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One of star traders in an interview said that some markets have more edge than others. He thought that because forex and futures are run mostly by "big guys", i.e. professionals, these markets are more efficient. As opposed to equities, where participation of retail traders is considerably higher, which gives the more edge, as the likelihood of mispricing - and therefore trading opportunities - is higher.
What do you think? What do you guys trade, mostly?
Can you help answer these questions from other members on NexusFi?
His logic is sound. There are thousands of equities, and on any given day you're almost guaranteed to see at least a good handful of them in play. Meaning, there is some news catalyst, earnings, or something causing the stock to be traded more heavily. More volume, more volatility, likely a gap up or down -- these things are generally more exploitable and open to opportunity than an instrument which opens unchanged, has low volume, and trades in a range.
His argument was that there are rarely "events" in the FX space. The currency markets are efficient, and while macro news can move them (BoJ, ECB, FOMC, BoE can all move their respective FX pairs, for example), there are only a few, relative to stocks. Same with futures. You may have some geopolitical-based volatility in crude, or weather-related moves in commodities, and the like, but there just aren't as many markets to choose from as stocks.
IMO, for day trading, index futures is the way to go. Sure, there's a number of stocks that move double digit percentage points each day...but you have to find those stocks before they make a move. Index futures offer up the opportunity for significant returns every day.
Let's look at the S&P emini futures for example. The daily change in the S&P 500 I'm guessing is averaging around 1%, or 50 points. With a tick size of $0.25 and tick value of $12.50/tick...a 50 point move equals $2,500 in gain or loss per contract traded. Plus, that 50 points is from open to close. The daily path is often much greater than 50 points. And the beautiful thing is it doesn't require any research. Just sit down at your trading station each morning and wait for your preferred setup and go.
The downside is the learning curve can be painful and costly. It's great there's now micro contracts sized 1/10th the full contracts to cut your teeth on.
Want to see what it's like? Check out my trade journal:
As the title states...this trade journal chronicles my efforts at using a futures account with AMP trading on the MT5 platform for monthly income. My goal is to consistently make $10k/month. I opened the account 10/1/23 with $10k.
No, while stocks have many benefits, so do futures, and I've been a futures guy most of my life (though I did have a short stint as an equities trader for about a year).
Actually, the current 30-day average daily range is 47 points, or less than 1% per day. And the market is pretty volatile at the moment. That average range during slow periods can be brutally low. It got down to 30 points back in December, with one stretch there over multiple weeks sitting in a 70 point range. Of course, if you adapt and can trade that, then it isn't so bad. Historically though, volatility can be quite low (see 2017) and when things aren't moving in the index, you'd much prefer a couple of stocks breaking out to try to trade. My point is, not all days offer the same quality of opportunity for a given trader's style/system.
Also, trading stocks can require a lot of research, but in the commodity space like grains and softs and metals, there's plenty of geopol and weather related type of stuff to be aware of there, in which case research is probably warranted. However, for equity index futures it's true that the research won't be the same type as stocks. But it does require preparation, IME. It's certainly possible to overdo this, and more important to be in the flow. But, those who come to the market unprepared and blindly trade setups may do well for a while but probably will not succeed long term (think, multiple market regimes spanning more than a year or two). It might be easy for newer readers to get the wrong impression if they read that you "just sit down at your trading station each morning" which IME is an oversimplification of what's required to be successful long term.
For the index futures, I'm talking about now...not 2017. The tick size and value has remained the same for the ES mini futures despite the index more than doubling since 2017. If the market crashes and goes back to the 2009 lows below 1k, the calculus will change considerably. I personally don't see that happening.
As I said, the current movement in the S&P is around 50 points. As the index increases over time, so will the number of points of daily movement. Sure, there will be good times and bad...but look at the expected average moving forward.
I never said it was easy. However, I think most folk make it more complicated than it needs to be. It took me over a decade to gain confidence and profitability. In the end, it should be as easy as "just sitting down at your trading station each morning". If your process is more complicated than that, there's room for improvement.
Trading professionally as your primary source of income is akin to being a professional sports player in the level of difficulty. It's f'n tough and requires a lifetime of dedication and training.
