Why do most professional intraday traders trade Futures? Why not Stocks, Options or Bonds? What is it about the ES, CL, GC, ZB that draws the crowds?
Why Trade Futures?
- Thread starter Equanimity
- Start date
Leverage! that's it. What about Technical Analysis of the Futures markets? Is there something about Futures TA that gives the trader the edge?
I don't know if "most" is correct because I don't think anyone has counted, but some of the appealing characteristics of futures include:
1. Leverage
2. Potentially lower tax rates on section 1256 contracts. Depends on your filing status (business entity structure).
3. Large contracts. Depending on trading style may result in lower commissions.
4. Shorter trading hours. When the pits dominated trade, most were typically open 4 to 5 hrs vs. 6.5 hrs for equities. Some of the more popular futures now trade nearly 'round the clock so maybe this isn't in the 'pro' column anymore.
1. Leverage
2. Potentially lower tax rates on section 1256 contracts. Depends on your filing status (business entity structure).
3. Large contracts. Depending on trading style may result in lower commissions.
4. Shorter trading hours. When the pits dominated trade, most were typically open 4 to 5 hrs vs. 6.5 hrs for equities. Some of the more popular futures now trade nearly 'round the clock so maybe this isn't in the 'pro' column anymore.
Currency trading in the cash market is much better. One can choose the leverage and the volatility is manageable plus no commissions or other fees. Plus 24h trading and the biggest market - 4 trillion/day. Many swing traders come from stocks via futures to forex and are very happy and profitable with it.
Felix
Felix
yes, leverage, but also the reduced day trading margin, and, profit potential
I went from fx to the 6E Euro FX contract Because of the leverage; but there's also the
M6E - micro fx contract, although volume is low - 5,468 v 227,064 for the 6E on 1/8/13
however even if a 1 or 2 pip fill difference from the 6E, still very tradeable
plus one can 'short' the contract - Sell just as easily as Buy since there's no additional
requirements as with shorting stocks. then there's the daily profit potential which in
general, day to day is much higher than can be obtained trading any single stock-
for instance: yesterday the 6E dropped 84 pips from its HH to LL = $1,050 which is a
200% return on the day trading margin, And rose another 30 pips/$375 before closing
try and get anywhere near that sort of intraday profit trading a stock
BUT, leverage is the account killer for everyone who doesn't have a robust intraday
trading system or method; much better to trade Day-to-Days-to-Weeks
Euro FX 6E: Initial margin - overnight: $3,300 ~ Day trade margin: $500
contract size: $125,000 - H M U Z - pip/tick value: $0.0001 ~ $12.50 comm: $4.87
spot fx eurusd @ 1.30787 @ 50:1 leverage $3,269.68 - no lower day trading margin
commission is variable and based on the spread: eg: @ 1.7 = $21.25
Euro M6E: Initial margin - overnight: $330 ~ Day trade margin: $100
contract size: $12,500 - H M U Z - pip/tick value: $0.0001 ~ $1.25 comm: $1.99
spot fx eurusd @ 1.30787 @ 50:1 leverage $326.97 - no lower day trading margin
commission is variable and based on the spread: eg: @ 1.7 = $2.125
ES Initial margin: $3,850 Day trade margin: $400.00
contract size: $50 x Index Value - H M U Z - tick value: $0.25 ~ $12.50 comm: $3.92
futures info via http://www.ampfutures.com/ ~ account minimum $500
fx info via http://fxtrade.oanda.com/analysis/margin-calculator ~ no account minimum
I went from fx to the 6E Euro FX contract Because of the leverage; but there's also the
M6E - micro fx contract, although volume is low - 5,468 v 227,064 for the 6E on 1/8/13
however even if a 1 or 2 pip fill difference from the 6E, still very tradeable
plus one can 'short' the contract - Sell just as easily as Buy since there's no additional
requirements as with shorting stocks. then there's the daily profit potential which in
general, day to day is much higher than can be obtained trading any single stock-
for instance: yesterday the 6E dropped 84 pips from its HH to LL = $1,050 which is a
200% return on the day trading margin, And rose another 30 pips/$375 before closing
try and get anywhere near that sort of intraday profit trading a stock
BUT, leverage is the account killer for everyone who doesn't have a robust intraday
trading system or method; much better to trade Day-to-Days-to-Weeks
Euro FX 6E: Initial margin - overnight: $3,300 ~ Day trade margin: $500
contract size: $125,000 - H M U Z - pip/tick value: $0.0001 ~ $12.50 comm: $4.87
spot fx eurusd @ 1.30787 @ 50:1 leverage $3,269.68 - no lower day trading margin
commission is variable and based on the spread: eg: @ 1.7 = $21.25
Euro M6E: Initial margin - overnight: $330 ~ Day trade margin: $100
contract size: $12,500 - H M U Z - pip/tick value: $0.0001 ~ $1.25 comm: $1.99
spot fx eurusd @ 1.30787 @ 50:1 leverage $326.97 - no lower day trading margin
commission is variable and based on the spread: eg: @ 1.7 = $2.125
ES Initial margin: $3,850 Day trade margin: $400.00
contract size: $50 x Index Value - H M U Z - tick value: $0.25 ~ $12.50 comm: $3.92
futures info via http://www.ampfutures.com/ ~ account minimum $500
fx info via http://fxtrade.oanda.com/analysis/margin-calculator ~ no account minimum
no Mickey Mouse bullshit like in stocks - no twenty dark pools fucking with your orders; no HFT messing w/ your best bid /offer by one tenth of a penny.
Transparent, centrally-located liquidity and 23-hour per day trading.
Overall, the fairest game of them all.