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Trend following futures with £10k?
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Trend following futures with £10k?

 
London
 
 
Posts: 3 since Dec 2016
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Trend following futures with £10k?

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?

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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?

Hi

This thread can probably give you clues about other people's views

https://futures.io/traders-hideout/15936-minimum-starting-funds-learn-trade.html

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Luxembourg, Luxembourg
 
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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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That is really good info @grausch thank you (I am new here).

When I started I traded e-micros, MGC & M6E primarily but gold is quite volatile. It was good for getting in on fundamental world news events - fear index etc.

It is a shame the ES micro has been spoken about a lot but never arrives. Perhaps there is a somewhat correlated micro contract proxy for it friendly to trend following?

Fenchurch

 
 
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Fenchurch View Post
That is really good info @grausch thank you (I am new here).

When I started I traded e-micros, MGC & M6E primarily but gold is quite volatile. It was good for getting in on fundamental world news events - fear index etc.

It is a shame the ES micro has been spoken about a lot but never arrives. Perhaps there is a somewhat correlated micro contract proxy for it friendly to trend following?

Fenchurch

You're welcome. Not sure if you wish to trade a trend-following methodology as the OP.

If you want to trade a trend-following methodology with futures and a small account, I would avoid forex and the index futures. Commodities that can do big runs are what you need. Look at what silver did a couple of years ago.

Unfortunately identifying the big movers in advance is not that easy. One way could be to look for commodities that have been going sideways for a long time, have had very little volume for a long time, suddenly sees a volume spike and then starts moving up. Catch one of those in a multi-week / month trend and you will sit with a decent winner if you manage to exit at the right time.

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grausch View Post
You're welcome. Not sure if you wish to trade a trend-following methodology as the OP.

If you want to trade a trend-following methodology with futures and a small account, I would avoid forex and the index futures. Commodities that can do big runs are what you need. Look at what silver did a couple of years ago.

Unfortunately identifying the big movers in advance is not that easy. One way could be to look for commodities that have been going sideways for a long time, have had very little volume for a long time, suddenly sees a volume spike and then starts moving up. Catch one of those in a multi-week / month trend and you will sit with a decent winner if you manage to exit at the right time.

I agree for the OP. I just had a look at MNF - Micro Nifty and it is just astonishingly thin. I am profitable on ES/CL however I do like the idea of trading corn and such as I believe there is some forecasting skill in this. CL is just news and noise however thick enough to scalp. I did well on copper recently.

I am going to look at commodities more seriously now thank you Grausch!

 
 
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Fenchurch View Post
I agree for the OP. I just had a look at MNF - Micro Nifty and it is just astonishingly thin. I am profitable on ES/CL however I do like the idea of trading corn and such as I believe there is some forecasting skill in this. CL is just news and noise however thick enough to scalp. I did well on copper recently.

I am going to look at commodities more seriously now thank you Grausch!

I think the OP is trying for larger gains holding trades longer. Andreas Clenow is a long-term trend follower which indicates a different style of trading that I think you are thinking of.

As an example, the Turtles had their stops at 2 ATR and risked 2% per trade. If the daily ATR (average true range) of CL is 100 ticks, then the daily $ movement is $1,000. Since the Turtles would placed their stops at 2ATR, the risk on the trade was $2,000 and then working back to a 2% risk per trade, the account size needs to be $100,000 for a single contract of CL. That would then also use the entire risk budget and no more trades could be taken in any other instrument until the CL trade was exited.

However, in recent years trend-followers have started using wider stops and a smaller risk % per trade. Thus, a typical trend following fund could probably only trade 1 CL contract with perhaps $500,000 in capital.

If a trader with a small account wishes to trade the same way as the Turtles, he needs to catch a big trend with his first or second trade. The account does not have a lot of leeway for losses. While most people don't think this is relevant, your best odds of winning money at a casino would be to place a single bet on black (or red) at roulette. The casino has an edge, so gambling there will just lead to losses over time. However, you can negate the casino's edge by just placing a single bet with good odds. If you lose, you at least got it over with quickly.

Small accounts work the same way in trading. Since you can't trade many contracts you can't scale back when things are going badly. Commissions and losses can hurt small accounts much quicker since they have less of a cushion. By focusing on trading less and making wins really count, a smaller account has a better chance of winning. It is just one way to minimize the effect of the house's edge against a small account.

Edit: Low liquidity is not necessarily a bad thing. It makes it easier to spot when a commodity becomes "attractive" for traders again. If you get sudden massive volume spikes, combined with big moves, then that commodity has become "hot". Easier to spot that than in CL, but you may need to wait a couple of years to get these type of trades. However, if you play them correctly, you can get the 100%+ year in one trade.

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Hi everyone,

Thanks for your replies. Looks like I'll have to look elsewhere for my risk fix.

 
 
London
 
 
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grausch View Post
I think the OP is trying for larger gains holding trades longer. Andreas Clenow is a long-term trend follower which indicates a different style of trading that I think you are thinking of.

As an example, the Turtles had their stops at 2 ATR and risked 2% per trade. If the daily ATR (average true range) of CL is 100 ticks, then the daily $ movement is $1,000. Since the Turtles would placed their stops at 2ATR, the risk on the trade was $2,000 and then working back to a 2% risk per trade, the account size needs to be $100,000 for a single contract of CL. That would then also use the entire risk budget and no more trades could be taken in any other instrument until the CL trade was exited.

However, in recent years trend-followers have started using wider stops and a smaller risk % per trade. Thus, a typical trend following fund could probably only trade 1 CL contract with perhaps $500,000 in capital.

If a trader with a small account wishes to trade the same way as the Turtles, he needs to catch a big trend with his first or second trade. The account does not have a lot of leeway for losses. While most people don't think this is relevant, your best odds of winning money at a casino would be to place a single bet on black (or red) at roulette. The casino has an edge, so gambling there will just lead to losses over time. However, you can negate the casino's edge by just placing a single bet with good odds. If you lose, you at least got it over with quickly.

Small accounts work the same way in trading. Since you can't trade many contracts you can't scale back when things are going badly. Commissions and losses can hurt small accounts much quicker since they have less of a cushion. By focusing on trading less and making wins really count, a smaller account has a better chance of winning. It is just one way to minimize the effect of the house's edge against a small account.

Edit: Low liquidity is not necessarily a bad thing. It makes it easier to spot when a commodity becomes "attractive" for traders again. If you get sudden massive volume spikes, combined with big moves, then that commodity has become "hot". Easier to spot that than in CL, but you may need to wait a couple of years to get these type of trades. However, if you play them correctly, you can get the 100%+ year in one trade.

That's a really useful response, thanks for taking the time to go through it step by step.


 



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