how to start futures trading (emini)

[butterfacetrader]

Actually he never mentioned leverage.

A futures position is a leveraged position.

In any case, this has been as usual an excuse for ET hobbyists to argue subjects about which they know little.

It seems to apply to you also.

Does one have to trade multiple contracts? No.

Does one have to trade the ES? No.

Does one need to have 100K in his account? No.

Does one have to hang on while his instrument moves 30pts against him? No.

Have fun everybody.

Get off your high horse. Given the context of what was said, here is how it went down:

OP asks if $6k is good for futures trading with IB. Most gave IB specific answers, which is he could only trade 1 ES contract overnight, 2 intraday.

Others also gave opinions based on their own risk tolerance which is to stay away from trading futures. OP moves on.

Ballers come in saying they should goto discount brokers and leverage to the hilt. You're a bad trader if you don't make money that way (they say).

You ride in on your high horse trying to play mediator but provided nothing. Facts are pretty clear. Say he takes the suggestion and opens a futures account at a futures brokerage allowing $500 intraday margin. $6K with 4 contracts means 27.5 S&P moves before liquidation. It means 27.5 loss you can take against you. If you suggest 1 point stop loss, he has 27.5 tries to get it right. Losing streak of 27 times in a row is possible even for a good strategy. Law of large number only argues expected result from large sample size. You can be wiped out even with a good strategy.

Thanks for playing governor.

 

[dbphoenix]

You ride in on your high horse trying to play mediator but provided nothing. Facts are pretty clear. Say he takes the suggestion and opens a futures account at a futures brokerage allowing $500 intraday margin. $6K with 4 contracts means 27.5 S&P moves before liquidation. It means 27.5 loss you can take against you. If you suggest 1 point stop loss, he has 27.5 tries to get it right. Losing streak of 27 times in a row is possible even for a good strategy. Law of large number only argues expected result from large sample size. You can be wiped out even with a good strategy.

Thanks for playing governor.

You really have no idea what a thoroughly-tested, consistently-profitable trading plan is all about do you?

Well, best of luck to you anyway.

 

[butterfacetrader]

And you are swing "trader" or possibly an investor. That's fine.
Intraday traders (at least those of my ilk) would not even consider maintaining an ES position (or whatever) of 27.5 points against and I am 100% certain there is a point prior to reaching 27.5 points against indicating the position is wrong. Sure, anything can happen at any time, but that can be said for any style of trading or type of business. Occupational hazard. Embrace it!

I don't label myself. I swing trade and day trade, and invest. It doesn't matter. The same concepts apply.

All this argument comes down to risk tolerance and risk management. I am admittedly more conservative. I am not a baller who puts on a huge position relative to their margin. I want to be able to sustain massive drawdowns and still have skin in the game. So there is no point arguing here. SOme people take more risks, some don't.

Point of discussion here is OP has been advised so far to open a futures account that allows small margin requirements. Leverage it up with at least 4 contracts, meaning sustainable up to 27.5 point moves. I don't care what strategy you use. That is risky. Even if you have iron clad strategy where winning odds are better than losing odds, you can still have losing streak periods where you can be out of the game even with a good strategy. Its all statistics.

This is why some traders walk home with nothing. They have lots of guts and a lot of pain tolerance, but not a lot of smarts. No account for probability and no account for risk management. To them it doesn't matter. Take a look at some career pit traders. See how many can tell you stories of big gains and how some make big gains and then go bankrupt because of one trade. Then look at a hedge fund manager who has skin in the game after decades of being in the market. Investing/trading is about surviving long term more than making the big shots and big wins. But to each their own.

 

[tiddlywinks]

A futures position is a leveraged position.

It seems to apply to you also.

Get off your high horse. Given the context of what was said, here is how it went down:

OP asks if $6k is good for futures trading with IB. Most gave IB specific answers, which is he could only trade 1 ES contract overnight, 2 intraday.

Others also gave opinions based on their own risk tolerance which is to stay away from trading futures. OP moves on.

Ballers come in saying they should goto discount brokers and leverage to the hilt. You're a bad trader if you don't make money that way (they say).

You ride in on your high horse trying to play mediator but provided nothing. Facts are pretty clear. Say he takes the suggestion and opens a futures account at a futures brokerage allowing $500 intraday margin. $6K with 4 contracts means 27.5 S&P moves before liquidation. It means 27.5 loss you can take against you. If you suggest 1 point stop loss, he has 27.5 tries to get it right. Losing streak of 27 times in a row is possible even for a good strategy. Law of large number only argues expected result from large sample size. You can be wiped out even with a good strategy.

Thanks for playing governor.

@Bufferface, err EggOnFace
Go back to your bunker.

 

[butterfacetrader]

You really have no idea what a thoroughly-tested, consistently-profitable trading plan is all about do you?

Well, best of luck to you anyway.

You have no idea what risk management is.

Approximation of probably of sustaining at least one losing streak:
[1+(N-S)*Prob_win]*Prob_loss_streak

Where
N = total sample
S = Streak
Prob_loss_streak = prob_loss^S

So, assume your iron clad strategy is 50.1% chance of winning. Someone has $6K start, $500 margin @ broker, 6 ES contracts. 1 S&P point stop loss. He can take S=18 losing streaks from the get go. Out of N=1000 samples.

