How much will be my maximal loss on a $2600 IB futures account

F

fuchsbox

How much will be my maximal loss on a $2600 IB futures account trading one contract emini NQ with this style of trading:
Trading only 9.30-11.00 am EST.
No trade on FED days and in the 30 minutes after a number came out.
Number of trades average 3 per day.
Average trade length 5 minutes.
On paper I have 65/35 reward/risk ratio.
My average target and stop loss are 5 pts.
All trades executed with TWSs transmit page command for a preset IB page with 3 orders, the first a market order for IN, the second a limit order for TARGET, the third a stop order for STOP LOSS (the second and third in the same OCA group).
I have 4 months trading expertise in stock swingtrading with IB, I am breakeven after comissions.

My trading capital is $15000, but I dont want to hold the total amount on the futures account, because I want to use IBs liquidation when falling bellow inraday margin as a secondary stop loss, if my stop loss didnt work somehow.
My concern is that in exceptional conditions (fast market, broker down, etc) my position will not be closed.
Anyone who knows the futures market could tell me how my chances are?

One more question: any practices regarding if IB always does always liquidation when falling bellow intraday margin (they say “ If the required margin is not maintained, Interactive Brokers has the right, but not the obligation, to liquidate all or part of Customer's positions.”)

Thanks in advance - newbie
Rob
 
well, the easy answer is $2600. :)

you must be prepared to lose it all. although you do everything to avoid that.
From reading you, you obviously want to make it and try to prepare enough.
well, maybe too much.
You need to try it now. after a few days you will see if your predicted behaviour and trading match reality. If it does, just press forward.

Also it will show you the real drawdown. This is much more important than the 'expected' drawdown or whatever people here will reply to you.

just do it. if it does not work as expected, pull the plug and then study why it does not. if it does that's great.

tntneo
 
you can lose alot more than the auto-liq number.

imagine a suprise fed announcement and a large gap in the futures against you. an auto-liq stop can only be filled at the prevailing market prices. other examples could be trading halts or lock limit markets.

the odds of the above are slim but you would be liable.
 
3 trades x 5 point stop = $300 + $100 for slippage, etc. = avg. $-400 of course worst case is a much higher loss.
you need too be fairly accurate in your trades here with only 3 trades and a tight 5 point stop!

How do you come up with a risk/reward ratio of 65/35 when your average profit and average loss are both the same? Looks like you risk 1 for 1?

With 3 trades then:
if 0 for 3 profit = -300
if 1 for 3 profit = -100
if 2 for 3 profit = 100
if 3 for 3 profit = 300

Generally if you can get 5 points in a NQ trade then you should not exit with a target unless its at a key support or resistance level or previous swing high or swing low, because you can get more than 5 points. It doesn't know that your target of 5 points was hit then immediately stops there!
I would trail a stop instead of exiting.
 
a) 2600 is not enough for the initial performance bond for one NQ, you need about 4000 for that. 2600 might be enough for maintanence though.

b) as someone pointed out in my thread "emini dangers" just avoid the actual time of the economic release. The market will very quickly factor in the information as it is released. My guess is if you are watching the NQ and it is not moving tick for tick with the NDX the news hasn't been fully digested by the marketplace.

c) my advice is don't concern youself with stoploss nonsense. Unless you understand from a TA point of view why the NQ is doing what it is doing, you shouldn't trade it. My experience with just a few days of trading the NQ and previously the QQQ is that you will almost never be albe to jump in at the exact turning point, where will always be a little adverse price movement against you. However, if you are confident about what the Nasdaq will probably do in the next half hour then stay in UNTIL the market proves you wrong. If you are wrong, then get out! Forget that stopless horsecrap. If you are not good enough to do this, then maybe just use a momentum oscillator and ride momentum. Of course, make the period smaller so it is more sensitive. Jump the boat when the momentum stalls. By the same token, don't have a fixed idea of the points you want to net. If you get 5 great, but if you are riding a momentum wave why not wait untli price hits the next important resistence, then hope out. The markets are organic things, in my opinion, you must be flexible too.

d) move all you money into the futures account and only focus on trading that for awhile. You need to be prepared to lose some money while you learn. That is just how it works.

e) when I asked my question, the thread mentioned above, I was thinking of a story I heard about how the ES moved fifty points on January's rate cut. My guess, although I can't check it because my CME data doesn't go back that far, is that the future that moved that much was the June contract not the March. It is kinda the same with the NQ. Does NQU2'CM track with the market, no it doesn't. It does seem to reflect economic outlook though. If you always trade the current contract you should be a little safer. If anyone has ever seen the most recent contract NQ or ES jump 50 or 100 points let me know!

good luck
 
Originally posted by o_2_b_sean
[when I asked my question, the thread mentioned above, I was thinking of a story I heard about how the ES moved fifty points on January's rate cut. My guess, although I can't check it because my CME data doesn't go back that far, is that the future that moved that much was the June contract not the March. It is kinda the same with the NQ. Does NQU2'CM track with the market, no it doesn't. It does seem to reflect economic outlook though. If you always trade the current contract you should be a little safer. If anyone has ever seen the most recent contract NQ or ES jump 50 or 100 points let me know!

