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Swing Trading Futures


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Swing Trading Futures

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  #11 (permalink)
Mercer Island WA
 
Experience: Advanced
Platform: Ninjatrader/Strategy Desk
Broker: Various
Trading: TF/NQ/ES/Stocks
 
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Posts: 561 since May 2010
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@karoshiman. Nice journal


karoshiman View Post
Watch out: TLDR material
I came to the conclusion that intra-day trading is not the right way to go as a retail trader. Anyway, I believe that intra-day price movements are
largely random; hence, the edge - if one is able to develop one - is very small in my opinion for retail traders (now, that
will provoke one or two traders here, I guess... ;-) ).

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.


Quoting 
In contrast to intra-day trading, I am certain that most people can learn and master swing trading strategies - i.e. trading
higher time frames for larger movements - as this is a totally different animal. It is a lot less stressful than intra-day
trading and requires a different skill set. Also, it is possible to have a day job and earn extra money on the side with
swing trading, something that is impossible with intra-day trading. That way, you can reach your financial goals much faster,
than with only one income stream.

Agree 100% with these statements.



Quoting 
I try to look at various futures markets to generate trade ideas with no preference for any particular contract.

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.


Quoting 
I use fairly wide stops. In order to be able to do this, you have to be well capitalized. There is no way this
strategy will work for you, if you have only USD 5,000 in you account and plan to hold a position requiring USD 3,000 overnight
margin. This would kill you very soon. If you do not have enough money for this, paper trade, earn money somewhere else
in the meantime and come back later to trade with real money if you have enough available.

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.

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  #12 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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djkiwi View Post
@karoshiman. Nice journal



Thanks!



djkiwi View Post

...

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.


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.



djkiwi View Post

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.


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).

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  #13 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Added to my positions:

QM now LONG from 87.18

YI now LONG from 33.56

No change in YK
(still LONG from 1446.44)

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  #14 (permalink)
Columbus, OH
 
Experience: None
Platform: NT 8, TOS
Trading: ES
 
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karoshiman View Post

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).

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.

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  #15 (permalink)
Mercer Island WA
 
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Quoting 

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.

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.




Quoting 
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 "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

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  #16 (permalink)
Mercer Island WA
 
Experience: Advanced
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Trading: TF/NQ/ES/Stocks
 
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Posts: 561 since May 2010
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Quoting 
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.

@Silvester17

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

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  #17 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Got stopped out of my YI position. Think silver will consolidate first before moving up (see chart).

New trade: Natural Gas

Price broke upward trendline & last swing low on Friday. Got short at 3.600. Target below 3.200.

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  #18 (permalink)
Munich, Germany
 
 
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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.

Various markets are taking a dive today.

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  #19 (permalink)
Munich, Germany
 
 
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Shorted NQ at 2669 (March contract). Break of upward trend line yesterday.

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  #20 (permalink)
Munich, Germany
 
 
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karoshiman View Post
Shorted NQ at 2669 (March contract). Break of upward trend line yesterday.

Took part of my profits at 2634.

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