jan 2014 chart thread, page-4

No, I don't specifically trade the Iron Ore Index as such.

I just use it as guidance for the stock's within it.

The idea came from wanting to trade stocks 'long', and wanting to see both the parent index (XJO) and the sector index (in this case the XMJ) moving in harmony with each other (bullish) & the individual stock I wanted to buy.

Sadly during the year, the Gold stocks were dragging down the XMJ and giving it a bearish look, even though the Iron Ore stocks were bullish within it in the second half of the year.

So after some thinking about it for a while, and having some discussions with Bones via email (who had already begun making some specific sector indicies, using the highest correlated stocks within the sectors), I built a couple of different versions for testing the specific sectors using Excel.

Although the different Indicies are still being tested & improved over time, the benefit of following them (combined) was almost immediately apparent.

So I rarely look at the XMJ now, as I have split it into different 'specific' sectors, like Iron Ore, and Gold etc.
(Bones has gone ever further and split Gold into Producers & Explorers)

It appears far more accurate to drill down into the sectors in this way, at least so far anyway, rather than using the broad indicies that are usually watched.

Further improvements are still to come.

cheers