Sweden Index Trading Strategy — Backtest and Example
Sweden has a vibrant stock market, with many interesting companies like AstraZeneca, Atlas Copco AB, and Ericsson. You can track the performance of the Swedish market with the OMX Stockholm 30 and OMX Stockholm PI indexes.
OMX Stockholm PI is the composite index of the Swedish stock market, consisting of all the shares listed on OMX Nordic Exchange Stockholm. OMX Stockholm 30, on the other hand, is an index of the 30 largest companies on the Swedish stock market. In this article, we provide you with a Sweden OMX 30 trading strategy.
Let’s take a look at the indexes and some of their biggest stocks. At the end of the article, we provide you with a backtest of the index.
What is the stock index of Sweden (Stockholm)?
The Swedish stock market is very vibrant, with many indexes tracking the various segments of the market, including the OMX Stockholm PI, OMX Stockholm 30, OMX Nordic 40, OMX Stockholm Mid Cap, OMX Stockholm Small Cap, and so on. In this post, we will focus on the first two.
Stockholm is the main financial center of the Nordic region – by far. In the OMX Nordic 40, the index that tracks the 40 biggest public companies in the Nordic stock markets, Sweden has the highest weighting, albeit Danish drug giant Novo Nordisk is the single biggest company.
The Nordic region is Denmark, Norway, Sweden, Finland, and Iceland.
OMX Stockholm 30
The OMXS30 Index is a major stock market index for the Stockholm Stock Exchange. It tracks the performance of the 30 largest stocks by market capitalization on the Nasdaq Stockholm Stock Exchange.
The OMX Stockholm 30 Index started on 30 Sep 1986, with a base value of 125. The index has been split by 4 on April 27, 1998. It is a free float, capitalization-weighted index.
OMX Stockholm PI
The OMX Stockholm PI is the all-share index of the Stockholm Stock Exchange. It includes all the shares listed on OMX Nordic Exchange Stockholm. The aim of the index is to reflect the current status and changes in the market and is available as PI.
The base date for the index is December 31, 1995, with a base value of 100. The index is available as PI.
What are OMXS30 futures?
The OMXS30 futures, which tracks OMXS30 Index, offers a way to gain exposure to the Swedish equity market. Created in September 1986 with a base value of 125, OMXS30 is one of the major stock indexes of the Nasdaq Stockholm stock exchange and consists of the 30 equities most actively traded stocks on the exchange.
OMXS30 futures are futures contracts that the underlying asset is the OMXS30 index — a capitalization-weighted index of the 30 most-traded stocks on the Nasdaq Stockholm stock exchange. Compared to other indices in the Nordic region, the OMXS30 is the biggest index, and its components are adjusted twice every year for rebalancing (removal or addition of components that fail or meet the index requirement).
A futures contract is a legally binding but tradeable agreement between two parties usually a buyer and seller to purchase a certain unit of an asset at a pre-determined price on a future date. It is standardized and trades on regulated exchanges. OMXS30 futures trade on the Nasdaq Stockholm exchange and are financially settled.
Since futures are leveraged instruments, they offer traders the luxury of participating in the market without having to put the face value of the underlying asset — only a fraction (the margin) of the total worth of a contract is needed to open a position. OMXS30 futures can be a great way to speculate or hedge in the price of the largest traded stocks on the Stockholm Stock Exchange without owning the stocks themselves.
What is the seasonality of OMXS30 futures?
In the financial markets, seasonality refers to patterns in the price of an asset that are frequently repeated at specific times of the year (months and seasons). These patterns, known as the market cycle, are usually observed over a longer period of time, such as months. Seasonality helps traders to have a forecast of what is to be expected in a given period, which can be the different months or seasons (Winter, Summer, Fall, and Spring) of the year.
The seasonal chart of OMXS30 futures is not readily available online, but we can make some inferences from the seasonal chart of the Nasdaq OMX Index.
From the chart above, you can see that the index tends to perform better in the second half of the year than in the first half.
What moves the OMXS30 — What affects the OMXS30 the most?
Because the OMXS30 is a price-weighted index, any change in the price of an individual component will have a considerable impact on the index’s overall price. However, economic activities in the Nordic area and the EU economic zone may be important movers of this index. Inflation statistics, such as the Consumer Price Index (CPI) and the Producer Price Index (PPI); retail sales data; imports and exports data; and manufacturing PMI all have a substantial impact on the index. Furthermore, because the index is primarily priced in Swedish Krona (SEK), its performance is highly correlated with the value of the currency, and as such, a weaker currency will have a negative impact on index growth.
How are OMXS30 futures traded?
The OMXS30 futures trades on the Nasdaq Stockholm Exchange (a part of Nasdaq Nordic Exchanges) from Monday through Friday from 9:00 a.m. to 5:30 p.m. Central European Standard Time (CEST), which is actually GMT +1. There is no break time for the Stockholm Stock Exchange.
