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I have read a few futures.io (formerly BMT) threads/webinars concerning the benefits for new traders using micro instruments to learn from initially. I believe this is probably the correct path for me to take as I continue to educate myself. However, what I have read so far hasn't seemed to clarify a choice for me yet. I was hoping to elicit experienced feedback between the two choices (or something entirely different), and to a lesser degree suggestions on platform/broker/feed to use with whatever is being suggested. It would be very helpful to me to keep in mind the details below with regard to my own situation, although general comments are welcome in case others might find this thread useful.
My details:
- I wont be doing anything but following charts with minimal sim trading for the next month so a free platform and feed would be excellent if such a thing exists (broker trial, etc).
- I am currently developing a trading plan and no real money will be used until that is complete. But I would prefer to learn on the same instrument as I will eventually trade live with.
- When/if I go to live cash I will be starting with up to 20k if necessary, however I would be much more comfortable with 5-10k at first. Another 10k might be available to add to capital in six months IF I have been consistently profitable. But at that point were probably talking "scared money". I give this info only to clarify that reaching the pattern day trading minimum of 25k+ will be unlikely for me for awhile.
- I am starting with a biasagainst Spot Forex because I just don't like the idea of it not being regulated, along with a less favorable tax structure. However, if its cheaper for me to learn on, even with potential spread "stealing" - then so be it. Also what concerns me is spending a lot of time learning Forex, knowing I may not want to stay there. I am too much of a rookie trader to know what knowledge I can transfer to another instrument at this point.
- My gut points me to M6E but reading about big spreads, not enough liquidity, and limited trade time windows worries me. Please challenge these poorly informed notions I have if you know better.
- The actual currency is open for me, however I've probably just defaulted to EUR/USD simply because I have read it has more liquidity.
- Somewhat partial to ninja trader, but only from what I have read. No real experience.
- In my education so far, what really resonates with me are Van Tharp's beliefs and short term technical discretionary trading (price action). Also I tend to like William O'neil's system for long term trading, but that will be for a separate equity trading account someday. I will, of course, develop my own systems but this is just for reference in case the kind of trading I am considering has any bearing on your recommendations
I know that is a lot (maybe too much info!), so thank you in advance. I appreciate being able participate in this forum, this site is wonderful.
Can you help answer these questions from other members on NexusFi?
Here some points on the M6E, which I trade every day for similar reasons as you:
-The M6E has 1-2 tick spread about 90% of the time
-The depth is there, just not volume
-Chart the 6E, trade the M6E
-Use market orders, this again relates to the depth being there, but not the volume
-If you are scalping, commissions might eat you up(depending on your broker)
-Be careful during the last 15 minutes prior to and first 5 minutes after market close....I have seen 20tick discrepancies between 6E and M6E during these periods
-If you are going for smaller targets, don't pay attention to commissions...view them as the price of education(much cheaper education than blowing up an account)
Commission --> 1.5 - 2 ticks
Due to volume you have to use market orders + slippage--> 1-3 ticks each way (1 tick slippage, 1-2 ticks due to limit order limitations)
After leaving many limit orders sitting out there just to see them never filled, I realized I had to enter with market orders and be careful on limit order exits.
So with these factors I would estimate that each trade you are about 3-6 ticks in the hole depending on how you enter/exit. If you are shooting for targets less than 10 ticks you will watch your account slowly decline. Personally, I was ok with this. You learn ways to squeeze a little more out of trades, and you have to go into it knowing you aren't going to make a living trading that way. I just trade it because it simulates the real emotions that SIM can never do.
Now if you are shooting for 50+ ticks, these 4 ticks aren't felt as much. If you swing trade for 100+ ticks 1-2 times a week with 2-3 contracts, you can actually have a little extra coffee money each week That is where I am currently transitioning to
Thank you for the info Xav. Would you still recommend your broker and platform for trading M6E? Any reason to consider other currency pairs in your opinion? And do you find a particular style of trading more compatible with M6E so far? Trend following, band trading, breakouts, etc... I am just curious of your view of that instrument's action, so exact trading style details aren't necessary. I haven't really come across many people trying to trade it so far.
Just for the sake of completeness, below I linked a couple other relevant nexusfi.com (formerly BMT) threads. Is anyone else trading micro currencies of any form that they think would be a better fit? I believe Big Mike's position is with Spot Forex before the micro futures, or at least it used to be? If micro-lots in spot Forex did have a cheaper transaction cost over all, I wonder if it would it still be cheaper when you consider higher tax liability?
I suppose it could also be worth considering slightly longer term swing trading of equities since that might get me passed the PDT margin. But that is a bit outside of the thread subject.
I have a similar idea to move in to regulated market, but the way it is going soon forex will be regulated i guess
With regards to knowledge transfer it is not a waste to learn Forex if you are a price action trader. on other hand if ur system is based on indicators and colourful signals then it could be a waste
Forex teaches you a lot. A heal lot to learn there
my 2 cents.
I see your sig also say you trade the 6E. So if you trade 6E for 3 to 5 ticks and there more volume, would you make money after you subtract trading cost?
Well I originally started trading the M6E for 4 reasons:
1) I already had a futures account
2) I traded full size contracts after watching the market for a couple weeks, and lost 40% in a very short period of time and I did not want to completely blow up my account
3) I have no faith in an unregulated market
4) ALL my technical analysis involves volume and/or order flow
Charting on the M6E is pretty much useless on smaller timeframes. The spread will follow the 6E very closely, but many times no trades will happen at those prices. I have a regular day job, so I have been getting up at 2:45 AM for the past couple months to work on my daytrading methods. I have recently began to transition from short term trading to long term trading. This week I tried 2 swing trades. Jumped the first one for a 60 tick loss, but waited for confirmation on the second one and rode it for 116 ticks(and that was mismanaged ). I am not here to tell you what would work best for you, but this week was an eye opener for me. I am up more than a good week trading London 4 hrs a day, yet have only spent about 2 hrs total in front of a chart, and that is only because I am still getting used to it.
One thing to remember in that the M6E is about the same as a mini spot lot. I don't know what the spreads and/or commissions are for FX EUR/USD for mini lots. I just look at the M6E as training ground. I am fine paying an extra $1 per trade to have peace of mind and volume data, some people will argue with me against that, but it just MY opinion.
One thing some FX brokers do offer is Micro or Nano Lots. This might suite you better if the $1.25/tick is a little more than you want to pay for education. I like the $1.25/tick because it is big enough to where it stings a little when I screw up, but it won't blow up my account anytime soon.
I chart the 6E and trade the M6E. My sign also says I'm a beginner
My opinion on "hyper-scalping" 2-5 ticks on anything other than bonds and maybe the ES is that it would only statistically work if you have super wide stops and super deep pockets. Noise would take you out if you had tight stops and a bad run(which will happen) would take you out if you had wide stops but a small account. That just my opinion though, so please do not turn this into a I am a scalper and make money every day argument. If that works for you, I am genuinely happy for you because its nice to see people succeed.
That is where I am currently transitioning to
). I am not here to tell you what would work best for you, but this week was an eye opener for me. I am up more than a good week trading London 4 hrs a day, yet have only spent about 2 hrs total in front of a chart, and that is only because I am still getting used to it.