Favorite Futures: Emini ES, Emini TF, Crude CL, Eurex DAX, EuroFX 6E, Forex EurUsd and Hang Seng HSI
Posts: 30 since Mar 2011
Thanks: 38 given,
This post has been selected as an answer to the original posters question
Some traders to choose their trading instrument based upon the parameters or results of their trade strategy. Unfortunately, traders get married to a particular trading instrument instead of trading something that their strategy can exploit for more profits.
For example, pretend you backtested your strategy on many numerous trading instruments that are futures, forex and stocks. You then discover that your backtest results shows one particular trading instrument has outperform the profits of the other trading instruments you've tested your trade method on. Yet, the trading instrument that outperformed the others isn't something you really want to trade. Some traders will then allow their bias to get involved and decide to continue trading something they "prefer" versus trading something that produce the most profits.
Yet, in some cases there may be a time zone conflict that has impact on what we choose to trade. For example, I myself primarily trade the Russell 2000 Emini TF futures even though three other trading instruments rank higher on my backtest results of performance via my trade method. The reason why I don't trade the other trading instruments (Eurex Dax futures, Hang Seng HSI futures and Forex EurUsd currency) is because of a time zone conflict. Simply, I'm not willing to trade when I normally should be in bed asleep. Also, I've tried the "grave yard" shift trading and I was walking around looking like a zombie after a month of doing such.
Another example is that I have a trading buddy that's married to the Emini ES futures even though his strategy easily outperforms in backtest results for trading Light Crude Oil CL futures. Yet, he chooses to continue trading the Emini ES futures even though there's no conflict in his time zone schedule.
However, the above examples aren't the only reasons why some traders may decided to choose to trade one particular trading instrument versus another because I've learned that some traders chooses a particular trading instrument based upon available capital in their accounts, trading restrictions, peer pressure, diversification and so on.
Yeah, to take this one step further, some traders that are consistently losing have not tested their trade method on other types of trading instruments to determine if they would be a profitable trader in trading a different trading instrument.
P.S. I'm up early this morning only because of some heavy duty upgrades I need to finish on my backup computer.
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I'm sure there are some other firms that are starting to use Limits; however, from my experience most of the major brokerages are market orders only.
Also the last time I traded with MB for forex the main thing I noted was that their commission structure was twice the price of trading the futures (think it was $10 a rt for a standard lot vs. $4.5 a rt for a single futures contract). Since I was trading the euro this was even more troublesome since the EURUSD is a $10/pip contract vs. the 6E being a $12.5 a tick contract. Other contracts like the GBPUSD vs 6B don't even compare. The average spread is 3-4 wide on the GBPUSD with most fx brokers. So at MBT for example you are looking at paying $40-50 rt vs. $22 for the 6B (2 contracts on the 6B is roughly equivalent). For anyone that trades more than a few times a day it is a major cost difference.
The reason I trade index futures is because I am comfortable with them. I've been trading them for a long time and I am happy with my success rate. Yeah I could probably learn to trade on the forex. But why change my ways if they're not broken?
Its a matter of simple time allocation. I try to spend as little time as I can on trading so that I can spend time doing other things I like to do. Making a change to forex means several months worth of focus and at least a year of getting comfortable with it. And I'm not getting any younger!
The great thing about these forums is that dialogue can lead to real understanding/knowledge. The truth is both futures and forex are fine instruments to trade. I trade both, if a setup is happening on the futures side I take the trade, if a setup is happening on a FX pair i'm watching I take the trade. There seems to be a lot of misconceptions regarding fx that are completely false on this board. First of all, many forex brokers are indeed registered, regulated entities with capital requirements and segregated accounts. Secondly, if you are trading at a broker that is straight through processing all orders and offering a conflict free trading environment you will have a fine place to execute your trading strategy. Many brokers are aggregating the price feeds from 10-15 of the largest banks/financial institutions from around the world which in essence is creating the best universal pricing feed. For more examples of why some think FX is better the futures...
Advantages Forex Futures
24-Hour Trading YES No
Minimal or no Commission YES No
Up to 500:1 Leverage YES No
Price Certainty YES No
Guaranteed Limited Risk YES No