Advice for a new futures trader

[oldtime]

Quote from murrica:

With $6k and 2% risk max, you have a max stop loss size of $120 and still have a decent (not large, but decent) risk of ruin, even assuming some type of positive expectancy.

This doesn't even take into account the initial margin requirements of your chosen instrument. Taking into account initial margin requirements, your stop loss size is reduced greatly.

Can someone run some basic RoR calculations here for OP?

Just based on observation, you would likely want something like $20k per contract, or more, to be safe and truly minimize odds of failure. And, without a positive expectancy, you should not be trading at all.

My advice is to save your money and perform more research. The market does not need your $6k as much as you do.

now hold on a minute murrica, I could use that 6k right about now, he's just a student, and has his whole life ahead of him, what we need is more students with 6k to help support us aging baby boomers. I did it when I was young, I donated plenty of money to the market to support those old codgers up in the pits. Now it's someone elses turn.

otherwise, I like the other guys idea of trading USO in a cash account

you may not make any money, but you will learn the painful lesson of just how much commissions, spread, and in this case carry, can cost you

 

[cdcaveman]

Quote from Zr1Trader:

Go to oanda

Deposit 100 dollars


Treat it like a million.

Do longer timeframes 4hr + while you do your school and other stuff.

Adopt a methodology and tie all loose ends.

This is just to get your feet wet and let you learn order types, get a feel for it ect.

It takes years to learn this just like anything else worthwhile.

i agree with this .. In that you should under position size.. to the point where it seems boring.. and don't scale up in size just because you have made traction for a short period of time..

your position size in CL is to big for your account size.. starting trading at any time to me is good.. you should customize the time you have to spend on trading to the time frame you trade.. ..

for example look at the longer time frame trend then look at a set up in a shorter time frame.. if you can't get this right.. why would you be able to trade shorter time frames in crude?

the get rich quick trade in crude is actually a get broke quick deal.. you will burn out or blow up over positioning in a highly leveraged instrument.. you can't position size correctly in CL for your account size..

 

[Visaria]

Quote from oldtime:

now hold on a minute murrica, I could use that 6k right about now, he's just a student, and has his whole life ahead of him, what we need is more students with 6k to help support us aging baby boomers. I did it when I was young, I donated plenty of money to the market to support those old codgers up in the pits. Now it's someone elses turn.

 

[murrica]

Quote from Visaria:

I forgot to mention the real killers (these have most certainly burned me in the past when attempting to trade with similar amounts of funds in a futures account):

- Overleveraging, particularly when in revenge or invincible mode.
- Exceeding risk parameters related to stop placement (Let me remove my stop or not use it, I really *believe* in this trade!)
- Overtrading
- Poor execution
- Sleep deprivation (particularly relevant to futures markets), leads to poor decision making

Let's not forget things that Mr. Market can do to fuck you over (intentionally or not):

- Stop running
- Slippage
- Commission
- Spread
- Gaps
- Flash crashes

Even if you have a nice, cozy plan to keep risk at 2% of capital beyond your initial margin requirement, in the real world, as a human, there are a number of factors that can and do easily work against you. And, there are other factors beyond your control working against you.

This is one of the reasons why, in my opinion, you have to grossly overestimate the amount of money to allocate per contract if you really want to stay in the game for the long term. This is likely why another poster pointed out that you really want 50% or so of the total value of the contract *in risk capital* allocated to your futures trading. Risk of ruin at that point is extremely low, even given the above gotchas.

Yes, there are likely more gotchas that I could not think of off the top of my head. Please, other posters, do add. I know oldtime is a heartless bitter old sociopath who doesn't mind taking $6k off other new traders [j/k, oldtime ], but c'mon, the market is not going to behave noticeably different as the result of X number of blown 5 digit futures accounts harvested from Elite Trader.

 

[actionzip54]

First, OP, you will probably lose all your money. Second, I would pick a market that is better suited to your capital level. Third, you can trade successfully on a small amount of capital. I did it and so have many others. If your scared to lose that money and you're not totally confident in your abilities odds are you are going to fail though. GL.

 

[misaki]

Quote from ct_investtrader:

Hello everyone,

First-time poster, long time reader... I've been paper trading futures off and on and want to open up an account to trade crude oil... only problem is I only have a small amount to work with (6k). Any advice you could give? If I opened an account I would only trade a few times a week with only 1 contract due to my hectic school schedule. Also I would need a good broker.

I went through that phase myself and I advise you don't proceed with trading, yet. It is a huge time sink and you will soon find the time you spend on it will hurt your grades.

The one and only way to make a substantial return on a 6k account is to have a strategy with very controlled PnL outcomes. To find such a strategy, you need significant investment in infrastructure, technical expertise and at least a year of development time (if you have an experienced team, more if you don't).

As such, it will be meaningless for you to trade as of this moment. Work hard, get a good GPA, get involved in leadership positions, and if you really want, take classes in financial engineering, e.g. quantitative risk management, financial programming, statistics. Also, in every half-decent university, there will be a few professors who are avid traders with intelligent ideas. Do yourself a favor, ask around starting with your department/faculty advisor(s), network a bit, and find such professors.

Knowing how to program will be extremely useful, whether you choose to do discretionary or automated trading. In the case of networking with professors, you will find that most professors hate anything which will inconvenience them; so if you have a programming skill that can increase their productivity and save time for them, they will like you - very much. Help them develop trading tools, maybe offer to collaborate on a paper in trading.

And apply to summer internships - right now. It's already getting late. Depending on your resume, as a college sophomore and above, you can aim anywhere from a data vendor/software provider like Bloomberg or Reuters, to a bulge bracket bank like BAC, Citi, CS, DB, MS, JPM, UBS (going through a lot of flak now, not worth applying), GS, or an exchange like CME/NYSE Euronext, to a prop firm like Allston, Jane Street, Knight, or hedge fund like D.E. Shaw. The list goes on. I can be more specific if I know your profile better. I'm familiar with hiring at a number of them. PM me if you need any further color. One catch: if you are going to prop, quite the contrary, having traded your own account can end up detrimental to your hiring chances.

For your first finance internship, do yourself a favor and find a place with a good training program - not one with a big name that makes you happy. And absolutely DO NOT land up in an "unpaid internship", or even worse, a place that charges you money - this means you ended up with a "trading arcade" (they tend to disguise themselves as prop shops, but they really aren't).

You're going to get a lot of deliberately hurtful and unconstructive responses on a forum like this. I wouldn't take it to heart. If you follow my advice, two, three years down the road, you're going to be happy that these are your competitors.