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Where to Start?


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Where to Start?

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  #1 (permalink)
Detroit, MI
 
 
Posts: 21 since May 2020
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I wrote this my intro, but it holds true for my question here. I'd like to get some advice on getting started on futures trading.

I just registered today. I invested in the 2000s. Lost money on stocks. Made money on gold and silver coins. Stopped to go back to school after selling my gold coins for a profit.

Fast forward and last year, I got serious about learning about what to do with my extra money since savings was paying 2-3%. Bought 30 year t-bonds last year, gold coins, and shorted the stock market through inverse ETFs. I doubled up on my short back in January and sold my gold coins last week for $1800. My t-bonds are up 40%.

The problem is that I realized that it takes an enormous amount of capital to make money investing and that leverage is the only way to accelerate the process for the retail investor. I was told that if I can make money buying and selling gold coins, I should look into the futures market.

I've been running a simulated account for 2 weeks, now on week 3. I was up $24k my first week, then made it to $50k on week 2 after adding stock index futures to the mix. Since I have a job, I simulate by trading overnight and close out my trades in the morning before work. I closed out $6,300 positive today.


I'm on furlough this week, so I have a bit of extra time on my hands and decided to sell my mercury silver dimes on ebay where the premiums are ridiculously high, lol.

If possible, I'd like to know how long do you guys think I should continue with simulation before diving into the real thing?

Also, are there any places here for beginners to get a better understanding of how to get started in the futures market?

My overall strategy is based on economics so I don't do much technical trading or fundamental analysis. I mainly watch central banks and other economic indicators. The success rate so far has been between 83-90% depending on the type of contract. Of course, this is only 2 weeks worth of data. NQ seems to be a wildcard so I most likely will stay away from that one.

Interests: GC, SI, and deciding between EMD or RTY. I like RTY because the Russell 2000 is a bit easier to short, but I find that the S&P400 has been paying off big time this year when shorting via the inverse ETF.

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  #2 (permalink)
Legendary Market Wizard
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Start watching webinars on this forum to see the different approaches that people take.

Ultimately, whatever approach you choose, you will have to make it your own to succeed.

Good luck buddy.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #3 (permalink)
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petergunz View Post
I wrote this my intro, but it holds true for my question here. I'd like to get some advice on getting started on futures trading.

...

If possible, I'd like to know how long do you guys think I should continue with simulation before diving into the real thing?

Most people would probably tell you that you should use sim trading just to get accustomed to the markets you are interested in and to your trading platform and tools, and that the sooner you are trading with actual money, the better.

Reason: having something real at stake changes everything. Trading in pure sim is nothing at all like actual trading, simply because you don't actually have anything at risk.

You also can keep your dollar risk under reasonable control by using one of the emicro contracts (click on the underlined "emicro" for more details in the wiki). The point values of MES, for instance, are one-tenth of ES (S&P emini contract.) The leverage is still there, but it's not as ferocious if you're wrong, as you will be often enough. There is an MGC micro contract for gold, and an M2K micro for the Russell 2000.

You can also look over the trading journals of other traders here on futures.io for a look at what others are doing, and one of the better ideas that traders often use is to start your own trading journal here also -- it will help you be more accountable and objective about your trade decisions as you go over your trading for the day and discuss what worked and what did not, what your reasons for a trade were, how your decisions worked out, etc.

But getting off sim and controlling your monetary risk by keeping the account small and controlling leverage with the micro contracts are the major suggestions I can give you.

Good luck. Keep us informed how things are working out for you.

Bob.

--------------------

Edit: this is not to say there is no value in sim, but it's practice. Athletes practice their game, but they go out and play it, and there is a big difference. You can use sim to try out strategy ideas, for example, but your real work will begin when you are trading live.

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  #4 (permalink)
Detroit, MI
 
 
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bobwest View Post
Most people would probably tell you that you should use sim trading just to get accustomed to the markets you are interested in and to your trading platform and tools, and that the sooner you are trading with actual money, the better.

Reason: having something real at stake changes everything. Trading in pure sim is nothing at all like actual trading, simply because you don't actually have anything at risk.

You also can keep your dollar risk under reasonable control by using one of the emicro contracts (click on the underlined "emicro" for more details in the wiki). The point values of MES, for instance, are one-tenth of ES (S&P emini contract.) The leverage is still there, but it's not as ferocious if you're wrong, as you will be often enough. There is an MGC micro contract for gold, and an M2K micro for the Russell 2000.

You can also look over the trading journals of other traders here on futures.io for a look at what others are doing, and one of the better ideas that traders often use is to start your own trading journal here also -- it will help you be more accountable and objective about your trade decisions as you go over your trading for the day and discuss what worked and what did not, what your reasons for a trade were, how your decisions worked out, etc.

