misconception about futures

GATrader

I am not saying stock traders are naive - what i said was - that once you have traded futures - you realise how naive you personally would be to have traded stocks - without understanding futures and their relationship to the underlying cash - and by extension - the stocks in the cash index

thats not to say - that there might be a lot of stock traders who have been making millions for years without any idea of futures - i have no idea if there are or not - but I feel that had they also introduced a deep understanding of futures into their trading - they would have made multiples more



.
 
Sabena asks: “Is trading futures more risky then trading stocks ?”

I would say YES and qualify it with – “for the inexperienced traders”.

As a newbie trader you start trading small number of shares to “pay” for your education.

With futures the “lessons” can be very expensive - possibly leading to an early exit from trading.
 
Originally posted by Miki
Sabena asks: “Is trading futures more risky then trading stocks ?”

I would say YES and qualify it with – “for the inexperienced traders”.

As a newbie trader you start trading small number of shares to “pay” for your education.

With futures the “lessons” can be very expensive - possibly leading to an early exit from trading.
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I agree.
 
its the expensive lessons that teach you the most - and if it forces you to understand more - perhaps the most valuable

100 losses of $1 is equal to one loss of $100

i know which one would wake me up the most!
 
I would say that one of the biggests risks is slippage (outside mini's, SP and US). Combined with roll over, many long term systems really don't hold up with real transaction costs, while they look good with continous contracts.

Also, I just don't like the slowness of the pits; which is another risk not really present in stocks.
 
ok, how's this - when you trade stocks - you may not realise it - but you are trading futures - stocks are derivatives of futures - just as futures are derviatives of stocks
 
Hi Stevet

I agree with you on most of your statement above. I read somewhere that a stocks movement over time can be attributed to 50% overall market (SP), 30% sector strength and the rest on that specific company's fundamentals. That is why I am going to try emini trading to see if I can do as well or better without the hassles / costs of bullets, following a lot of stocks, simplicity of trading emthodology not to mention better tax treatment of PnL. I still have to see the logic behind your claim that futures are deivatives of stocks.
 
its meant to be a self reinforcing statement - futures are deriviatives of the cash - but the cash is a deriviative of futures

personally i would not go long a stock if the futures were weak, nor short, if futures were strong, there are always exceptions which can make you money - but in general - you would not want to fight the futures

and since there is only one future ( ok - 2 with the emini and the big) - maybe it is easier to play that - than find the right stock - at the right time - and get the fill - and then still be dependent on futures
 
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