Starting in futures versus forex

Georgii

Georgii

Hello all,

I'm new to trading. Initially I was considering daytrading stocks, because that is what I understood. But I don't have $25,000 to throw into a brokerage account.

I learned about the mini ES contract, and it seems that you pretty much can get away with starting on a $10K account for an intraday strategy, which is doable for me. I eventually want to make the move into trading commodities.

On the other end a number of people have told me its a better idea to start with Forex. One futures trader insistently told me that futures is probably the worst place to get started, because of the very high leverage and volatility.

Personally, for some reason I have no interest in the currency market and can't bring myself to get interested in it. It smells of bucket shop, I hear all these scam stories and that market makers will try to kill you on some trades. For a beginner, is it a good idea to be dealing with such a scenario?

Besides, I figure if I'm going to eventually move into commodities, why not start with futures and learn the instrument cold instead of wasting my time on FX which I don't imagine I'll be trading?

Basically, the big plus I'm told about Forex is that you can't lose more than your margin deposit. But what's the big deal, can't you just keep a firm stop on a futures account which prevents you from a margin call?

Any opinions are appreciated...
 
Quote from Georgii:

Hello all,

I'm new to trading. Initially I was considering daytrading stocks, because that is what I understood. But I don't have $25,000 to throw into a brokerage account.

I learned about the mini ES contract, and it seems that you pretty much can get away with starting on a $10K account for an intraday strategy, which is doable for me. I eventually want to make the move into trading commodities.

On the other end a number of people have told me its a better idea to start with Forex. One futures trader insistently told me that futures is probably the worst place to get started, because of the very high leverage and volatility.

Personally, for some reason I have no interest in the currency market and can't bring myself to get interested in it. It smells of bucket shop, I hear all these scam stories and that market makers will try to kill you on some trades. For a beginner, is it a good idea to be dealing with such a scenario?

Besides, I figure if I'm going to eventually move into commodities, why not start with futures and learn the instrument cold instead of wasting my time on FX which I don't imagine I'll be trading?

Basically, the big plus I'm told about Forex is that you can't lose more than your margin deposit. But what's the big deal, can't you just keep a firm stop on a futures account which prevents you from a margin call?

Any opinions are appreciated...
More...

New trader + daytrading = financial suicide

Learn to trade in demo account, and forget about opening live account with 10K.

Anyway, both futures and FX can be traded successfully, there are some very decent Forex brokers that are regulated , all you have to do is do some research instead of listening to what others tell you. Also if you think futures are volatile, then have a look at intraday FX charts.

Daytrader's objective is not to lose more than 1%-2% of total equity per trade. For a daytrader, "objective" of not losing more than your margin deposit is a function of proper risk management, therefore your argument for "big plus about Forex" is meaningless, unless you want to get into scenarios when you wouldn’t be able to close the "daytrade" in futures for reasons other than lack of discipline.

Decisions about which market to trade should be based on your trading objectives. Post your objectives and you’ll get a better reply.

All the best :)
 
Thank you Mr. Consistent, you've already helped clear my head quite a bit...

Allow me to introduce a bit more information about myself:

1) I have been following the stock market since July of 2008, and since then have spent several hours per day reading about it and studying.

2) Since then I have done some investing with stocks and funds (not exactly the kindest time, of course), but have not yet actively traded.

3) Two weeks ago I passed the Series 65 exam.

4) I have been reading voraciously about trading for a few months (on average a few hrs a day).

My objective with trading is to have it as a secondary source of income, and if I feel I am truly talented at it, to make it my primary profession.

The reason I gravitated towards futures is because it seems there is always action going on somewhere, be it in indexes, be it in commodities, etc. I think that if I learn to trade futures, I will not be stuck in a situation where the market is too quiet for me to make any money.

Also, it seems this is the market where the most successful speculators have traded, such as William Gann, Richard Dennis and Larry Williams. Seems like this is the place to be if you really want to make money on trading in the long run. None of those guys started as stock or forex traders.

My feeling is why not simply learn what you are going to be trading right off the bat? If it's riskier, you learn good money management habits right away because if you don't, you'll be out of business in no time.

Point taken, that it is important to start trading demo (although some believe that demo doesn't inspire you to care as much).

Some say that it is better to start as a position trader or swing trader first, prior to becoming a day trader. What is the logic behind this? If you have the time during the day to daytrade, why not start doing that right away and learn the ropes that way?

Thanks once more for any and all advice!
 
Quote from Georgii:

Hello all,

I'm new to trading. Initially I was considering daytrading stocks, because that is what I understood. But I don't have $25,000 to throw into a brokerage account.

I learned about the mini ES contract, and it seems that you pretty much can get away with starting on a $10K account for an intraday strategy, which is doable for me. I eventually want to make the move into trading commodities.

On the other end a number of people have told me its a better idea to start with Forex. One futures trader insistently told me that futures is probably the worst place to get started, because of the very high leverage and volatility.

Personally, for some reason I have no interest in the currency market and can't bring myself to get interested in it. It smells of bucket shop, I hear all these scam stories and that market makers will try to kill you on some trades. For a beginner, is it a good idea to be dealing with such a scenario?

Besides, I figure if I'm going to eventually move into commodities, why not start with futures and learn the instrument cold instead of wasting my time on FX which I don't imagine I'll be trading?

Basically, the big plus I'm told about Forex is that you can't lose more than your margin deposit. But what's the big deal, can't you just keep a firm stop on a futures account which prevents you from a margin call?

Any opinions are appreciated...
More...


