buy one futures contract every 3 months for 10 years? (long term futures)

1a2b3cppp · Mar 31, 2011

I tend to like most of what this guy says, such as his logic for why all trading systems are BS and if anyone had a profitable one they wouldn't sell it, why brokers want you to trade frequently, etc.

~ Most market movements are too complex to be reliably predictable simultaneously in both timing and price.

~ The only certainty is that, for the last 400 years, market indices have almost always risen over a period of 5 years or more. One notable exception was 1929 (over 20 years to recover), and almost certainly by now December 1999 (for the FT 100 and the Dow, for example). Raise this to 10 years and it's hard to find an exception except for the years following 1929.

~ So the only reasonably reliable approach is to buy and accumulate over at least 10 years, leveraging one's position only by as much as one can afford assuming a fall of up to 50% in the value of the market at some time during the first five years.

~ Proof that it works, and in spades: look at any long-term graph of the Dow or FT 100 - it doesn't take a mathematical genius to work out that you would have made spectacular profits over almost (and there's your risk : almost) any 10-year period in documented history. And of course you would accumulate as you went, in small increments starting from a humble single futures contract, until after ten years you had a portfolio worth millions in any currency.
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Then you can read on and see how he made $100,000 in the first year and then got greedy and messed up.

But my only concern is, what if you buy your one contract and then there's a ton of drawdown. You'd potentially need a big account just to survive the drawdown of one contract. A $10,000 account, for example, could only survive around a 200 point drop in the ES. Good luck picking a long term entry that won't retrace 200 points at some point.

source: http://www.tradingfutures.biz/page1.html

Also, lol @ this:

I recently had a Japanese student at my English language school who told me at his admission interview that he worked for a futures broker in Tokyo. I didn't tell him that I traded futures, otherwise he would have perceived me as a potential client and talked to me the way futures brokers talk to clients - less than candidly, in a nutshell.

"My word Sato," I said, "that sounds like an exciting job. How do you like it?"

"I hate it." he said with a dark look. "Every morning I go to work feeling bad."

"Why? Surely it's an exciting job with an international flavour and lots of money to be made?"

"My job is to think of reasons. Every day the markets go up or down, and our clients want to know why. So we have to find a reason. That is my job."

"You mean... you invent the reasons afterwards?"

"Of course. That's my job. I hate it because every day they are waiting for me to come to work with a reason for yesterday's rise or fall and sometimes it's impossible to find a really good reason... Nobody actually knows why markets go up or down."

You have been warned.
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source: http://www.tradingfutures.biz/page13.html

luisHK · Mar 31, 2011

Interesting, any more input on buy and hold strategies with futures rathers than the corresponding ETfs ?

Does on get the same returns as with the ETF long term , and how does the dividend get accounted for ? (it's an issue for me as I get taxed on dividends but not capital gains) and how does it work out with leverage ?

failed_trad3r · Mar 31, 2011

If market is at 700, cushion need 700. If at 1300, cushion need 1300 This coukld work. But it wont be as good as u think because of rollover

Soon2Bgreat · Mar 31, 2011

You could also roll calls - gets rid of the downside.

Butterball · Mar 31, 2011

If the author is looking at price indices? What he ought to be looking at are total returns, adjusted for inflation.

The only certainty is that, for the last 400 years, market indices have almost always risen over a period of 5 years or more. One notable exception was 1929 (over 20 years to recover)
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1. US stocks, adjusted for dividends and inflation, took less than 10 years to recoup the losses since the 1929 peak.
2. "have almost always risen over a 5 year period" = famous last words. Japanese stocks, adjusted for dividends and inflation, over the last 26 years (1985-2011) show a net return of 0.00%.

r-in · Mar 31, 2011

Quote from Butterball:

If the author is looking at price indices? What he ought to be looking at are total returns, adjusted for inflation.

1. US stocks, adjusted for dividends and inflation, took less than 10 years to recoup the losses since the 1929 peak.
2. "have almost always risen over a 5 year period" = famous last words. Japanese stocks, adjusted for dividends and inflation, over the last 26 years (1985-2011) show a net return of 0.00%.
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Sounds good, but the reality is very few, and close to know one has the diversification to replicate the market, and in '29 for the most part if you owned a basket of stocks it was much longer than 10 years to make back your money. In the past 20 years we have had at least 3 market kills, and for the most part it set back your retirement quite a few years. My wifes 403B is just now back above its high and it has been 4 years. This includes her contributions, and her employers, so actual growth is minimal. She has been fortunate her employer has contributed through tough times, and she isn't a public employee. Most people have not only lost on their retirement plans, but have also lost their jobs. As far as relying on Social Security you would have to be nuts and quite a few of people on it now have it as a bonus to what they have from an employer.

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buy one futures contract every 3 months for 10 years? (long term futures)

1a2b3cppp

luisHK

failed_trad3r

Soon2Bgreat

Butterball

r-in