How Risky is it to Trade Futures?

September 1st, 2015, 02:56 PM

furytrader

In Michael Harris' new book "Fooled By Technical Analysis", he actually runs a simulation whereby the minimum amount for an e-Mini S&P account comes in more like $30,000, based upon random entries and exits.

That sounds incredibly stupid. What is the point of random exits and entries? Is he trying to say that this is what the average trader does? Even so, random entries/exists don't make a trader profitable so there is no point in having any size of account with that strategy.

That writer must be a business genius because he was able to publish his book...

September 3rd, 2015, 08:44 AM

furytrader

In Michael Harris' new book "Fooled By Technical Analysis", he actually runs a simulation whereby the minimum amount for an e-Mini S&P account comes in more like $30,000, based upon random entries and exits.

You learn something new everyday.

Those that makes money does not publish books.
Those that publishes books does not make money.

September 3rd, 2015, 10:09 AM

Pedro40

That sounds incredibly stupid. What is the point of random exits and entries? Is he trying to say that this is what the average trader does? Even so, random entries/exists don't make a trader profitable so there is no point in having any size of account with that strategy.

That writer must be a business genius because he was able to publish his book...

Seems like most inexperienced traders do enter and exit randomly. Maybe that was his point.... either way it's not a good idea. "Trade randomly! all you need is $30k"

September 3rd, 2015, 10:45 AM

Pedro40

That sounds incredibly stupid. What is the point of random exits and entries? Is he trying to say that this is what the average trader does? Even so, random entries/exists don't make a trader profitable so there is no point in having any size of account with that strategy.

That writer must be a business genius because he was able to publish his book...

Not familiar with this book but the point of random entries is the same as the coin toss exercise. It's something you do in the beginning to help you understand an edge in trading. You take these random trades usually in sim or in an e-micro or something similar in spot FX. You do it 100 times heads long tails short with 5 tick stop and target, for example. Then again with a slightly more sophisticated trade management process and you prove to yourself there can be an edge in the market by this alone after you calculate win rate and expectancy as you do a tiny bit better or worse than BE. Then you realize after you patiently wait for your trade to set up and execute it flawless you are procession of a true money making edge.

Ron

September 3rd, 2015, 12:42 PM

nathanologist

Seems like most inexperienced traders do enter and exit randomly. Maybe that was his point.... either way it's not a good idea. "Trade randomly! all you need is $30k"

Basicly he was saying that with a 30K account one can survive a coin flip strategy. The question is what exactly he meant by surviving? I assume going back to breakeven or so....

The problem with the coin flip analogy is that profitable traders has a better than 50% ROI strategy and if we count human psychology, losing traders has a much worse than 50%. (averaging into losers, cutting profits short and such)

All in all, that analogy is not valid so I don't see why it was included in the book...

September 12th, 2015, 11:36 PM

if a trader was trading randomly he would be better off taking that 30k and going to las vegas. at least you will get free drinks and pretty girls surrounding you when you piss your money away.

September 13th, 2015, 08:16 PM

hifromeddie

I am new to Futures trading although I have been trading Forex on and off for about 5 years.

I am interested in trading the Emini S & P 500.

During the application process at the end I had to read and sign multiple agreements.

What stood out the most to me is all the info in the agreements they emphasized over and over that when trading Futures there is no guarantee your positions or stop losses or profit levels will be filled where you want them, and that you can end up losing more money then you have in your account which you will have to pay back to the brokerage etc., etc., etc.....

Can trading only 1 contract of the Emini S & P 500 on a 15k or 25k account still have risks involved of blowing the account from crazy market activity, and needing to pay back the broker?

Or is it one thing to trade 1 or 2 ES contracts max in $15k - $25K account, but another thing to try to trade perhaps 10 ES contracts in a 25K account when the required day margin is very low. I can see how the latter might blow the account, but not the former...unless I am missing something

I also read this online pertaining to the same subject:

"With $500 margins covering $60,000+ contracts like ES, if something crazy happens and the broker fails to liquidate before the account goes under balance, the FCM wants to be able to get their money back, either freely or by suing the customer. If the customer has no assets or income then it becomes a problem. ......Futures traders get into deficit too often in spite of account policing efforts. The firm has to initially make your losses good with the other side, then try to collect from you. Likely they feel it's not in their best interest to deal with someone whom they perceive as "pockets are not deep enough".

Now in the above quote are they implying someone opening perhaps multiple contracts during the day time when the contracts are cheap, but perhaps they maxed out and could not close the trades before night maintenance came....and then ran out of margin, but the trades kept running, then they wake up with a huge bill to pay the broker?

I hope this all make sense....just trying to figure out if Futures is safe to trade on not.

Any advice will be great if you have time.

I would say that it is very hard to make it in this game if you are under-capitalized. As mentioned yes events that are out of your control and even market lock limits although rare, do occur. Keep in mind you are trading super leveraged products when you play this game, so yes you can very well end up losing more than your initial balance. When the clearing issues margin calls on you, that's no fun either. Ask yourself how risk- averse you are before considering this business.

September 14th, 2015, 01:57 PM

Trading a futures like ES you will be up against some of the best and most well capitalized traders on the planet. Not to mention big banks with billions and every conceivable advantage possible... options as their "stop" (which anybody can do well maybe not anybody ...those who know how to shall we say) you name it. If you are worried about the risks involved (which you very well should be just not to the point it stops you) why not just start your futures trading in something not necessarily trading by this group. YM or a e-micro futures like M6E etc.

If you refuse to trade anything but ES study it and pull out some probabilities with Excel, R https://en.m.wikipedia.org/wiki/R_ or some other language.

Attached is a csv file for ES RTH back to 8/8/2011 about 1000 excel rows and not back adjusted.

Ron

September 14th, 2015, 02:08 PM

hifromeddie

...
Any advice will be great if you have time.

make sure you have a good and stable internet connection, keep the broker number close by.

October 4th, 2015, 08:32 AM

Pedro40

That sounds incredibly stupid. What is the point of random exits and entries? Is he trying to say that this is what the average trader does? Even so, random entries/exists don't make a trader profitable so there is no point in having any size of account with that strategy.

That writer must be a business genius because he was able to publish his book...

Random exits and entries are the only smart way to look at the problem, unless of course you can see the future. Nobody can know if the next tick will be a continuation of the trend or the first in the inevitable reversal. The average trader generally does worse than 50-50.

How Risky is it to Trade Futures?

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How Risky is it to Trade Futures?