Using ETF Returns to Trade MSCI Futures

Summary

This note describes a five-minute trading rule that uses returns from an Indian equity ETF as a lead signal for MSCI futures. When the ETF’s average return exceeds the futures’ average return, the spreadsheet generates a buy signal; when it is lower, it generates a sell signal. The model tracks entries, mark-to-market values, and trade outcomes, and exposes its calculations so users can adjust parameters and inspect the backtest.

The example uses data from February to March 2015 and reports 277 trades, with a stated total profit of $1,970 before costs and a net profit per trade of $5.04 after its stated transaction-cost adjustment. Its assumptions include one lot per trade, five-minute closing prices, regular-session trading, and a fixed transaction cost. The results are limited by the short sample and simplified execution assumptions: bid-ask spreads are ignored, and trading only at candle closes may not reflect achievable fills. The article does not establish that the ETF reliably leads the futures outside this example.

Key ideas

• The strategy uses ETF returns as a directional signal for MSCI futures.
• It evaluates prices at five-minute intervals and trades one futures lot per signal.
• The spreadsheet tracks signals, entry prices, mark-to-market values, and trade profit or loss.
• The reported backtest omits bid-ask spreads and assumes trades execute at interval closes.
• The brief historical sample does not establish that the signal will generalize.

Tags

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