Switching from equities to futures

You are wasting your money on $5,000 BS courses. The only viable vendor and who helped me immensely is Kingfish at Kingfish Traders (www..com).

Do a search on google and I am sure you will find a lot of great things about him.

He completely turned my trading around. Thanks to him, I am living the dream.
 
Just to avoid confusion the above post under my name is a cut and paste of something posted on ET previously by Cutten. I also thought it was a great post and cut and pasted it so that I could print it out.
 
To put it very succinctly, nothing beats the ES. It has the liquidity and the volume for the setups to work, for entry and for EXIT. The SP is all about the stock mkt, thus it is an index of a very important game.

The sp (ES) attracts the brains of the trading world from all over the world. I sit there and look at my screens and imagine people all over the world looking at the same thing, my mission daily is to pick their pockets and smile....:)

Some are afraid of the SP500, they say it is wicked, they say it is unpredictable, they say it is the toughest game out there....Well in my book they are right, that is why i want to be a player.

Maybe a rule could say....NO WIMPS ALLOWED.....
 
wow....lots of info.....trading emini?....take 97K of your 100K and put it away in a cd for the next 30 days....put up 3k in an account. Start trading with only 1 lot and only 1 lot until you make 20 net pts. At this point you should have 4K in your account. Keep trading 1 lot until you double your money. Once you have 6K, you have made a total of 60pts in the emini.( $50 per point). Once you have reached 60pts, by this time you probably have made your mistakes, figured out your money manaagement etc. Now, I know what you will be thinking.....if I make 60pts on 1 lot, with 3K, then with 100K I would make 30times that amount. True, but it does not work that way. This game is a leverage game. Your leveraged to start 20 to 1. In other words, if you lose, you also lose big. emini is about money management. I see to many traders come in with big accounts like yours and blow it in 2 weeks if not less. Oh, and about stops, USE THEM. I know some of you who trade the minis might argue this point, but for 95% of those who trade the minies, should use a STOP. Reason, it gets you out and gives you another chance to play.

Regarding the courses out there, TI, KF....which I know both....stay away. Market Profile, is good, but takes time to learn, like anything worthwhile. Learn to trade support and resistance, have a sound strategy, money mangement, and you have a good chance of making it. Stay away from the "magic" indicators...there are none. All indicators are is a "cruch" and something to blame when you have a bad trade.

I'm sure there are some good educators, but if they are not willing to show you live their trades for some period of time in order to see if there trades are realistic, then don't bother, keep your money.

Wish you well in the eminis, it is a great market to daytrade. Oh , and by the way, you dont have to make lots of trades during day to do well, as you will figure out.

Good Luck
 
Thanks for all the information. And a special thank you to mokwit for the cut and paste job, it was very helpful.

One thing about futures trading that I havn't heard much about is the favorable 40/60 tax treatment (if you're in the U.S.). I wonder how much this impacts net profitability compared to standard short-term gains? Is this a factor that keeps traders in the futures game or is it just icing on the cake?

Based on some of the replies it seems that trading the S&P e-mini is more difficult then swing trading stocks. I think I'll stick with the stocks for now, but will look into some strategy changes.

Once again, thanks to everyone who replied. Hopefully I'll be able to contrubute helpful info to other posts. ET seems to be best forum out there. Not sure why it took me so long to discover it.
 
Quote from xxxskier:

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Please correct me if I'm wrong.....it seems that besides excellent entry and exit discipline and placing stop loss orders immediately, the primary risk in day trading e-minis would be slippage. I would probably start out using a hit and run strategy with a target of 2 points per trade. So slippage could be a problem. For you futures traders, is a 2 point hit and run strategy profitable?

I'd appreciate any feedback from experienced traders who made the switch.
More...

I don't understand your comment on slippage? With a 100k account, trading the ES during daytime, I don't think you would see any slippage on your entries and exit trade executions - even on the stops.

Size becomes an issue: ES is 50x the SP500. So "2 points" is $100. The trading cost is ~$5 round trip. The tick is 0.25 or $12.50. The ATR or Average Trading Range each day is about 12 points or $600/contract. Back in 2000 the ATR was 80 at one point or $4000/contract each day - prohibited a lot of small accounts from trading futures.

You probably can make the switch carefully if your system can stand the coarse granularity of a minimum size position being $60k on a $100k account.

