To Anyone Who Has Made the Transition Into Futures

M

Mike805

Here is a bit about my history and my current goals:

I have been a full time stock trader for 2.5 years (mostly intraday/swing) and part time stock trader/investor (longer time frames) for 5 years prior to that. I am currently mildly successful in intraday trading and more so when trading 1 day-2 week time frames. I trade both relatively liquid stocks and very illiquid stocks, I like the inefficient pricing that lower liquidity issues are often associated with. My methodology is a type of visual chart/tape reactionary trading (I'm not sure how to explain it but it works and suits my personality well - I can describe it more if anyone wants to know).

In my daily research I often track commodities and recently, I've been noticing some correlations between crude, the CAD and JPY currencies, transports, etc. I readily study all markets (macro and micro) and the more global aspect of commodities is really starting to appeal to me. Given this I believe I could effectively apply some of my basic ideas to trading certain futures.

Given the above, I know a little, but am still largely ignorant about the basic's of trading futures. I've watched the ES and I've been tracking crude for some time but I've never actually traded anything in the derivative category. I am planning to devote 30k and 2 years of learning curve to this pursuit. 1 contract at a time only for 2 years worth of losses at an already calculated risk. That being said I do not have problems with discipline.

Can anyone share their experiences with such a transition, be it a successful or unsuccessful one? Learning curves, ingrained thought processes from stocks that had to be removed and re-programmed?

What markets display tendencies that one would recommend to a beginner - I've heard the ER2 being mentioned. Why would this be the case (what is a good market to start learning on)? Any recommendations in terms of quality of price moves, follow through, volume characteristics? Any general observations/experiences would be helpful.

What type of trading costs would I be looking at a frequency of 1-3 trades/day - possibly overnight or longer?

I realize these questions are general in nature and certain items have been answered before. I am looking for information from individuals who have made a successful transition into trading both equities and futures, any type of feedback (references to books, posts here on ET, threads) would be much appreciated.

Best Regards,

Mike
 
My thoughts, I would stay away from ER2, too fast and flavor of the moment for my liking.

You are right this is a general question, I can only give you some of my experiences - trading methodology has to fit our our personality types :) right?

Based on my style, be prepared to be bored, I look for turns, maybe 2 or 3 during the day, if you are not running an ATS this can be very boring. Boredom can lead to overtrading (I kicked that habit fast). I trade NQ, ES and YM. YM used to be a nice instrument to learn on but now the point swings eat stops (my stops are stomach-turning wide, but it works for me). I began trading stocks and switched to futures - you already have an edge there. Every futures trader should do a few years trading stocks!

Good that you already have discipline. If you don't take it slow, futures trading can humble ya real fast.

Why don't you try to take your stock trading to the next level instead of attempting learning curve of futures?
 
Wanted to add, trading off daily pivots is one starter method. It's price-based and keeps you out of the market. Floor traders aren't looking at indicators.

My 2 cents.
 
Quote from satchel:

Why don't you try to take your stock trading to the next level instead of attempting learning curve of futures?
More...

My stock trading is always getting better but I find myself limited by trade selection and quality. Case in point, opportunities exist everywhere and this would be another way to apply my analysis to the indexes/commodities markets rather than just individual equities.

Per example, I was analyzing the CL Nymex (light crude Nymex) future in mid-September and saw the formation of a head'n'shoulder. This chart pattern coupled with my belief that the price was based from irrational demand rather than realistic demand made me want to trade the future. This is just one of several opportunities in the past year where not having the ability to trade a certain derivative cost me. I do not like to miss good opportunities and lately, I've been seeing more of them in the futures markets. Don't get me wrong, stocks present great opportunities all the time, I just want to expand a bit.

Mike
 
if youre making money in stocks, why move?

if you like illiquid stuff, look at emd - s&p mid cap 400. its like er2 used to be when it was good. now er2 is the biggest slag on the block. everyones in there trying to take her for a ride - but they usually get something nasty!!


trading is trading at the end of the day. its all just numbers and sticks jumping around on your screen. i really dont get why you want to change. probably a new challenge i guess.

but if you are already a successful trader, the transition shouldnt take 2 years. more like 6 months tops.


why not try futures overnight and keep the stocks for day trading?
 
Mike805,
I basically did the transition that you are thinking about doing. I've been an 'investor' for many years, worked as a stockbroker for 4.5 yrs, and then made the jump to full-time 'trader' mainly in the futures markets.

Contrary to a couple posts here, we LOVE the ER2. $10/tick is nice (when you're right!). We also trade the Oil EmiNY quite abit too. Just the last week or so, the volume has picked up considerably in the Oil EmiNY and at times, rivaling the volume on the ER2.

Regardless of which futures market(s) you trade, just study them like you've done in stocks. My warning would be that sometimes the range on the ES is so tight and choppy, that even with all that liquidity, it can be hard to make money. At least the way we trade.

Good Trading!
 
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