One contract unit for the OMXS30 futures is equivalent to the value of the index multiplied by SEK 100. The price quotes are in Swedish Krona per index point on the Nasdaq Stockholm Exchange. The minimum price fluctuation of the index is 0.125 points which translates to a tick size of SEK 12.5 per contract.
The contracts come in four quarters (March, June, September, and December), which are listed for up to 3, 18, and 60 months. Trading usually terminates at 5:25 p.m. on the third Friday of the contract month, or the previous day if this is a Swedish bank day. The final settlement is calculated as the difference between the previous day’s futures closing price and the current day’s futures closing price.
How do you start trading OMXS30 futures?
The OMXS30 futures can be traded through any futures broker that can give you passage to the Nasdaq Nordic Exchange where the contract is traded. There are very few brokers that offer access to European markets. Interactive brokers (IB) can offer you access to this market, but first, you will need to create an account and fund it on their platform before you can trade. Future allows you to use leverage, therefore you do not need to have large capital for you to participate in the market. All you need is a fraction of the contract’s worth as the margin requirement to open a trade.
Another way to trade this market is with the use of Contracts for Difference (CFD) that tracks the OMXS30 futures. OMXS30 CFDs are offered by some brokers such as IG and AvaTrade. Once you have chosen a broker, you can go ahead and open an account. CFDs are also a great choice and usually do not expire as they are continuous in nature.
What is the OMXS30 trading at?
As of December 11, 2022, OMXS30 futures were trading at 2,116.45, according to TradingView’s chart for the index and the Nasdaq OMX Nordic website.
What’s OMXS30 futures hour?
The OMXS30 futures can be traded on weekdays from Monday to Friday from 9:00 am to 5:25 p.m. Central European Standard Time (GMT +1). The market schedule is as follows:
- 09:00 a.m. ─ 5:00 p.m. (Full Trading Hours)
- 9:00 a.m. ─ 1:00 p.m. (Partial Trading Hours)
All time is in Central European Standard Time (CEST), which is GMT+1.
Where can I find trading charts?
You can get the chart from the Nasdaq OMX Nordic website. There are also chart providers, such as TradingView, which offers a free and paid charting platform where you can customize your own indicator. The extent to which you make use of TradingView will determine if you need a subscription or not. Generally, the freemium version is good enough for analyzing the market. Other chart providers for the OMXS30 futures include MarketWatch, Yahoo Finance, and Barcharts.
What are the trading symbols for OMXS30 futures?
The trading symbol for OMXS 30 futures is OMXS30.
What is the specification for the OMXS30 futures contract?
The trading symbol is OMXS30 and the underlying asset is the OMXS30 Index. One contract unit of the futures contract is equivalent to the value of the index multiplied by SEK 100. The price quotes are in Swedish Krona per index point on the Nasdaq Stockholm Exchange. The minimum price fluctuation of the index is 0.125 points which translates to a tick size of SEK 12.5 per contract.
The contracts come in four quarters (March, June, September, and December), which are listed for up to 3, 18, and 60 months. Trading usually terminates at 5:25 p.m. on the third Friday of the contract month, or the previous day if this is a Swedish bank day. The final settlement is calculated as the difference between the previous day’s futures closing price and the current day’s futures closing price.
Why should you start trading OMXS30 futures?
It gives you access to the 30 most actively traded stocks on the Stockholm Stock Exchange, so you can use it to hedge your exposure in the Swedish equity market. It is excellent for speculation — most of the time, the index is range bound, which can provide you with numerous trading opportunities such as buying support and selling resistance.
OMXS 30 futures is also an excellent choice for investors looking to expand their investment portfolio into a new market.
What is the contract size?
One contract unit for the OMXS30 futures is equivalent to the value of the index multiplied by SEK 100. Given the current value of the index, 2,116.45, as of writing, the total worth of the contract in SEK is 100 X 2,116.45 = SEK 211,645. At an exchange rate of 0.098 USD per SEK, the USD worth of the contract is 211645 X 0.098 = $20,741.21.
What is the tick size?
The tick size is SEK 12.5 per contract
What is the minimum price fluctuation for OMXS30 futures?
The minimum price fluctuation is 0.125 per point.
Are there any ETFs?
Some of the ETFs that track the index are in the table below:
| ETF | Ticker |
| XACT OMXS30 ETF | XACT OMXS30 |
| XACT Bull ETF | XACT BULL |
| XACT Bear ETF | XACT BEAR |
| XACT Bull 2 ETF | XACT BULL 2 |
| XACT Bear 2 ETF | XACT BEAR 2 |
What factors affect OMXS30 prices?