But getting off sim and controlling your monetary risk by keeping the account small and controlling leverage with the micro contracts are the major suggestions I can give you.

Good luck. Keep us informed how things are working out for you.

Bob.

--------------------

Edit: this is not to say there is no value in sim, but it's practice. Athletes practice their game, but they go out and play it, and there is a big difference. You can use sim to try out strategy ideas, for example, but your real work will begin when you are trading live.

Thanks Bob! No worries. I ASKED for advice. Be tough for sure. The good news is that I'm able to somewhat replicate my strategy with my real money in my current accounts using the ETFs and inverse ETFs, but I find that my strategy has a lower success rate than if I had done it on the overnight futures market based on sim results at least.

Question: Other than the actual money being on the line, is there anything different from live versus sim? My guess is that you probably don't always get the contract at the price you want it, but I'm sure there are other issues I haven't considered. So I'm wondering if there is anything else that's different. From what I can tell, it seems that it's the psychology and being able to handle doing what you think you would do if the money wasn't your's? Would that be correct?

Also, I definitely can't wait to start. It's taken forever to get my accounts to a broker that does futures. The money clears tomorrow. I'll be starting with gold and silver micros for now. At some point, I'll sell off my inverse ETFs and then give a micro index a try, probably M2K. I'm okay with risk, but it was hard at first. I was losing all of last year, but I was able to hold and it eventually paid off.

I learned a lot during that time. Failure is the best teacher.

Thanks again for the advice!

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  #5 (permalink)
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You were up 24k in week 1? How many contracts did u have on? What if you were down real 24k? Are u ok with that? How would you have managed risk/losses? There is always value in real money as compared to Sim but ready to gain/loose what u can stomach as a learning fee


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petergunz View Post
Question: Other than the actual money being on the line, is there anything different from live versus sim? My guess is that you probably don't always get the contract at the price you want it, but I'm sure there are other issues I haven't considered. So I'm wondering if there is anything else that's different. From what I can tell, it seems that it's the psychology and being able to handle doing what you think you would do if the money wasn't your's? Would that be correct?

That's exactly correct. If a person can take sim just as seriously as they would take live trading, and if they can manage the resulting psychological issues, then there's no important difference. Most of us have some issues with seeing real money disappear, but if you can handle the risk and if you take your sim experience as seriously as if it were live, then the major difference goes away.

There may be minor differences in executions when you're dealing with real trades in the market as opposed to simulated trades, but unless your trading depends on such a close tolerance that a tick or so in the price you get will make a big difference, then you're fine.

I noticed now that @jokertrader has asked about how many contracts you were using in sim, which is a good question. If you're not used to the high leverage of futures, money can vanish very, very quickly.... which is why I suggest keeping the amounts involved very small, until you are confident that you have things well in hand.

Good luck.

Bob.

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-- Cervantes, Don Quixote
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  #7 (permalink)
Detroit, MI
 
 
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jokertrader View Post
You were up 24k in week 1? How many contracts did u have on?

I traded 2 contracts my first day. GC and SIL (I meant to trade SI, but ended up doing SIL by mistake). I started on a whim too shorting GC at midnight, lol. I didn't even think about mark to settlement as I thought it meant if you held for 24 hours. Looking back at the transactions, I think I was trying to time a bunch of open and closes based on data throughout the day. It was just these two contracts though. So regular gold and silver micro. Total: $1,675.

Day 2: Left my short positions open Wondered if my strategy would work for the indices so I went ahead and shorted RTY. Mark to settlement on gold and silver left me at a loss. I kept RTY open and shorted another contract. Total: -$400

Day 3: Closed out gold and silver in the morning for a loss. Learned a lesson about letting positions stay open over the weekend. Shorted gold and silver again. Found out I had been trading the wrong silver contract and shorted SI instead of SIL. Left RTY open. Total: -$1,059

Day 4: Woke up at 7am and closed out my positions. Made a good profit. After 4pm, went long 1 GC, 1 SI, 1 RTY. Including mark-to-settlement. Total: $10,574

Day 5: Was heavily down on mark-to-settlement at midnight, but by 7am, was all in the positive once I closed my position. At 6pm ET open, went long 2 GC, 2 SI, and 2 RTY contracts. I shorted a t-bond future to see if the strategy worked here. It didn't. I tried the opposite approach and still failed, lol. Conclusion: Stick to regular t-bonds and avoid t-bond futures. Total: $3,640.

Day 6: Closed out all of my positions before work. GC and SI did very well. RTY and UBM were down, but less than $200 each. Went long on one of GC, SI, RTY, and UBM(again) after 6pm. Total: $6,662.50

Day 7: Closed everything out in the morning and did not leave anything open over the weekend. Total: $2,208.75

Since I started on a Friday, I decided to include that as part of the total. If it was strictly 6 days, the total would have been $21k. The final total is $23.3k. For some reason, I thought it was 24k, but close enough I suppose.


