Intraday Cash–Futures Spread Trading with Bollinger Bands and MACD

Summary

This project outlines an intraday strategy for trading the spread between a security’s spot price and its futures price. It classifies futures trading above spot as contango and below spot as backwardation, then calculates the spread from one-minute prices. Bollinger Bands mark upper and lower spread levels; CCI and MACD are used to assess spread movement and confirm entry or exit signals. The strategy buys spot and sells futures at an upper-band signal, and reverses those legs at a lower-band signal.

The project also describes one-position-at-a-time trade tracking, a late-session entry cutoff tied to Indian short-selling rules, sizing based on available funds and contract lots, and profit calculations after trading expenses. It reports an approximate performance ratio but provides no detailed sample, costs, or validation statistics in the excerpt. The author recommends testing time frames by stock and notes that market conditions, costs, and changing strategy effectiveness limit the results; the claims should not be treated as established performance evidence.

Key ideas

• The strategy trades spot and futures legs when their price spread reaches Bollinger Band extremes.
• CCI and MACD are applied to the spread to help confirm entry and exit signals.
• The method tracks one open trade at a time and calculates position size from funds and contract lot size.
• The project accounts for trading expenses and imposes an intraday cutoff for new entries.
• Reported performance is not supported by detailed validation data, and the author advises stock-specific backtesting.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.