Korean KOSPI 200 Trading Strategy – Backtest, Futures Example, and Insights

KOSPI is a short form for Korean Composite Stock Price Indexes, and KOSPI 200, which comprises the 200 largest publicly-traded common stocks traded in Korea, is the most popular. KOSPI 200 futures are one of the most actively traded equity indexes in the Asian market and definitely the most traded on the Korean Exchange. Want to know about the Korean KOSPI 200 futures strategy?

A Korean KOSPI 200 futures strategy is the methodology or technique you can use to profitably trade the Korean KOSPI 200 futures market. KOSPI 200 futures refer to financial derivative products that represent a contract to buy or sell a specified amount of the Korean KOSPI 200 Index on a future date, at a pre-agreed price. The contract trades on the Korean Exchange and Eurex, and it is cash settled. You can use the Korean KOSPI 200 futures strategy to take positions on the performance of the KOSPI 200 Index, either for speculation, portfolio diversification, or hedging purposes.

In this post, we answer some questions about the Korean KOSPI 200 futures strategy. We also make a backtest of a trading strategy.

What are Korean KOSPI 200 futures?

Launched in 1983, KOSPI refers to the Korea Composite Stock Price Index — an index of all common stocks traded on the Stock Market Division of the Korea Exchange (KRX). KOSPI 200 represents the largest and most liquid 200 stocks of the composite index, and just like the S&P 500 Index in the US market, it is calculated based on market capitalization.

The KOSPI 200 futures are the most actively traded equity index futures on the Derivative Section of the Korean Exchange. The contract represents a legally binding financial agreement to buy or sell a specified amount of the Korean KOSPI 200 Index on a future date, at a pre-agreed price. It trades on the Korean Exchange and Eurex, and it is cash settled. KOSPI 200 futures offers a way to gain exposure in the Asian market, specifically the Korean market. You can use it for speculation, portfolio diversification, and hedging purposes.

What is a Korean KOSPI 200 futures strategy?

A Korean KOSPI 200 futures strategy is the methodology or technique you can use to profitably trade the Korean KOSPI 200 futures market. This will often involve technical and fundamental analyses for market timing and risk management, as well as position sizing and risk management techniques.

If you want to trade the Korean KOSPI 200 index futures profitably, you must have a solid trading strategy. Your Korean KOSPI 200 futures strategy must include precise entry and exit signals, as well as risk management techniques. You may use it to take positions on the performance of the Korean KOSPI 200 Index and profit from price fluctuations or to hedge risks using the index futures, but it can also be used for arbitrage or spread trading.

Korean KOSPI 200 futures strategy backtest

Let’s look at a very simple seasonal trading strategy for the Kospi. We lack data for the futures contract, so inste