Futures - one commodity or multiple?

B

billpritjr

As someone studying futures, I find it somewhat a pain in the as* to keep track of all the contracts, with underlying margin requirements, tick values, etc, etc.

I would like to ask those who actively trade futures, from a trend following persective (not day trade), do you focus on a few commodities only or do you try to track everything under the sun?

I would see logic in monitoring these at all times and nothing more.

Light Crude
Unleaded Gas
Gold
Silver
Soybeans
Corn

all of the above appear to be high volume and liquid contracts and also more truely aligned with the "supply and demand" theory.

I would find it extremely difficult to monitor at same time

Eurodollar
mex peso
Cotton
Lumber
Soybeans
Gold 5000 oz
Sugar
+ XXXX number of other contracts

curious if the profitable futures traders "specialize" in one or two commodities only.

I recall Marty Schwartz stating that he traded mostly SP 500 index and maybe also Treasury Notes, don't know.

I am learning so bear with me.

thanks

:)
 
Great question. I am in your boat too -- just starting to trade futures.

It seems to me that if you are a trend follower you have to select your markets carefully. So you have to look at a wide range of markets, not specialize in only a few.

Someone said that markets only trend 15% of the time. Whatever the percentage is, it isn't most of the time, and you need to find the markets that are breaking or breaking out.

I would love to hear what experienced people say.
 
Bill,
As a person that has been in the futures business for close to 20 years that is a lot of markets to follow. It may help you to follow one or two markets or markets that trend together. The Yield curve on the CBOT and Eurex. At least these markets all trade electronic and tend to trend together. When you have all the grains trading plus the oils it tends tbe harder to track all of them. Then all of your orders are going to the floor versus you making those trades electronically. The currencies are a little easier to follow plus you can trade them all either indiviually or as forex spreads on the CME. If you have any questions feel free to email or call.

Rich
 
Quote from billpritjr:

As someone studying futures, I find it somewhat a pain in the as* to keep track of all the contracts, with underlying margin requirements, tick values, etc, etc.

I would like to ask those who actively trade futures, from a trend following persective (not day trade), do you focus on a few commodities only or do you try to track everything under the sun?

I would see logic in monitoring these at all times and nothing more.

Light Crude
Unleaded Gas
Gold
Silver
Soybeans
Corn

all of the above appear to be high volume and liquid contracts and also more truely aligned with the "supply and demand" theory.

I would find it extremely difficult to monitor at same time

Eurodollar
mex peso
Cotton
Lumber
Soybeans
Gold 5000 oz
Sugar
+ XXXX number of other contracts

curious if the profitable futures traders "specialize" in one or two commodities only.

I recall Marty Schwartz stating that he traded mostly SP 500 index and maybe also Treasury Notes, don't know.

I am learning so bear with me.

thanks

:)
More...

The problem with your list is that they are correlated. Oil and gas will trade together directionally, as will gold and silver. Of course, you can spread them, but it sounds like you are planning on directional trend following. The problem is you can easily end up risking twice as much than you want per trade because what you consider two small trades is really one big trade.

I think the best markets for trend following tend to be the interst rate futures, the currencies, the grainsand coffee. Stock index futures have usually been terrible for trend following systems, but the bubble market and subsequent bear market tricked a lot of people into thinking they were good trend following markets. In most times they are not.
 
so would it be correct for me to conclude that it is best to "specialize" in a few commodities and not try to trade everything under the sun?

My public state university education tells me the "true" supply and demand commodities (there are only so many oranges in them trees....) would be best to specialize in. Even oil is subject to OPEC regulation.

So, from today forward, I am studying more and more and will be monitoring the following high volume, active, futures:

CORN
SOYBEANS
HEATING OIL
LUMBER
SUGAR 11
COPPER
GOLD
SILVER

I am still in "learning phase" right now

comments always welcome
 
If you want to learn about Long Term Trend Following of Stocks or Commodities, I suggest you visit this website, or do a Google search on Trend Following.

www.turtletrader.com


Yes, I track everthing under the Sun!

Good Luck!

:)
 
I was a long term trend follower from 1994 through 1997, the last two years of which I was registered as a CTA. I analyzed the markets using end-of-day data and only occasionally spot-checked the market throughout the day. I was pretty much a pure technician. I followed about 35 issues in 6 sectors, and treated 2 or more positions in the same sector as one trade. Some of my best trades were in foreign markets (e.g. Baltic freight index, rapeseed, high sulphur fuel oil, etc). One of the biggest problems I had at first was that I sometimes had positions quoted in several different currencies, and my broker didn't yet have a consolidated statement.

Now I trade mostly stocks very short term. As I got older, I found I didn't like the big drawdowns in long term trend following. I also prefer electronic trading.
 
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