Why is the Futures market supposedly more difficult?
- Thread starter newguy1
- Start date
In reply to the original question, the reason and it is pretty clear. The responses on this thread show how little people actually know about SIFs:
1) Equities are not a derivative instrument. That ultimately says everything because it is nearly impossibe to hedge an equity trade. (equities actually are a derivative, but not to the extent that futs are and is not relevant to this discussion.) People think that most professional SIF traders are sitting there speculating. Few retail traders realize who the biggest players outside the MMs in the futures (SIF) markets are - they are the options MMs at the CBOE offsetting SPX MNX and DJX order flow. That means the (SIF) futures order flow is often (most of the time ?) coming from an indirect source and it is nearly impossible to ascertain the true direction of the given market a large percent of the time, and is not really representative of true supply/demand.
2) While one of the biggest order flows to the NYSE is also CBOE option MMs offseting equity option order flow, equities on the other hand are the means by which large institutions put money to play and must put in play, and often do so directly using equities which means the other side of your trade is not automatically a MM from another exchange offseting some other risk. That means the other person on the other side of your trade does not automatically have a huge edge over you, because they cannot offset that risk so easily - they are speculating along with you. This means the two sides are more evenly matched when an equity trade executes. So when someone executes an equity trade, a large percentage of the time they are actually interested in that instrument showing true supply/demands, not offseting some other trade on another exchange, which makes equities trading more transparent (when it is not a CBOE MM offseting option risk) and therfore more amenable to "tape reading."
There are many more reasons, but the rest of the reasons have been discussed on this forum so many times it is not worth repeating.
nitro
1) Equities are not a derivative instrument. That ultimately says everything because it is nearly impossibe to hedge an equity trade. (equities actually are a derivative, but not to the extent that futs are and is not relevant to this discussion.) People think that most professional SIF traders are sitting there speculating. Few retail traders realize who the biggest players outside the MMs in the futures (SIF) markets are - they are the options MMs at the CBOE offsetting SPX MNX and DJX order flow. That means the (SIF) futures order flow is often (most of the time ?) coming from an indirect source and it is nearly impossible to ascertain the true direction of the given market a large percent of the time, and is not really representative of true supply/demand.
2) While one of the biggest order flows to the NYSE is also CBOE option MMs offseting equity option order flow, equities on the other hand are the means by which large institutions put money to play and must put in play, and often do so directly using equities which means the other side of your trade is not automatically a MM from another exchange offseting some other risk. That means the other person on the other side of your trade does not automatically have a huge edge over you, because they cannot offset that risk so easily - they are speculating along with you. This means the two sides are more evenly matched when an equity trade executes. So when someone executes an equity trade, a large percentage of the time they are actually interested in that instrument showing true supply/demands, not offseting some other trade on another exchange, which makes equities trading more transparent (when it is not a CBOE MM offseting option risk) and therfore more amenable to "tape reading."
There are many more reasons, but the rest of the reasons have been discussed on this forum so many times it is not worth repeating.
nitro
You know Candletrader, on every single one of these threads about futures trading, your nose is in it making the same claim over and over, and you are looking suspiciously like a vendor to me looking for newbie sheep to corral.
You are rarely interested in the honest question that was asked, and often the first thing out your mouth (if not, you get around to telling everyone about it eventually) is how you average 1 point a day trading futs trading "size."
What is also funny is that the "usual suspects," people that have been known to be associated with chatrooms, are always in these threads along with you too claiming how many points a day they make or are "pulling out of the markets."
Hmmmmmmmmm...
nitro
You need to hang around in more positively reinforced circles. Either that or give up candles. There are many traders out there pulling in more than a point a day consistently.
Interesting observation. Do you have the actual numbers? I guess I naively assumed Futures volume was much larger than related index option volume, but I've never compared them.
I would have said that program trading was the biggest single influence on the futures, but certainly I could be wrong. Something like 60% of NYSE volume is program-generated, and generally that is offset by futures. A newbie who gets into futures without understanding program trading is asking for trouble.
The title of this thread is very interesting, in it's question of SUPPOSEDLY. I have read in numerous places that futures ARE more difficult, based on the trader survival rate. Approximately 10% or less of equity traders (daytraders) succeed, and something on the order of 2% or less of futures traders succeed.
Relatively speaking, you may have a point. As was said before already, leverage is much higher with futures, so the weak players go broke more quickly.
If you are referring to points per contract, I don't believe its common to make more than 0.5pt to 1pt per day per contract (long run average)... and this is for someone who is actually capable of making a living off futures...
If you are referring to total points per day, then of course I agree with you... most professionals trade more than 1 contract...
You are someone who believes that its impossible to make a living trading futures... well that's your issue for you to resolve, whether you believe its impossible to make a living trading futures, stocks or indeed anything... there are lots of people trading all sorts of things making a perfectly decent living doing so... and no, I am not selling anything to anyone... but I will make an exception and sell my trading approaches to you for $50,000 when/if they stop working...
I absolutely disagree with you about the feasibility of making a living off futures... I know that its perfectly possible for a good trader to average around 0.5pt per contract per day over the long run...
I also disagree with all those who say its possible to average multiple points per day per contract...
Both your utterly negative position and their overly optimistic position are the extremes... my position is somewhere between... a good living off futures is not an impossibility if you formulate a robust system and trade it with strong discipline... and can figure out when/if its bust and not simply going through a drawdown...