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Best futures for relative newcomer in futures trading
- Thread starter lojze
- Start date
Merry Christmas?
My recommendation is to trade the CME agriculturals like wheat, corn, and soybeans. They have a built in seasonality that makes for nice long trends on the daily charts, giving you many opportunities on the hourly charts. They also have reasonable liquidity and trading hours. This is what I have been doing, with no complaints.
I see that in the 2nd post you made to this thread, you explained a little further to say that the person you are asking for does trade stocks successfully, so this dramatically changes the question.
If I was going to throw in my 2 cents, (coming from an amateur), and without seeing your second post, I would say that it just doesn't matter what he would trade. As a new trader, the lack of the proper trader mindset could very well mess up trading any instrument out there. Whatever his fears are, and how ever they manifest, will undoubtedly show in his trading. So no matter what instrument he chooses, I just don't think it would matter much. Its like if he set out to cross the Pacific Ocean and was asking which was the better boat.... a row boat or an inflatable raft. I imagine he would eventually sink in either before reaching his destination.
Now if we take into account your second point about him being successful with stocks, then going forward would probably depend on the strategy that he uses for stock trading, and finding the futures instrument that most closely resembles this. Some stocks spend way more time in a range, so if his strategy is reversals, he better find a futures instrument that resembles this and figure out if his strategy will work here. Likewise, if he's the type of trader to want to trade trends and go for big wins... the chosen futures contract better show this strategy to work.
So in conclusion, I think that asking for the best instrument for a beginner is almost irrelevant. First he has to know what his psychological makeup is and whatever the limitations that he has will allow him to accomplish (ie. what are his fears), and if he does actually have a proper trader mindset, then he just has to figure out what kind of trader he is, what strategies he likes to use. Then its just a matter of figuring out if his stock trading strategy can work on that futures contract, and if it can't, can he switch up strategies.
To put another way, an amateur who has no idea and can't think the way a trader needs to think will fail at trading any type of instrument. An experienced trader will understand himself and how he interacts with the market, and hence will know to first figure out if this interaction is favorable to the conditions of that instrument. If its not a perfect match, he will figure out if what he needs to change is his strategy, or look for a new instrument.
Oh... and I forgot to add, that the reason why I say this is because there have been quite a few opinions so far of which is the best instrument, but each of these opinions comes from that trader who understands himself and the market he is trading. The biggest variable in trading is the trader, so these suggestions, although good and can more than likely be backed up with stats and figures, still don't take into account the biggest variable, which is that trader's psychological profile.
That would indeed be directional, because at the current prices of the front contracts,
1 long ES = 2100 * 50 = +$105,000
1 short YM = -18122 * 5 = -$90,610
In effect, you would be $14,390 long.
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Tell your friend to take his/her trade strategy and then backtest it on all the futures trading instruments he/she has access to. Next, trade the top three that has the best backtest results.
Simply, tell your friend to only let the backtest results determine which is the best to trade via the trade strategy being used.
Don't you think this is a form of overfitting / curvefitting?
If this is intraday I would actually recommend learning on one of the thinner markets (like cl, gc, or the fdax if you are inclined) and develop a way or get something that will allow you to disseminate and reconstruct the t&s and learn to read the specific price channels where the block trades are being placed. After you get the hang of things the rest should be cake. If you learn to do this on thin markets and apply it to thicker markets (es, zn) you can catch magnificent moves. Good luck.