Hi guys. I have been trading on and off part time (i quit for a few years due to work and using the capital to start a business) for about 5 years. I mostly swing trade equities. Have not really dabbled in anything else other than a few options here or there to hedge positions. I have to say i am not the most profitable guy around...Most of my errors are due to very tight stop losses, and i get jigged out of positions very quickly...resulting in loses. I find it disheartening that many instruments are very squirrley... I would like nice (somewhat logical) movements that dont go all over the place due to little news stories here and there. Can i find that in commodities? Has anyone had more luck there than in equities? In many of the books i read (market wizards) many of the commodities guys dont like euqity markets. how has insight on this? thanks in advance.
I think it depends on your preference. If by commodities you mean futures and options in agriculture, metals, etc, then almost all of these products are still pit-traded, in which you will be at the mercy of floor traders giving you fills. There are clearly good and bad in a product being floor-traded or electronic, electronic means that anybody with software can send orders into the exchange matching engine and get filled (which is great for individual traders), but this will also give rise to algorithmic trading (which there is more and more of), which would react faster than humans, but with less accuracy (or so I would think). If a product is floor traded, the orders would take longer to fill, and the market makers would have easier time scalping the orders. Most of the "market wizards" (I haven't read the book, and don't want to, but I know most of the names) trade futures and options because it gives them much bigger leverage than vanilla equities, which is why most hedge funds are very active in the derivatives market. Now, there are people making significant profit in either types of products, it just depend on your preference, that's all.
right...i understand the innate advantages and disadvantages... maybe i should ask another way... " of those people who have traded both...do you prefer commodities and why?" i think i would mainly be looking at interest rates, S&Ps, Dows, becuse i understand it more. I would not deal with meats, grains, currencies and the like. i tend to get wordy! thanks, dan
Futures (I trade the YM for example) will amplify your profits, and your losses. It's where you got to be quick, and ready for anything, and if you can't react, or you have to think about getting out of a bad trade or have any problems with being at the screen all the time to monitor your trades (unless you are automated or something), I am sure you won't like Futures. I have read about many stock traders who have trouble switching to futures, and I have heard of others who fell in love with them. I am the latter. But, I am with Futures because I can't daytrade stocks with the 25K rule, and that's why. I like futures better than equties, but, you will lose your shirt many times faster with futures if you don't know what you are doing. Why not get a simulator from TradeMaven or CQG or something like that and practice? You will never know unless you try, and that is the simple fact. Or even open up an account and throw 2k in it and see how long you last trading 1 contract. Make sense?
=========== Like stocks much more than derivatives; can find some stocks lots less squirrely, less trader competition. Like the Rich Dennis derivative interview much, howrver would rather compete with people less skilled , like are in stock market. Dr Van Tharp's son rtharp,made an accurate elitetrader observation; lots more professional traders[especially short term] in derivatives, as a % of total. Much easier-quicker to hit 49-50 PLUS% drawdown with derivatives; didnt really hurt Rich Dennis much, when he did that--49%dd. At a birthday on 1955, last thing i want is 50% drawdown; & learned much from William O'Neil, stock market king, & much more money is long term/investment in stock market May go back to short term trading derivatives;if i ever have trouble staying awake during stock market hours
Murry Any chance you could post a pic? I have been reading your posts for years and I have this really bizarre picture in my mind and I really would like to get rid of it.
your problem is stops, you must enter where the slightest move against your position will mean you are wrong, you must also allow for larger stops. If you do both you will get stopped out much less often and only for a good reason.
Futures. Mainly because that's what I started with. I have traded equities with Bright as well. Besides the leverage and tax treatment, many "commodities" trend very well. You also don't have to worry about scandals, earnings disappointments coming out of the blue, etc. I have a universe of only about 30 markets that I will trade, and many of those are purely electronic. No MM or specialist to worry about. Take a look at Gold, copper, crude. etc to get an idea of how well they can trend. As for being pit traded, commodities like cattle, grains, etc, should only be approached with a longer time frame as fills can get ugly in quick markets. Enter these only with a limit order, and always use stops as a market could move really big before you'd even get your order to the floor. 99% of my trading is electronic. These markets may be too volatile for you however. Futures actually move less than most stocks on a % basis, but when you add the massive leverage, the volatility can get really impressive. Jay