

I see what you mean about the Range bars. That would make sense, considering the tick size for these instruments. However, I would still expect to see different results on these two instruments. Even though DAX futures are a derivative of the DAX index, the DAX futures price should be based on traders' expectations of future price for the DAX index on the futures contract's settlement date, rather than the current price of the index itself.

For example, comparing today's prices of these two instruments, I'm looking at a 5-minute bar from 5:40pm MST today, and I'm seeing a 11433.27 high for the DAX, and a 11444.50 for the FDAX. That's nearly 11 points of difference on the same bar.

Because of this, you will likely not be able to duplicate strategy performance between these two instruments. The price action will be too naturally different to fire off the same conditions at the same time.

[KarstenKafl]

I think my question is a bit close to this one - and I think i dont completely understand but here goes:

Basicly - can the FDAX price ever have any impact on the actual DAX price?
(my question was originally for the ES futures vs S&P500 index)

If 50 trillion traders buy FDAX - i assume that the FDAX future price would rise but that can never have impact on the DAX - right? Or what am i misunderstanding? :-)

[NinjaTrader_Marco]

Hello,

Thanks for your post.

They both follow the same underlying instrument, and the difference is that they are just large or small units. If one is higher it can be sold, and the lower one bought with the expectation of them coming back in to line again and the position flattened. This is called arbitrage and many traders do this to bring the two instrument values together

As the markets are both priced online in real time and can therefore be monitored print by print by anyone looking for discrepancies in price to exploit, prices stay in line.

Please let me know if I may be of any further assistance.

[KarstenKafl]

But we talk about FDAX is future and DAX index - right?

And again - just to be sure - can DAX index change value - because a trillion trades happen at FDAX?

[NinjaTrader_Marco]

Hello,

Thanks for your reply.

The Dax is an index which measures the total return of the German 30. As the value of the index is tied to the performance of the stocks, a drop in the futures instruments in an overnight sessions would mean that sellers agree the index is going to go down when the market opens. If they are right, they make money, if they are wrong they would lose money and the spread is filled in by arbitrage traders bringing the futures back in line with the index's value.So regardless of the amount of trades placed on the Fdax- it still follows the Dax index.

Please let me know if I may be of any further assistance.

[KarstenKafl]

Thanks Marco

So - what i think im asking - if i trade Futures - like ES - or FDAX - and i have strategy based on volume profile, bid/ask, delta - and some more things - is that basicily not making sense - if all the volume/bid/ask/delta etc. in the world - can never move the ES? - sinse the only thing that moves ES - is only the Index S&P?

I believe what im asking is not "true" - but i have hard time understanding how the futures actually work.

If I sell 100.000 ES futures - will that have no impact on the movement of ES?

[NinjaTrader_Marco]

Hello,

Thanks for your reply.

The ES is it's own instrument and can have a different valuation from the index. If you sell 100,000 contracts all at once, it will likely cause the future to decrease significantly the price of the contract. Many people will buy these undervalued contracts and will bring the price back up to the value of the index and profit off the big loss you just gave yourself.

Having said that, this is becoming a bit far from the scope of NinjaTrader Platform support. You may wish to reach out to a trading education website for more information on this concept.

If you have any further NinjaTrader inquiries we may assist with, please don't hesitate to ask.