Dax day trading

Discussion in 'Index Futures' started by shortbleu, May 16, 2009.

  1. Hi all,

    This is my first post on this website, I read a few threads here and I really like Elite Trader Forums.

    Just to introduce myself:
    I am not new to Equity Index Futures trading (FCE CAC40) that I've been trading as a long term investor, holding positions from a few months to over a year and rolling the contracts every month when they expire.

    I am quite new to day trading however, I worked for a prop firm 5 years ago for just about 3 months and I left because I was "forced" to scalp financial futures like bobl, bund, and eurodollar on a tick by tick basis (very short term scalping) and I hated it. Just to put it right, I am not and will never be a short term scalper looking for a tick target beccause 1) I don't have the skills and aptitude to do this, and 2) I don't have any interest in this kind of extremely short term day trading.

    Basicly, I can't trade financial futures in a trading range as it does not fit my personnality. I am a trend follower and I like equity index futures because they are less likely to trade in a range, they are more volatile and large moves can easily allow a single trade to capture between 5 points (10 ticks) and 50 points (100 ticks).

    I am very new to equity index futures day trading, I started 3 days ago on the future dax with only 1 lot at a time and I have a few questions for you.

    1) Am I trading the correct equity index future (Dax) or should I trade the CAC40?

    Although I have a better knowledge of the CAC 40 than the DAX, I thought the Dax would be better for me because his movements are a bit larger than the CAC40, eg. when the CAC40 takes 5 points, the dax might take 6 points, so i thought the larger moves would suit well my approach. Also, I thought about the ratio commission / profit which is I believe better for the Dax as the Dax has a larger nominal. My reasoning is has follow:

    If it costs me EUR 4 round turn and I make 5 points on CAC40, the ratio commission / profit will be: 4/(5*10)= 0.08
    Comparing with Dax, if I make say 5 points on Dax (could be 6 points), the ratio will be 4/(5*25)=0.032. Therefore my conclusion is the Dax is lot more cost efficient because the nominal is a lot larger: 4700pts *25eur = 117500 eur for dax against 3200pts*10eur = 32000eur.

    I'd like to know if other people have the same reasoning and if you look at profit / commission ratio in the same way? Can you please confirm the Dax will suit my trading style better than the CAC40?

    2) what margin should I use to day trade the DAX?

    The value of the Dax at the moment is 120,000eur more or less.
    At the moment, I use a capital of 30,000eur for one lot (leverage 4). Do you think this is conservative enough or too risky? From your experience, is it likely to blow out the capital in a few weeks / months with this sort of leverage? I was thinking the capital to trade 1 lot should be anywhere betwen 24,000 eur and 60,000 eur (somewhere between leverage 2 and 5). I can't imagine myself using a leverage over 5 as I really want to preserve the capital.
    Can you tell me your thoughts, what sort of leverage are being used by profitable trend following day traders who have been successful over at least 2/3 years without blowing their capital?

    I read other threads and read that other day traders were complaning about brokers asking 5,000 eur for intraday margin and they were turning to brokers asking 2,000 eur intraday margin or less for DAX. From my perspective, this is madness as I believe there is a potential to lose 80 points (2,000 eur) in a few seconds on a single trade if the market goes mad on news and a gap / mini krack can happen and people who use 2,000 eur or so would blow out their capital straight away. Am I just wrong or is there something I don't understand? I am asking because I've read threads on other forums where people ask for very low margin and high leverage. I just don't get it.

    Many thanks for your advices.
  2. You should consider the difference in volatility between the two contracts before making your decision.
  3. It's better to trade only in the morning hours of the DAX.
    And almost every morning the DAX goes up or down visa versa but comes back again to the open.
  4. RedDuke


    Hi Shortbleu,

    Welcome to ET.

    DAX is a great contract to trade, it is rarely in the small range. When markets get too volatile the spread can easily be 3-5 ticks and even more, that is when it is best not to trade. You definitely do not need 30k eur margin per contract if you only plan to trade intra day. The key is to be always flat when some major news like IFO or ZEW come out, unless you are a gambler. If you trade with tight SL anywhere between 5 to 10 K per contract is more than enough. I remember few years back looking at CAC and it moved much less than DAX. I only wished DAX was a bit thicker, once you go over 3-5 lots, you will start getting slippage. Also, I would highly recommend to skip trade if spread goes over 2 ticks.

  5. keri60


    Hey RedDuke,

    Have you ever considered to trade 6E (EUR/USD futures) instead of Dax? Volatility is good and very good intraday trends. You have to trade more contracts though.

  6. RedDuke


    Hi Keri60,

    I made a switch to trade KOSPI since late February, but still follow DAX since I know this contract pretty well. You can easily trade around 50 cars on KOSPI without any slippage (i do not trade any meaningful size yet) most of the time. The tick value is around $20.

  7. Hello all,

    I've been following the intraday movements of the dax and the dj euro stoxx 50 and I came to the conclusion that trading the dax is ok when the cash index market market is opened as it is likely the future dax will move a lot during this period, so i can let profits run and cut losses short, and paying a spread of 2 or 3 ticks is ok. However, trading the future Dax from 8.00 and 9.00am london time, or 7pm to 9pm london time is a lot more difficult because it moves in a tight range and paying the spread is lot more problematic with regards to risk reward ratio.

    Therefore, I am planning to trade the Dax in the mornings only when I have a half day off work, and trading the dj euro stoxx 50 in the evenings after work when the trading range is tight because the spread is tight on the dj euro stoxx 50.

    Does that seem reasonnable?
  8. RedDuke,
    Yes, EUR 30 K margin seems about right to me for trading Dax, as I was thiking about a leverage 4, and yes, I will not be in position during the news as I am looking for consistency over the long term:D