Numerous factors can influence the OMXS30 225 futures. The first is Krona’s value: the index is influenced by the performance of the local currency, as it is priced in the currency. Another factor is major news releases in the EU and Nordic belt: these can have a significant impact on contract movement.
Furthermore, government policies can boost or depress the index’s price, and earnings reports from the index’s component stocks can drive prices up or down.
What is the all-time high for OMXS30 futures?
The index reached its highest point ever on January 2022, when it reached a value of 2466.9336.
What are the biggest risks in trading OMXS30 futures?
The market volatility that comes with trading OMXS30 futures poses the biggest risk. Given that it is a leveraged product, negative price movement can result in significant losses. For instance, if your trading leverage is 20x, every 1% loss in the market will result in a 20% loss in your account balance, and a 5% adverse movement can wipe out your account.
What is the settlement method?
The contract is cash settled.
What is the settlement procedure?
The settlement amount is the difference between the previous day’s and the current day’s futures closing prices. The cash settlement day is the Swedish bank day following the mark-to-market day.
What is the block minimum for OMXS30 futures?
There is no block minimum for this contract.
What is the difference between OMXS30 futures and the CFD for OMXS30?
The key difference between trading CFDs that track the OMXS30 futures and trading the futures contract directly is that futures contracts have fixed expiration dates, but CFDs can be traded indefinitely.
Which forex pair is the same as OMXS30 futures
OMXS30 CFD
What are some important dates for this market?
Some important dates for the OMX30 index market include:
- 30th September 1986 when the index was launched with a base value of 125
- 27th April 1998 when a 1:4 split was applied
- January 2022 when it made its current all-time high of 2466.9336
What is the highest OMXS30 has ever been — its all-time high?
According to the TradingView chart for the OMXS30 Index, the highest value the index ever traded was 2466.9336, which happened in January 2022.
What is the lowest OMXS30 has ever been — its all-time low?
According to the TradingView chart for the OMXS30 Index, the lowest value the index ever fell to was 273.1600, which happened in March 1995.
What are the top 5 stocks in the OMX 30 Index?
The top 5 stocks in the OMX Stockholm 30 include the following:
- AstraZeneca PLC (AZN)
- Investor B (INVEB)
- Abb Ltd. (ABB)
- Atlas Copco (ATCOA)
- Hexagon AB (HEXAB)
However, by the time you read this, the weightings have most likely changed. Markets are extremely dynamic and companies go and go. To learn more about the extreme changes in public companies from decade to decade, you must read our article called Do Stocks Outperform Treasury Bills? We can assure you that the answer is not what you expected!
Let’s briefly look at the biggest companies in the OMX 30:
AstraZeneca PLC (AZN)
AstraZeneca PLC is a world-renowned biopharmaceutical company. It focuses on the discovery, development, production, and supply of drugs and other pharmacological agents. It focuses on three main therapy areas: Oncology, Cardiovascular, Renal & Metabolic (CVRM), and Respiratory, while selectively pursuing therapies in Autoimmunity, Infection, and Neuroscience.
Presently, the company has approximately 38 projects in Phase I, including 26 new molecular entities (NMEs), and 12 oncology combination projects; about 43 projects in Phase II, including 25 NMEs; six additional indications for projects that have reached phase II, and 12 oncology combination projects; and about 22 projects in late-stage development, either in Phase III/pivotal Phase II studies or under regulatory review.
The company’s market cap as of July 28, 2022, is 2.113 trillion SEK ($207.074 billion). The stock has been on the rise for quite some time and may be due for a pullback.
Investor B (INVEB)
It is a venture capital firm that invests in mature, middle market, buyouts, and growth capital investments. The firm seeks to invest globally and acquire a board seat. It operates through four business areas: core, private equity, operating, and financial investments. For core investments, the firm invests in health care, financial services, IT, and fintech sectors and considers investments in listed companies in leading minority positions. Some of its listed holdings include investments in ABB, AstraZeneca, Atlas Copco, Electrolux, Ericsson, Husqvarna, Nasdaq, Saab, SEB, Sobi, and Wartsila.
The stock has been on a prolonged decline year to date and may continue in its decline for some time. Its market cap as of July 28, 2022, is 578.282 billion SEK ($56.67 billion).
We have written a detailed analysis of Investor on our other website called RationalThinking dot net.
ABB Ltd. (ABB)
ABB Ltd is a holding company that engages in various products, including electrification products, robotics and motion, industrial automation, and power grids. It serves customers in utilities, industry and transport, and infrastructure through its four operational segments: Electrification Products, Robotics and Motion, Industrial Automation, and Power Grids. As of July 28, 2022, the stock’s market cap is 575.435 billion SEK ($56.4 billion). The stock has been on a decline for some time and may continue on that path for a while.