Sean: At least three times in the last 3 1/2 years the nearby ES has rallied 50 pts. without "trading". Keep in mind that deferred or back month index futures do not "discount" news 6 or 9 months out. They merely trade at cost of carry over the front month and over cash. If not then arbs will bring the spread back in line immediately. Also day trading margin on ES is a tad under 2k with IB. As we both know one would be crazy be so leveraged unless they have additional $ in reserve. I can't preach enough that there is an illusion of liquidity that is prevailing among many market participants. 10x prop, SSF's and shoestring daytrade margins in futures threaten not only the solvency of many on this board but perhaps the integrity of the nations financial system. This advice is from one of the most notorious overtraders ever. ME!
More...
 
"2600 is not enough for the initial performance bond for one NQ, you need about 4000 for that. 2600 might be enough for maintanence though."

I don't believe these numbers apply to daytrading the nq with a firm that offers daytrading margins.
 
>Sean: At least three times in the last 3 1/2 years the nearby ES has rallied 50 pts. without "trading". <

Pabst, can you tell us the circumstances of those point jumps? What caused them and what time of day did they happen? I can see how something like that could easily happen during the afterhours trading, with low liquidity, etc, but during the day?!? Also what do you mean by "without trading"? Are you saying they just jumped fifty points, instantly? Are you aware of any such moves happening with the NQ in recent history? I haven't yet seen the NQ trade anything more than ten points aware from the index during market hours? Afterhours is a different story...


>Keep in mind that deferred or back month index futures do not "discount" news 6 or 9 months out. They merely trade at cost of carry over the front month and over cash. If not then arbs will bring the spread back in line immediately. <

Thanks, didn't know that. Like I mentioned before, I am still getting used to the whole "idea" a futures.

>I can't preach enough that there is an illusion of liquidity that is prevailing among many market participants. 10x prop, SSF's and shoestring daytrade margins in futures threaten not only the solvency of many on this board but perhaps the integrity of the nations financial system. <

Have to agree with you on that one. Risk, I think, is the name of the game, eh? That is one of the things that annoys me about the way people pitch the e-minis. The CME even suggests on their site that trading the NQ is basically the same as holding a basket of stocks, or trading an ETF like QQQ. Very misleading in my opinion. Totally different ballgame.
 
Originally posted by o_2_b_sean
>Sean: At least three times in the last 3 1/2 years the nearby ES has rallied 50 pts. without "trading". <

Pabst, can you tell us the circumstances of those point jumps? What caused them and what time of day did they happen? I can see how something like that could easily happen during the afterhours trading, with low liquidity, etc, but during the day?!? Also what do you mean by "without trading"? Are you saying they just jumped fifty points, instantly? Are you aware of any such moves happening with the NQ in recent history? I haven't yet seen the NQ trade anything more than ten points aware from the index during market hours? Afterhours is a different story...


>Keep in mind that deferred or back month index futures do not "discount" news 6 or 9 months out. They merely trade at cost of carry over the front month and over cash. If not then arbs will bring the spread back in line immediately. <

Thanks, didn't know that. Like I mentioned before, I am still getting used to the whole "idea" a futures.

>I can't preach enough that there is an illusion of liquidity that is prevailing among many market participants. 10x prop, SSF's and shoestring daytrade margins in futures threaten not only the solvency of many on this board but perhaps the integrity of the nations financial system. <

Have to agree with you on that one. Risk, I think, is the name of the game, eh? That is one of the things that annoys me about the way people pitch the e-minis. The CME even suggests on their site that trading the NQ is basically the same as holding a basket of stocks, or trading an ETF like QQQ. Very misleading in my opinion. Totally different ballgame.
More...


Go back to early 2001 on nqs. The fed lowered and I think the nqs move 300 pts intraday.I forget what the gap was. Sometimes the nqs can move for no reason other than some poor slob put his elbow down on the buy or sell button and sent orders for 100's/1000's of contracts to the exchange thereby causing a spike. There are few instances of that over the past 2 years on futures markets. Don't forget to build in the possibility of power outages as well. Or Connections to Globex going down, or broker software freezes, or phone lines going down,etc.etc...
 
fuchsbox, I cannot add anything to the excellent advice above as I have no experience trading the NQ's. If, however, someone were to trade a fictitious instrument with the parameters listed below, a $2,600 account would, on average, turn into a total of about $17,000 by year's end. The account would go below $1,000 about 80 times in 100,000 years. I know this is not what you asked, but hopefully it will be of some interest.

Parameters
3 trades per day
Stop loss = stop profit = 5 points
Probability of winning trade = 0.65
Commission + slippage = $10 per trade
Market and trader both well behaved
 
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