Don't try trading futures with 10k you have no wiggle room with your stops. Try trading some of these bank stocks. Buy pull back and ride them up trading 100-300 shares. You don't have to day trade them.

Avergae in and scale out. Build your account up and gain confidence then try futures.
 
Thanks Roman Candle...

Let me try to get some takeaway points down here:

1) Forex volatility is no different than futures volatility, therefore the risk of losing money doesn't vary.

2) The margin call risk for futures can be mitigated with a strictly enforced mental stop.

3) A $10,000 account does not give you enough wiggle room to day trade 1 emini ES contract. This is because futures contracts are highly leveraged and one whip-saw can blow your account or force you to take a stop before things work themselves out.

Okay, so let's say I move into a stock account...

I can use something like SPY to mimic the ES, GLD to mimic gold, etc. This is probably the best way for a newbie like me to go?

Also, why swing trade first versus daytrading right off the bat?

Thanks again for all your help!
 
the reason most will advise you to do some swingtrading instet
of daytrading is because you have less noise in higher timeframes,
with noise is mean whipsaws or less up-down-up movement and
a higher probability to catch a trendtrade

the disaventage of trading forex non-future but at a
socalled "bucketshop" is you will have to
deal with the market-makers as those products do not
trade at a exchange like futures but are socalled "made-up" prices which could cause some spikes now
and then or as
some other prefere to call them "stoploss fishing"

best luck
 
Quote from flyingdutchmen:

the reason most will advise you to do some swingtrading instet
of daytrading is because you have less noise in higher timeframes,
with noise is mean whipsaws or less up-down-up movement and
a higher probability to catch a trendtrade

the disaventage of trading forex non-future but at a
socalled "bucketshop" is you will have to
deal with the market-makers as those products do not
trade at a exchange like futures but are socalled "made-up" prices which could cause some spikes now
and then or as
some other prefere to call them "stoploss fishing"

best luck
More...
This is a myth. Yes, you do get spikes at news release times, but everyone knows exactly when that will occur,so it's not a problem for a day trader.

No sane FX market maker will go stop hunting for retail trader's stops, the market maker would have to be capable to move the market in order to do so, and Forex is the most liquid market in the world. In fact stop hunting is common in stocks and futures, but for some reason people believe there is a conspiracy theory in the Forex market. :)
 
Quote from Georgii:

Thank you Mr. Consistent, you've already helped clear my head quite a bit...

Allow me to introduce a bit more information about myself:

1) I have been following the stock market since July of 2008, and since then have spent several hours per day reading about it and studying.

2) Since then I have done some investing with stocks and funds (not exactly the kindest time, of course), but have not yet actively traded.

3) Two weeks ago I passed the Series 65 exam.

4) I have been reading voraciously about trading for a few months (on average a few hrs a day).
More...
That's all very nice, it but this won't help you in daytrading. You have to develop a business plan, have some backtested trading method, and most importantly learn about trading psychology and then actually turn theory into practice.
]Quote from Georgii: My objective with trading is to have it as a secondary source of income
More...
By objectives I meant things that would relate to market selection. For example if you need to trade three contracts so you can scale out, or you might be willing to tolerate only certain amount of drawdown, etc. which might not be possible with futures contracts, and as a beginner you might find Forex mini lots or even micro lots more flexible. Or you might not want to get up early in morning USA time, and since Forex is most active during European time you might not enjoy getting up early. Or for daytrading ES you might use volume and market internals which are not available in FX. Things like this are what you should be thinking about. Both markets can be daytraded successfully, there are good and bad brokers for both markets, so make your choice on what would suit your trading methodology and lifestyle.
Quote from Georgii:
The reason I gravitated towards futures is because it seems there is always action going on somewhere, be it in indexes, be it in commodities, etc. I think that if I learn to trade futures, I will not be stuck in a situation where the market is too quiet for me to make any money.
More...

This is a wrong assumption. There are days when you won't get your ideal set up, and since you'll be trading only ES or indexes you'l lbe tempted to enter suboptimal setups and force trades. If you add stocks to your trading you'll have more instruments for optimal setups. But this is obviously a personal choice.
Quote from Georgii:
Also, it seems this is the market where the most successful speculators have traded, such as William Gann, Richard Dennis and Larry Williams. Seems like this is the place to be if you really want to make money on trading in the long run. None of those guys started as stock or forex traders.
More...
That's not true. Some of the best and largest traders trade Forex.
Quote from Georgii:
Some say that it is better to start as a position trader or swing trader first, prior to becoming a day trader. What is the logic behind this? If you have the time during the day to daytrade, why not start doing that right away and learn the ropes that way?
More...
Sure, you can start with daytrading, but the reality is that we human beings are wired to do opposite to what is necessary for successful trading. Daytrading will magnify any of your psychological weaknesses, that's why daytrading is so much harder. If you have time, you can start demo trading with demo account, nothing wrong with that, just take it step by step, don't expect any miracles for a very long time, keep a trading log, learn from your mistakes and commit yourself to eliminating those mistakes, and by doing so you'l slowly start improving. First aim for consistency instead for profits.
 
Thanks once again, Mr. Consistent...

After some though, I decided that OTC Forex is probably the wiser way to start. There is no monthly cost for data feed or a trading platform, the commission spreads are usually lower than a futures contract, and its a market thats tradeable around the clock, pretty much. Also, you can start an account for less money, which is good for starters. If I'm going to blow my account, its better to blow a couple of hundred bucks than ten grand!
 
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