And yes, a 2 point hit and run can be profitable
 
Quote from xxxskier:

... .

I've done a lot of research, read well over a dozen books on trading, and am prepared to continue this life-long education.....I'm very passionate about it.

I probably put in about 50-60 hours a week trading and doing research. That doesn't really bother me as I like to study (I have a Ph.D.) But I am now reaching the point where I wish I was in all cash every night. I'm getting tired of all the shenanigans in the equities market with morning gaps and all the other games.

I'd like to be to able to start each day fresh. It also seems like it might be a little less taxing to continually watch one market, i.e. e-mini, versus many stock positions at once.

I did one of those free "live interactive trading educatiion seminars" with Traders International last week and was intrigued although it did bring up a lot of questions.

Please correct me if I'm wrong.....it seems that besides excellent entry and exit discipline and placing stop loss orders immediately, the primary risk in day trading e-minis would be slippage. I would probably start out using a hit and run strategy with a target of 2 points per trade. So slippage could be a problem. For you futures traders, is a 2 point hit and run strategy profitable?

I'd appreciate any feedback from experienced traders who made the switch.
More...

I think you are doing a lot of things correctly so far. You have obviously done a lot of background research. I would be careful about relying too much on advice from strangers on message boards. That said, let me offer some.

You must have read pretty much every trading book published, but you need to realize that most of the authors couldn't pay their electric bill from trading. some of the biggest loudmouths have been disciplined by the CFTC for selling trading courses and/or systems on the claim that they were highy profitable traders when in fact they never traded at all or were unprofitable. One notorious example was the heavily advertised "RS from Houston."

There are useful books out there. Larry Williams is controversial but he has written some good stuff. Mark Douglas is not a very good writer, but his books are useful. Gallacher's Winner Take All is a classic. My personal faves include Gary Smith (not the guy who writes for Realmoney but the other guy), an old book called West of Wall Street, Marty Schwartz's book, and some of Alex Elder's stuff. Linda Bradford Raschke is kind of a female version of Larry Williams, very highly publicized, but her website and books do offer useful tidbits. Joe Ross is another highly controversila guy who has a number of very overpriced books, but the one on daytrading has some useful advice, although I strongly disagree with his ideas on exiting trades.

I can't say that I derived one trading method from these books but together they start to put the puzzle together for you.

I'm not a big fan of TradeStation, the company, but I do think it is very useful for a newbie to get some sort of backtesting software and do some serious backtesting. You probably will not find anything that works, but you will find out that 99% of the stuff the books and seminars say to do will absolutely not work over the long run. You will gain an understanding of how stop levels affect profitablility. Pay attention to the concept of maximum adverse excursion (MAE), as it is crucial to daytrading.

The biggest risk in daytrading is not slippage, it is your head. You will absolutely do the wrong thing at the wrong time and you will know when you are doing it that it is wrong but you will do it anyway. And you will repeat that mistake or others. Accept it, but learn to deal with it.

As for actual methodology, I think it is crucial to understand the concept of levels. The S&P market is manipulated all day long. Once you understand which levels are significant, like intrday highs and lows, etc, you can be alert to it. I think it is important to trade with the trend, as defined by the next higher timeframe, typically the 60 minute or daily chart. You must learn which times of day are productive, why the high or low is usually within the first 30 minutes and how to tell if a market is likely to run all day or chop. One advantage of the stock index futures is you have a number of derivative indicators like the Tick, TRIN and premium. Learn to use them. Learn all about program trading and index arbitrage, as over 60% of the NYSE trading is program-driven.

As for the Times method, I think it has some validity, but you certainly don't need to pay them $5k or whatever they get to teach it. It is just a basic divergence technique. I have posted on here a number of times how to trade divergences. There is nothing special about what they use. Any oscillator will do. There is also nothing special about the 2/2 rsik/reward ratio they use. I wouldn't want to limit my upside if I were trading with the dominant trend, but on a countertrend trade,which most divergence trades are, yes I would look to take profits.

Don't underestimate how difficult this game is. There is no substitute for actually trading in real time, but start wiht one ES contract, don't hold overnight and don;t fall into the trap of overtrading. If you are trading more than three or four times a day, you are probably overtrading. In fact, you would better off trading three or four times a week. You want only the best trades.

Good luck and keep us informed of how it is going.
 
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