Atlas Copco AB (ATCOA)
The company, together with its subsidiaries, offers productivity solutions. It supplies piston compressors, oil-free tooth and scroll compressors, rotary screw compressors, oil-free blowers, oil-free centrifugal compressors, gas and process compressors, air and gas treatment equipment, and medical air solutions primarily for use in the manufacturing and process industries. The stock has been on the decline over the past year and may continue in its decline for some time. Its market cap as of July 28, 2022, is 528.857 billion SEK ($51.83 billion).
Hexagon AB (HEXAB)
The company operates as a provider of information technologies that drive productivity across geospatial and industrial enterprise applications for a range of industries, including agriculture, metals and mining, oil and gas, automotive, aerospace, medical devices, and pharmaceuticals. Its solutions integrate geospatial and industrial sensors, software, three-dimensional (3D) mapping, five-dimensional visualization and analysis, domain knowledge, and customer workflows into intelligent information ecosystems that deliver actionable information.
Hexagon AB is active in approximately 50 countries. It operates through numerous subsidiaries, including NESTIX Oy, MSC Software, Catavolt Inc., and DST Computer Services SA, among others. The company’s stock has been on a decline for the past one year and may continue in its decline for some time. As of July 28, 2022, the stock’s market cap is 315.078 billion SEK ($30.88 billion).
Sweden and OMX is a good place to invest
Contrary to what many believe, Sweden is not as socialistic as many believe. Sweden has a long history of being capitalistic and has a very innovative economy. As a result, it has performed better than the US stock market since 1965:
The table above is taken from Triumph Of The Optimists written by Dimson, Marsh, and Staunton. The returns above are real returns. As you can see, the Nordic countries have all performed better than the US market!
Sweden OMX trading strategy
But this article is about trading, not long-term investing, so let’s go ahead and look at one example of a Sweden OMX trading strategy. We used to trade OMX futures but we stopped a few years back to narrow our focus to other futures markets. One of the reasons was the time zone. We are based in Northern Europe, but we also trade other EU products in addition to the US markets. To narrow our focus and work we decided to skip OMX.
Sweden OMX trading strategy backtesting
The backtests done in this article are based on the cash index – NOT the futures. Thus, the results are only indicative!
If you backtest the OMX futures you might get very different results (the shorter the time frame the more different results). The best way to learn about the differences is to actually backtest BOTH the cash and the futures and you’ll experience it firsthand yourself. Trading is all about trial and error!
Sweden OMX trading strategy no 1
We start with a trend following strategy: we use the classic 200-day moving average strategy where we buy a cross above the moving average and we sell when it crosses below. This simple strategy has returned the following equity curve:
The Compound Annual Growth Rate (CAGR) is 3.5% which is substantially lower than the buy and hold of 6%. However, the strategy is only invested 34% of the time and the risk-adjusted return is over 10%. For more info about the latter please read our article on strategy performance metrics.
We did a strategy optimization of the moving average strategy, but the results get worse the short the days in the average.
Sweden OMX trading strategy no 2
Let’s go on to backtest a mean reversion trading strategy. This is a type of strategy that has performed well on most developed stock markets over the last 30 years. Does it work on Sweden’s OMX? There is only one way to find out and that is by using backtesting.
The RSI indicator has worked well for mean reversion strategies, but we prefer the Williams %R indicator made by Larry Williams.
Below is an equity chart showing where we buy a low Williams %R reading and sell when the readings goes above a threshold with a higher reading:
The average gain per trade is 0.55% and the trading win ratio is 74%. However, the strategy has performed poorly since 2017. We backtested many other mean reversion indicators, and they confirmed the same pattern: mean reversion has deteriorated over the last years. Is this temporary or a long-term trend? Only history can tell. This is what makes trading so challenging!
Sweden OMX trading strategy – ending remarks
Sweden has a huge capital market and the liquidity and trading opportunities are high. A lot of capital has accumulated in Sweden over many decades.
In this article, we backtested the most traded instrument, the OMX 30. Unfortunately, in our opinion, it has become trickier to trade the OMX over the last five years. The OMX trading strategies we backtested confirm that, especially when it comes to mean reversion strategies.
FAQ:
What is the seasonality of OMXS30 futures?
Seasonality in the financial markets refers to patterns in asset prices at specific times of the year. While specific OMXS30 futures seasonality data is not readily available, historical patterns suggest better performance in the second half of the year.
What factors influence OMXS30 prices?
OMXS30 prices are influenced by changes in individual component prices, economic activities in the Nordic area, EU economic zone, inflation statistics, retail sales, imports/exports, manufacturing PMI, and currency fluctuations.
What are some of the biggest risks in trading OMXS30 futures?
The primary risk in trading OMXS30 futures is market volatility. Due to leverage, negative price movements can result in significant losses. It’s essential to manage risk carefully, considering the potential impact of leveraged products on account balances.