Quoting 
What if you were down real 24k? Are u ok with that? How would you have managed risk/losses? There is always value in real money as compared to Sim but ready to gain/loose what u can stomach as a learning fee

I'm okay with it. My real life shorts via the inverse ETFs I still hold were down by $17k before February's crash. And that was borrowed money (not borrowed on margin). Now they're in the green by a decent amount although not quite as high as they were in March. I have roughly 110k in the market right now plus my profits from the gold coins I sold last week. Not all of it is borrowed money, but all of the majority of it, which is in the taxable account is(80k).

Some of those sim trades were down by as much as $12k during the night session. I kept wondering how I would feel if it was my real money. At first, I was a little disturbed, but then felt that if I couldn't handle it, I needed to quit so I let it go. Almost every time when I woke up, I was in a positive balance. I learned to just let the system do the work and let it go. I even started to turn off TOS after around the 4th day.

I've thought about risk management. But, if I had set a close during any of those nights, I would've been closed out and not made any money in almost every case. As I mentioned, I was down over $10k total almost every night. One morning, when gold didn't move how I wanted it to, I realized that there was another issue going on and decided I was selling my coins on the spot so I learned something that day. This was during week 2.

As for losing money: I read in the Millionaire Next Door that 78% of millionaires went bankrupt at least twice. After I read that, I figured that losing it all was part of the process. A book I have on dividend investing even says that you don't begin to learn until you lose it all. I figure that as long as I have a job, which I suppose these days isn't a sure thing either, I'll be okay.

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  #8 (permalink)
Detroit, MI
 
 
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bobwest View Post
That's exactly correct. If a person can take sim just as seriously as they would take live trading, and if they can manage the resulting psychological issues, then there's no important difference. Most of us have some issues with seeing real money disappear, but if you can handle the risk and if you take your sim experience as seriously as if it were live, then the major difference goes away.

I definitely do! My purpose is to stop working for somebody else. My plan is to eventually invest in dividend stocks for passive income. It would take forever to reach the amount necessary to make that happen in the stock market or saving up from my job so I decided that I needed leverage. If I can't make the sim work, then I can't do it in real life. So I take it very seriously although I will test things out on sim that I would never do at this stage in reality like go long or short 4 stock indices at the same time. I did it to see which index had the best return and how they responded to the strategy.

Real estate is decent and probably safer leverage, but it just doesn't click with me. It can be just as risky as many are finding out so I figured to go with what I was comfortable with.


Quoting 
There may be minor differences in executions when you're dealing with real trades in the market as opposed to simulated trades, but unless your trading depends on such a close tolerance that a tick or so in the price you get will make a big difference, then you're fine.

There have been times when my timing was off by a hair and it ended up costing me, but the loss was minimal as documented in my response to jokertrader.


Quoting 
I noticed now that @jokertrader has asked about how many contracts you were using in sim, which is a good question. If you're not used to the high leverage of futures, money can vanish very, very quickly.... which is why I suggest keeping the amounts involved very small, until you are confident that you have things well in hand.

Good luck.

Bob

I didn't quite understand everything at first, but it makes a lot more sense now. Because I don't have much to allocate to gold right now, I'll be trading micros out of necessity. I will not move up to minis unless I can buy them with the profits from the micros. I think using profits from micros to advance to minis will be a good way to hinder blowing it all on red so to speak.

Funny enough, my friends who are super risk averse and lose more often than win are trying to encourage me to hurry up and trade. I've been conservative about it. The only reason I decided to speed up is because I sold my gold coins. Those guys want to make fast money, yet they lose their money fast. I don't get it. I'm a salesman by trade and they're engineers. How can guys that are so logical be so illogical and bad at stocks? One guy treats it like the race track. "I just got a good feeling that X stock is going to come through today." How on Earth do you put money in the market based on feelings? I use quite a bit of data to make my decisions.

Thanks for the advice and encouragement Bob! It really helps!

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  #9 (permalink)
Braunschweig Germany
 
 
Posts: 12 since Dec 2019

If you ask me, you should try some other approach to trading. Many forums and brokers offer their training for free, which includes different webinars and forex strategies. I think that these materials won't interfere with your trading and may have a positive impact on you and your trading)

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Sairi View Post
If you ask me, you should try some other approach to trading. Many forums and brokers offer their training for free, which includes different webinars and forex strategies. I think that these materials won't interfere with your trading and may have a positive impact on you and your trading)

I've made $88k since I started and the returns are compounding weekly. After about a month of dabbling and struggling to make it past $10k, my results have gone through the roof. I made one tweak 2 weeks ago and it's really been a game changer.

Week of 7/5: $40k profit
Week of 7/12: $38k profit

I think I'll stick to what I'm doing for now, but thanks for the tips.

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