Prob of losing streak happening from get go: [1+(1000-18)*0.501]*(0.499^18) is 0.2%. This is too much risk. Sorry. But then again Im not a baller.

Same broker. 8 ES, S=14. Probability of losing streak 3%.


Since he is with IB, $6K start, $2703.125 intraday margin @ broker, 2 contracts. 1 S&P point stop loss. S=6. Probability of hitting a 6 losing in N=1000 samples is 691%. Guarenteed to lose.

How about IB $6K start, $2703.125 intraday margin @ broker, 1 ES contracts. 1 S&P point stop loss. S=12. Works out to be 12% hitting losing streak.

How about IB $6K start, $5406.25 overnight margin @ broker for swing trade, 1 ES contracts. 1 S&P point stop loss. S=12. Works out to be 12% hitting losing streak also.

Thanks for playing.

 

[dbphoenix]

You have no idea what risk management is.

Probably of sustaining at least a losing streak:
[1+(N-S)*Prob_win]*Prob_loss_streak

Where
N = total sample
S = Streak
Prob_loss_streak = prob_loss^S

So, assume your iron clad strategy is 50.1% chance of winning. Someone has $6K start, $500 margin @ broker, 5 ES contracts. He can take S=22 losing streaks from the get go. Out of N=1000 samples.

Prob of losing streak happening from get go: [1+(1000-22)*0.499]*(0.501^22) is 1%. This is too much risk. Sorry. But then again Im not a baller.

To begin with, my winrate is considerably higher than 50.1%. Second, a thoroughly-tested, consistently-profitable trading plan will not have a string of 22 losing trades. Whatever inevitable losses do occur would amount to only a few points.

What is it with you and the ES and multiple contracts? If you keep setting up straw men, you can go on with this to the limits of absurdity.

 

[butterfacetrader]

Since he is with IB, $6K start, $2703.125 intraday margin @ broker, 2 contracts. 1 S&P point stop loss. S=6. Probability of hitting a 6 losing in N=1000 samples is 691%. Guarenteed to lose.

How about IB $6K start, $2703.125 intraday margin @ broker, 1 ES contracts. 1 S&P point stop loss. S=12. Works out to be 12% hitting losing streak.

How about IB $6K start, $5406.25 overnight margin @ broker for swing trade, 1 ES contracts. 1 S&P point stop loss. S=12. Works out to be 12% hitting losing streak also.

Thanks for playing.

Correction was doing it on the whim:

IB $6K start, $2703.125 intraday margin @ broker, 2 contracts. 1 S&P point stop loss. S=12. So 12% chance.

IB $6K start, $2703.125 intraday margin @ broker, 1 ES contracts. 1 S&P point stop loss. S=66. Works out to be 1e-16%, so quite small.

IB $6K start, $5406.25 overnight margin @ broker for swing trade, 1 ES contracts. 1 S&P point stop loss. S=12. So 12%.

 

[butterfacetrader]

To begin with, my winrate is considerably higher than 50.1%. Second, a thoroughly-tested, consistently-profitable trading plan will not have a string of 22 losing trades. Whatever inevitable losses do occur would amount to only a few points.

What is it with you and the ES and multiple contracts? If you keep setting up straw men, you can go on with this to the limits of absurdity.

This is a statistical assumption. Its great if you think you have a fool proof trading strategy. We don't know what it is and its not the point of the debate here.

What matters is staying power. Clearly someone who can take on more loss can stay in the game longer.

Its not strawman stuff. OP with IB. He can trade 2 ES intraday or 1 ES overnight. He has 12% chance either way of getting a losing streak that puts him into margin violation using a 1 S&P point stop loss metric. Obviously if he has more pain threshold for higher move stop loss, the less tries he has with the strategy.

Even a winning strategy has a chance of a losing streak that can put you out of the game.

E.g. flawless strategy with 80% odds winning independently. N=500. Streak of loss of S=6.

[1+(500-6)*0.8]*(0.2^6) has a 2.5% chance of getting a losing streak.

 

[dbphoenix]

This is a statistical assumption. Its great if you think you have a fool proof trading strategy. We don't know what it is and its not the point of the debate here.

What matters is staying power. Clearly someone who can take on more loss can stay in the game longer.

Its not strawman stuff. OP with IB. He can trade 2 ES intraday or 1 ES overnight. He has 12% chance either way of getting a losing streak that puts him into margin violation using a 1 S&P point stop loss metric. Obviously if he has more pain threshold for higher move stop loss, the less tries he has with the strategy.

Even a winning strategy has a chance of a losing streak that can put you out of the game.

E.g. flawless strategy with 80% odds winning independently. N=500. Streak of loss of S=6.

[1+(500-6)*0.8]*(0.2^6) has a 2.5% chance of getting a losing streak.

All of which depends on the trading plan.

What exactly is your trading plan?

 

[tiddlywinks]

@ButterFace

Make sure your bunker is free of flying insects.

According to the National Safety Council
http://www.nsc.org/news_resources/injury_and_death_statistics/Documents/IF_37.pdf

1 in 71623 people died in 2007 coming into contact with hornets, wasps, and bees.
The odds are slightly better in 2014 since colony collapse disorder has been identified. But you can never be too safe.