just a slight futures tip..

C

coolweb

Because of the choppiness nature in futures (YM , ER2)
<b>Too many participants.</b>

a stop less then 7 ticks or so, will get stopped out even if you are right in the direction.
They just love to run around your entry for fun.

Not so in stocks..
Buyers/sellers protect their castles like their life depended on it.
Once broken, hell breaks loose.

That is why people lose more money in futures, risk control is harder. Stops have to be wider. Wider the stop, the pain hurts a lot more when you hit a drawdown.

ps. I did not trade futures, just an observation from watching it constantly over the last year or so.
 
Quote from coolweb:

Because of the choppiness nature in futures (YM , ER2)
<b>Too many participants.</b>

a stop less then 7 ticks or so, will get stopped out even if you are right in the direction.
They just love to run around your entry for fun.

Not so in stocks..
Buyers/sellers protect their castles like their life depended on it.
Once broken, hell breaks loose.

That is why people lose more money in futures, risk control is harder. Stops have to be wider. Wider the stop, the pain hurts a lot more when you hit a drawdown.

ps. I did not trade futures, just an observation from watching it constantly over the last year or so.
More...

Another reason why futures are not for very small money. There is strong correlation between IWM and ER2 as well as SPY and ES, just to name two stock index futures.

However, minimum tick value for ER2 or ES is $10 / $12.50, where as you can take much smaller size in the ETFs.

Just another reason why if you don't have the money, you shouldn't be playing the futures game.

RoughTrader
 
Quote from coolweb:

Not so in stocks..
Buyers/sellers protect their castles like their life depended on it.
Once broken, hell breaks loose.
More...

Well you just showed your complete lack of experience.

Running the stops in stocks is much more common cause the specialist and MM can see them. If you have a system automated stop, then it's better, but levels get faked and chopped just like in futures, even worse in semiliquid stocks.
 
<i>a stop less then 7 ticks or so, will get stopped out even if you are right in the direction. They just love to run around your entry for fun.</i>

That is very true... a $70 per contract stop in the ER will almost never hold unless the entry is perfect right ahead of any directional surge.

However, where in stocks can a small-account trader take positions risking -$150 total while having potential to make +$500 on that exact-same trade? What shares and how many allow this type of risk/reward scenario?

Today I had two ER trades go more than +5pts in favor... one short in the morning, one in the afternoon. I had a couple more go more than +3pts and stop out for +2pts gain on trailed orders.

**

The leverage of emini futures is exactly what each of us assign it to be. A $5,000 account balance can (mathematically) trade one ER contract risking -$150 on each stop, with strong potential to gain +$300 or greater gains.

How well can a "patterned day-trader" in stocks or shares manage such risk while enjoying such reward potential via intraday trades?

The answer is, <b>none</b>. A small account trader in stocks has to be minimum $25,000 the last time I trade equities.

There are many reasons why professional traders specialize in the eminis for paying the bills... experience to see past the noise lets one see the methodical reward.

Hope this helps :>)
Austin
 
"
However, where in stocks can a small-account trader take positions risking -$150 total while having potential to make +$500 on that exact-same trade? What shares and how many allow this type of risk/reward scenario?
"

Austin,

Very good point! The rewards in futures are very large when you are right and sitting tight.


Futures just tends to make most wrong more then usual.
(not refering to the superstar traders)
 
Although one should not consider taxes when they are trading, it should be mentioned that futures are taxed more favorably than short term stock trades in a non retirement account.
 
So what vehicles allow you to risk $30 per trade and a reasonable chance of making $100 per day?

You cant do that with stocks any more due to that stupid day trading rule requiring an account of $25K.
 
Coolweb, you are 100% right about the degree of challenge in emini trading. The volatile buzz (noise) compels too many traders to become scalpers, which is a quick death for most who do not survive.

One way to avoid much of the noise is trading 9:30am ~ 11:30am and then 1:00pm ~ 3:30pm periods of favorable swings. Avoid the midday period, and trade heavier in the afternoon when directional moves appear probable as they did today.

**

Orangecat's point about 70/30 long-term capital gains versus short-term gains does make futures profitable. Also, let's not forget the mark-to-market simplicity of futures accounting versus wash-sale nightmare scenarios in stocks.

Never said emini trading is easy... no successful trading is easy. But there are great advantages to emini trading once the usual learning curve is survived.
 
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