Agree 100% with this statement. There are other points as well. Firstly, there are 20 year + veterans who will wipe the floor with even advanced retail traders. Secondly, algos are increasing their presence on the day trading time frame. Thirdly, transactions costs can quickly remove that small edge you mention. Put all these together and the retail trader has a very difficult challenge particularly trading instruments with a high level of commercial participation like the ES.
Agree 100% with these statements.
Agree 100% with this approach and can provide a fairly good edge. What I've come to realize is all instruments move to the same destination. The only difference is some get there faster than others.
Agree 100% with these points as well. My opinion is futures are less risky than stocks provided leverage is removed from the equation. Why? Because there is very limited gap risk on futures.
The following 3 users say Thank You to djkiwi for this post:
Are you referring to correlation between instruments? I've observed this as well. Although, the last days/weeks wheat futures behaved in the exact opposite way than the rest of the markets I'm looking at.
Exactly! I've read now several times about the "unlimited" risk of futures trading. Of course, there is the risk of a major crash which happens over the weekend, so that your stops don't take you out at the right level. But even then, if you are well capitalized this should not wipe you out completely. In case of crashes during the week your stops should still take you out at the right level. Even the "flash crash" took 15 minutes or so. I was not involved in the markets back then, but I would assume that you could still get out without major slippage in such situation as a retail trader (might be different, if you have 50,000 ES contracts on your books).
The following user says Thank You to karoshiman for this post:
first thank you for your journal. and second this is not a critique. just some thoughts.
depending what kind of crash there's while the market is closed, even if you're well capitalized, it can hurt you very badly. so at least be aware of the size you're trading. I wasn't in a trade during the flash crash, but there's no doubt in my mind you would have suffered major slippage. of course that would apply to day trading as well.
my point is if you're not hedging, it's not justified for a retail trader to swing trade futures (especially for newer traders), because of the risk. there's plenty of other instruments like options, etf etc which are more suited for swing trading.
of course this is just imho, and I do realize many will disagree.
The following 5 users say Thank You to Silvester17 for this post:
Actually, I'm referring to specific swing analyses. For example, the following post discusses ES. The analysis is virtually the same for oil in that the swing sizes are virtually the same. The difference being oil has many more swings. Basically what this means is I'm setting the same swing targets for oil and ES but I expect oil to get there much faster.
Similar to the BE stop on large market moves, a collection of day trades that have not reached any acceptable reward level after the session yield negative returns because they do not reach their reward as often, given the effect of other time frames …
The "unlimited risk" relates simply to money management. Anyone who continues to defy even the most basic position size logic deserves to have their heads handed to them in my opinion.
The other big mistake traders make is scalping for 5 or so ticks with tiny stops because that's all they can afford. Often what ends up happening is they blow through $5k, lose that, save another $5k, lose that and rinse repeat. What happens is they lose $50k in quick succession. The alternative would have been to papertrade for 12 months, then they would have $50k, more experienced and better capitalized.
Cheers
DJ
The following user says Thank You to djkiwi for this post:
Actually, I think this is only partially true. If you were in a stock position with a crash overnight you are screwed because your stop is at market and you are stopped out on open. I've suffered some horrific losses over the years due to overnight gap events.
With futures your major gap event is really the weekend. So even though you may incur slippage overnight at least you can get out of the trade if you wish. One thing I enjoy about futures is waking up in the morning and looking to see whether overnight I've been stopped out of a position or preferably my targets reached. This gives me much more control and much less risk over the trade than individual swing stock plays.
The point you make is size/leverage. Remove leverage from the equation and futures risk reduces considerably. My personal view is an account size of a minimum of $250,000 is required to trade futures. Futures trading, like any business, if you are under-capitalized and hit a rough patch you will probably go under. People trading with $10k or less really have no hope in this game.
This means the trader can fully collateralize his positions effectively removing leverage from the equation. For example if you trade the TF with a $250k account you can trade 3 contracts (~$80k per contract x 3) = $240,000. Use the minimum amount of cash to fulfill margin requirements and then use the rest of the $250k in your equities portfolio. As your equities portfolio increases or decreases then the number of contracts increases or decreases.
If the futures account increases then transfer the cash profits to the equities account. So this means you are only ever trading with what you own.
Cheers
DJ
The following 2 users say Thank You to djkiwi for this post:
Stopped out of QM as well. Trying a short from 87.80. The long scenario is not valid anymore. Price needs to go above 90 in order for the long scenario to play out.
