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Hopefully I am adding this question to the correct forum. I am new to this forum and futures trading and struggling to decide on a time frame to trade.
I am committed to futures (of all types if needed).
I am developing my edge through technical analysis based on Weis and Wycoff's work.
One area where I am uncertain is the timeframe on which I should trade.
Is day trading the best if I only have 2 hours at the open to trade? Is that enough? Will I get enough set ups?
Can I swing trade (holding 1-5 or so days) if I only do technical analysis at night and enter trades at the open? Or do I need to watch the markets as closely as a day trader does?
What are the nuances of position trading - (holding my position for a longer term and letting winners run) that I should consider?
What are the pros and cons of each?
Any other advice based on what I have written is helpful.
I have about $50-60K that I can comfortably start my trading with. I am confident in my risk management. I have always set a stop-loss and never risk more than 1-2% per trade.
I would start with the micro contracts and trade those. You say you are good with risk management. Well futures will test your comfort level with risk no matter what size you trade. Try taking 10 losses in a row and just see how that feels. You may handle the losses well or you may change your plan all together. I guess what I am trying to say is you have to trade and see what you like. Try all time frames and see what happens. Just try risking real money and see how you like it. Sorry if this doesn't really answer any of your questions but the market will take all of your plans and ideas and crumple them up in a ball. I would also tell you to watch how much you lose on each trade. Don't let losses get out of hand and keep things manageable. I realize that this advice is the definition of risk management, I just thought it was worth saying again.
Set this money aside and practice on a demo account. I know some people will argue until they're blue in the face that a sim account won't teach you anything, and that you risk developing bad habits.
Ok, fine. But think about this. If you cannot turn a profit on a sim account, what makes you think you'll show better results when trading live, a circumstance under which emotions are heightened and unstable?
I've always found this one interesting. Yes I've read the market wizard books and others with the professional traders saying never risk more than 1-2% per trade.
What they don't tell you is it sure is easier to risk 2% on each trade when you are managing 100+ million dollars or even billions. 2% risk = 2 million per trade. That's a nice size position. Depending on which futures contract your trading(2% of 60k = $1200) a $1200 risk area may only equate to 1or 2 contracts traded. I'm thinking of CL and ZB for examples.
What if you have 10 positions on at one time and they all become losers. Your 2% risk per trade has now translated into a 20% loss of your account valve, in one shot.
I understand that the % loss(10 losers in a row) is still the same for the professional traders as it is for the small retail trader, but it sure is a lot easier to come back when you still have 80 million left rather than 48k.
I think many times we read something about the " Paul Tudor Jones'ez" of the world and we tend to forget that these types of guys manage tons of money and have been for years. Unfortunately, their risk philosophy doesn't seem to work the same on small retail trading accounts.
I'm not trying to disrespect your risk parameters, I'm just giving some food for thought for you since I've dealt with this problem myself for a long time on normal small retail trading accounts of the 10k-50k value size type.
Disclaimer: If my math is wrong please don't be shy to correct me, after all I am just a goofy truck driver.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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@LakeEffectTrading my advice would be invest it not trade it. Unless your very very good trading is probably a losing game.
If you insist on trying to trade it, something like trend following has a long term consistent track record, although they have had many multi year flat periods, and of course could stop working from this point forward. Many great books on trend trading, or you could just try and build your own systems.
Get to know when and what time the important data releases, speeches and presentations are to be made. Which ones are more important. You don't have to understand the numbers or meaning , but you don't want to be in a trade, or have an order place, a minute before one of the big releases... unless you really have a good idea of what will happen. Stops don't help in these situations until its too late. There are news traders but for a beginner, its dangerous territory.
Generally, the first 2 hours of the RTH Open will be sufficient.
Yes.
Swing trading will on average give you better R/R ratios - meaning for every dollar you risk the potential reward will be greater. There's usually also more time for decision making and most importantly it doesn't require you to trade every single day.
One of the things that I've become painfully aware of over the last few years is the amount of time it requires to day trade. You're basically stuck at your screens on a daily basis and there's no way around that unless you're fully automated.
Day trading also requires very fast decision making and you're more subject to noise and intraday fluctuations which may go counter to any prevailing major trend.
Do not, I repeat, do not, fund a $50-60K account for day trading unless you're very rich and this is play money that's easily replaced.
If you fund a $5K account the chances of you losing that is VERY high.
If you fund a $50K account the chances of you losing that is also VERY high.
The learning experience is the same for both while the latter will cost you greatly and potentially incur a lot of psychological damage in the process.
Day trading successfully (consistently) is extremely difficult. Don't listen to anyone who's telling you anything else. Please read through my thread where I'm considering throwing in the towel in this very forum. In addition to my own experience (and I can say humbly that I'm not a stupid guy) you'll notice the lack of responses from people who are successful day traders. The commonly quoted high failure rate is very much real.
If I were you, I would strongly consider focusing on swing trading instead and don't spend a minute thinking about pursuing day trading.
