What is it about futures that make them harder than stocks?

A

Audi_R8

A few reasons I hear are:

1. Futures are extremely efficient.

What exactly does that mean? Aren't there thousands of very intelligent traders/institutions using algo's to trade stocks squeezing every last bit of perceived inefficiency out of them using every strategy under the sun creating chaos basically?

2. Stocks are more volatile than futures.

True on any given day you can find a stock to trade thats "in play" and is moving nicely. However, what difference does that make? It moves a lot BOTH ways, up and down so your losses are going to be larger also.. thats what I don't get. Its not like the up moves are great and the whipsaws back act as if the stock wasn't in play anymore.


3. You can spread risk across many stocks and allow your strategy to work over many trials.

True, this will smooth out your equity curve BUT a losing strategy across many stocks with smaller positions is STILL a losing strategy. The losses will just be less severe allowing for a slower decline.


Could a seasoned trader please explain where I am wrong in my analysis or provide a better explanation please?

Thanks in advance.
 
1 is true, but only slightly more than the most liquid shares.

3 is complete nonsense. And with 2 you contradiction your own argument.

Plus,

4, futures you have no idiosyncratic risk.
5, Futures have a much more favorable tax treatment.
6, Futures are in large part are executed vastly more cheaply than are shares.



Quote from Audi_R8:

A few reasons I hear are:

1. Futures are extremely efficient.

What exactly does that mean? Aren't there thousands of very intelligent traders/institutions using algo's to trade stocks squeezing every last bit of perceived inefficiency out of them using every strategy under the sun creating chaos basically?

2. Stocks are more volatile than futures.

True on any given day you can find a stock to trade thats "in play" and is moving nicely. However, what difference does that make? It moves a lot BOTH ways, up and down so your losses are going to be larger also.. thats what I don't get. Its not like the up moves are great and the whipsaws back act as if the stock wasn't in play anymore.


3. You can spread risk across many stocks and allow your strategy to work over many trials.

True, this will smooth out your equity curve BUT a losing strategy across many stocks with smaller positions is STILL a losing strategy. The losses will just be less severe allowing for a slower decline.


Could an INTELLIGENT trader please explain where I am wrong in my analysis or provide a better explanation please?

Thanks in advance.
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psychology............most individual futures traders are way overlevereged, risking more on any one trade than they would with stocks, or can afford to lose
 
A hand full of the guys on here that successfully are trading stocks (lescor, dustin, ericp, a few others) say DON'T trade futures.
 
I could see the advantage of both sides...

stocks - depending on how you screen, you could easily find the ones moving and in play every day. No need to focus on just a handful of stocks.

futures - if you can trade them profitably, could make more there w/ less money needed to fund the account & better tax treatment.

The issue with futures IMO is that you are staring at the same market(s) each day and if you are in a day where the ES is just not moving, you could be playing stocks that are moving (and there's always stocks moving).
 
If you mean by "harder" that it is harder to make money trading futures than stocks, then that is just nonsense. You have to understand what you are trading and how to do it, but that is the same no matter what you trade.
 
So, a group of stock traders say don't trade futures. I've got 10+ yrs experience with trading futures and I can tell you DO trade futures (but only if you are willing to give it 110%)

Quote from Audi_R8:

A hand full of the guys on here that successfully are trading stocks (lescor, dustin, ericp, a few others) say DON'T trade futures.
More...
 
Quote from Audi_R8:

A hand full of the guys on here that successfully are trading stocks (lescor, dustin, ericp, a few others) say DON'T trade futures.
More...
there are always some execptions to the norm. If you could learn from them then it's all good.
 
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