Equities vs. Futures

Discussion in 'Trading' started by NasdaqTrader, May 19, 2003.

  1. I'm thinking of making the switch to index futures(ES and NQ) from stocks for daytrading purposes.I thought of a few reasons why they would be more advantageous.If i forget anything,please add.

    1)60/40 tax treatment of gains
    2)no pattern daytrader rule
    3)no short sale rule
    4)more trading hours
    5)higher leverage
    6)no margin interest for positions held overnight
    7)moves are not subject to company specific news
    8)no MM's and specialists to deal with
  2. 9) cheaper execution costs.
    10) still plenty of volatility.
    11) tech analysis works better than with equities. Almost all futures traders are technical traders of some sort.
  3. bandit


    Don't forget about the benefits of trading stocks. Relative strength of the stock vs futures. Knowing a buyer or seller is in a particular issue (size, chart, patern of buying or selling in issue). The specialist may be a crook, but if you see the game he is playing, and play with him on his side....money.

    I see alot of traders on this forum talking about how great the em's and nq's are. Well I tried them for 2 months, and it sucked. Been trading for 9 years, and you have to stick to what you are good at. If you can make a living in stocks....stick to it. The grass is not greener on the other side.

    Good luck with it either way.
  4. Momento


    That's a good point too.
    The previously listed relative benefits do not necessarily mean that trading futures are easier or more profitable. For example; some ppl that got used to pennies will find the 1/2 and 1/4 spreads harder to control when it comes to spillage too.
  5. Why do you say that? I have compared my indicators on both (MA, Fibs, T/L, patterns), and would say that is not true at all.
  6. I have no empirical evidence. This is just a belief common to most futures traders. The leverage makes very short term trades much more common, which negates fundamental trading for the most part.

    My experience shows this to be very true, especially for classic chart formations. My time at Bright trading equities was very frustrating trying to make my charts work, even though I had a decade experience in futures already. In fact, Bright told me the charting was a waste of time, wouldn't work. With me anyway, it didn't.

    I am not talking about indicators here as they are lagging anyway. I am talking about channels, triangles, flags, etc. Yes, you can use them for stocks as well. But I would guess over 90% of futures traders are focusing on this stuff. No market makers to look at (there is depth, but thats different), no sectors to concentrate on, and spoos usually lead everything else, so for me anyway, its just a brief look at other markets for confirmation only, if that.

  7. You can also use the index futures to get an idea of what some stocks will do throughout the day.

    It is uncanny how IBM will mirror what the S&P futures does. The other day, the S&P futures was trending down and so was IBM. Then the futures developed an intraday support level and started to slowly trend up. IBM then trended up 3/4's of a point. The futures then reversed to the downward direction and so did IBM.

    Yesterday (5/19/03), the S&P futures had a straight down trend day and so did IBM.

    The S&P futures can be used as a leading indicator for some of the underlying stocks that they represent.

  8. A big fish in the stocks pond is a small fish in the futures pond... futures are easier to move around without any liquidity issues on fills...

  9. prox


    it's safer than stocks in most cases, huge 50% gap downs or halts are simply not possible.

    on the other hand, it's much more competitive and you'll almost have to relearn how to trade as your system might not work as well, if at all.
  10. #10     May 20, 2003