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Trend following futures with 10k?

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Luxembourg, Luxembourg
Trading Experience: Advanced
Platform: TWS
Broker/Data: Interactive Brokers
Favorite Futures: Stocks
Posts: 491 since May 2012
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Mcginty View Post
Hi there,

I've been trading for about 4 years, trend following stocks and holding positions for weeks at a time. Basically I want to move up the risk/ return ladder so I'm considering switching from stocks to futures.

I was doing a bit of research into Andreas Clenow as I was thinking about buying his book on the subject. However on his site, he recommends starting capital of no less than about a million.

What's everyone else's view?

The TradingBlox forum is the best place to look into this. Their forums have lots of info on the amount of capital required. The typical diversified LTTF system will skip trades where the risk when the risk is too high and this can happen with a $1 million account. Wish I was talking from personal experience here, but this is the info I got from running backtests with TradingBlox.

Stocks suffer less from the effects of granularity, i.e. the difference in risk exposure is pretty large between one and two contracts, whereas you can easily adjust exposure with stocks - it is easy to adjust exposure from 200 to 212 shares and vice-versa.

If you must trade futures, then I can relay my experience with a $10k account trading a single market. You can do extremely well when things go your way, but gains tend to be given back quite violently. If you stick to a core group of maybe 3 of the smallest futures contracts, then you may have a chance, but liquidity on those is bad and unless you get a decent run, be prepared to top up your account due to whipsaws. A single contract is also doable, but you really need some diversification to make a LTTF system give a better MAR (return / drawdown).

Regarding better risk/return I would suggest googling Mark Minervini - his record in stocks may be one of the best risk adjusted records of all traders out there and many of the best do not have the annual returns he accomplished at his peak.

Edit: Should add that Clenow trades a fund - his objectives are different than ours. He wants to get 20% p.a. with small drawdowns (40%-50%) which will make him a rock-star in the funds world. Know of him, but don't know how well he is regarded in the industry.

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