E-Mini questions, please help!

[oldtime]

Quote from schulzey:

Aside from spreading the ES vs YM, what other single futures contracts are smaller or less volatile that I could trade?
I've been thinking of currencies or bonds but I haven't really been in that world so there would be a lot to learn. Like I said, I've always focused on stocks.

yes, forex is small
IMHO the number one reason for failure is under capitalization
you will never experience that over there. You have complete control of size
you still get 40 to 1 leverage
but the favorable 60/40 cap gain break is in question
I trade with interactivebrokers
you can open an account there and just paper trade to your hearts content all the strategies you are talking about for just $10/month

SPY will be 15 minutes delayed, but it sounds like you already have that covered

but futures and forex in the paper is extremely close to live

the other futures minis are just too illiquid for my taste

there are other forex brokers that will let you trade micro size, but they are market makers. I prefer an ecn. It's 10k to open an account at IB, if you don't like it you can get your money back at anytime within a day or two.

I like it because even if I only trade forex, I can put on some corn or some gold or buy that little stock or etf anytime I want.

personally I only use ib for trading, for the other stuff I use the usual broker

never like to have too many eggs in any one basket

 

[schulzey]

Quote from oldtime:

yes, forex is small
IMHO the number one reason for failure is under capitalization
you will never experience that over there. You have complete control of size
you still get 40 to 1 leverage
but the favorable 60/40 cap gain break is in question
I trade with interactivebrokers
you can open an account there and just paper trade to your hearts content all the strategies you are talking about for just $10/month

So you can use very low leverage with forex? I've always wondered that because I've heard a lot about people blowing up with currencies and I didn't know if it was the same situation with a huge minimum contract size and people not properly capitalized to trade it.

I thought the capital gains 60/40 rule applied to all futures? That's changed for currencies now?

 

[oldtime]

Quote from schulzey:

So you can use very low leverage with forex? I've always wondered that because I've heard a lot about people blowing up with currencies and I didn't know if it was the same situation with a huge minimum contract size and people not properly capitalized to trade it.

I thought the capital gains 60/40 rule applied to all futures? That's changed for currencies now?

yes, the IRS hasn't come up with a definitive ruling on forex. I took the 60/40 split in 2011 and they haven't said anything

with 20k, forex is the place to be

no, you can trade as small as you want

at ib the minimum forex size is 25k, so that comes out to about $2.50 per pip

if you are going to move less than 100k at a time you might be better off with a mm due to the commissions

ask RCG (another poster) about his broker

 

[icarus618]

Quote from schulzey:

Everything is relative to the amount of cash you have. I don't want to use insane leverage. How is it any different to try to turn $20,000 into $40,000 as opposed to turning $200,000 into $400,000? It's no different as long as your risk is scaled to account value.

From the looks of it trading just one Emini contract with a $20,000 account is way too highly leveraged (depending on the time of day you're trading and your timeframe of course). So I'm going to look into what oldtimer was talking about with ym/es.

A 1% move in the S&P is equal to about $700. That is my normal size stop that I use in the market and would not make sense for my account size. I would have to play a much shorter timeframe with much tighter stops which I'm not comfortable with.

I don't quite understanding the kind of trading you want to do with the e-mini. I thought it was intraday trading, and for that $20K for 1 contract is very conservative. Intraday margin of $500 is common. Therefore most of the $20K will just sit idle in your account. Of course, even if you have the margin to trade more you should always trade the minimum (1 contract) until you've proven yourself.

$700 is 14 points ES. I would not recommend allowing the possibility of a 14 point loss trading intraday regardless of your account size. With index futures you get volatility, liquidity, leverage on a very short-term trading level. If you don't want or know how to use them to your advantage then there's no point migrating over to the e-mini from stocks.

 

[oldtime]

Quote from icarus618:

I don't quite understanding the kind of trading you want to do with the e-mini. I thought it was intraday trading, and for that $20K for 1 contract is very conservative. Intraday margin of $500 is common. Therefore most of the $20K will just sit idle in your account. Of course, even if you have the margin to trade more you should always trade the minimum (1 contract) until you've proven yourself.

$700 is 14 points ES. I would not recommend allowing the possibility of a 14 point loss trading intraday. With index futures you get volatility, liquidity, leverage on a very short-term trading level. If you don't want or know how to use them to your advantage then there's no point migrating over to the e-mini from stocks.

no, he likes to average down and hold overnight, sometimes for weeks. He already does it in stocks, but he wants more leverage and wants to avoid PDT. That's why he correctly discerned that even trading ES 1 contract at a time with a total of maybe 3 on altogether is too close for 20k. And I agree

 

[schulzey]

Quote from oldtime:

no, he likes to average down and hold overnight, sometimes for weeks. He already does it in stocks, but he wants more leverage and wants to avoid PDT. That's why he correctly discerned that even trading ES 1 contract at a time with a total of maybe 3 on altogether is too close for 20k. And I agree

Thanks for answering. I may not have explained it as clear in previous posts but that essentially sums it up (except only averaging up, not down). I like to start with small positions and add to them when they are going my way to reduce risk on my initial positions.

I was looking into forex and the $2.50 per pip (smallest $25,000 leverage) position with the kind of volatility that curriences have is exactly the kind of risk reward I'm looking for. I can risk $25-50 on a trade and not blow up an account while easily adding to winners. With 1 contract of ES 1 point is $50 and could blow past my stop quite easily.

Looks like I might have to learn some more about Forex now.

 

[oldtime]

Quote from schulzey:

Thanks for answering. I may not have explained it as clear in previous posts but that essentially sums it up (except only averaging up, not down). I like to start with small positions and add to them when they are going my way to reduce risk on my initial positions.

I was looking into forex and the $2.50 per pip (smallest $25,000 leverage) position with the kind of volatility that curriences have is exactly the kind of risk reward I'm looking for. I can risk $25-50 on a trade and not blow up an account while easily adding to winners. With 1 contract of ES 1 point is $50 and could blow past my stop quite easily.

Looks like I might have to learn some more about Forex now.

my first real money forex trade was quite simple. I started with 25k long USD.JPY and 25k short USD.CHF. So basically I was just long CHF/JPY since I keep score in USD. My only strategy at the time was to add to the winner 25k at a time. By the end of the day I made over 2k. I turned on CNBC and Rick Santelli was saying it was some kind of one day up record for CHF.

 

[schulzey]

Quote from oldtime:

my first real money forex trade was quite simple. I started with 25k long USD.JPY and 25k short USD.CHF. So basically I was just long CHF/JPY since I keep score in USD. My only strategy at the time was to add to the winner 25k at a time. By the end of the day I made over 2k. I turned on CNBC and Rick Santelli was saying it was some kind of one day up record for CHF.

Nice!

Any suggestions for learning the basics in forex or did you just download a demo and figure it out?

 

[oldtime]

Quote from schulzey:

Nice!

Any suggestions for learning the basics in forex or did you just download a demo and figure it out?

just figured it (and am still figuring it out) myself. Yes, if you already have trading experience (and it sounds like you do because you are asking about risk) best is just to fool around in a paper account for a while. I know of no good information out there I would waste my time reading. But you can pick up a lot hanging out on ET.

 

[schulzey]

to oldtime:

Any chance you could send me the link to the specific page on the cme website that talks about margin and spreads with eminis?

Thanks again for all of the info!