Expected Return on Futures vs Stocks

Discussion in 'Trading' started by qll, Nov 30, 2006.

  1. qll


    I am facing a difficult decision now. I need to know if I should continue trading futures.

    1. my cost of capital is 10%
    I lend away my money at 10% to other business. I borrow from stock brokers at 10%

    2. my stock performace is between 20% to 60% a year. over 3 years.

    3. I start trading futures 6 weeks ago. Earned 130% in the first 4 weeks, then lost half of the gain in the other 2 weeks. In the market I trade, there is No STOP Loss setup. Market is close for 2 hours during lunch time. There is no Level 2. There is no GoodUntilCancel orders.

    So basically, I must watch all contract personally and wish there is no event happen during the 2 hour lunch time. There was a market crash 2 days ago. I could not unload all of my contracts at my stop loss price, because I did not enter order fast enough by hands. I need to know if I should keep trading futures or I should stay with stocks. 50% gain a month is really nice, but I am not sure this performance is normal or I am just lucky because corn and copper just move one direction without currections recently. Future trading takes too much more energy than stock trading, because the leverage and more difficult to evaluate a future contract than a stock. One day, I am up $60K, the other day, I am off $50K. The up and downs are too quick and big too for me comparing stocks.

    It costs me 2 hours a day on stocks to gain 20-40% a year, or 8 hours a day if I need to go for the extra 20%

    It costs me 8 hours a day on futures and I feel sad, disappointed, even I am up 65% after 6 weeks.

  2. hels02


    I haven't given serious thought to futures, so I'm not the expert you are looking for an answer from. However, your post struck a chord with me because everything in it screams that you don't want to do this and just need some validation for your decision to give up on the futures.

    I think the entire market is legalized gambling, and the futures market is the faster paced more dangerous side. If you can lose 1/2 your gains in a week or 2, can you not lose 1/2 your principle in a week or 2 also?

    All that for the stress and worry of watching it minute by minute?

    If you really enjoy that, then you should do it, but you apparently don't. You're making good gains in stocks, why deal with the risk and worry of futures if you're not comfortable with it?

    In any investing, your exposure should be limited to the types of risk you are willing to take. In futures, you can lose 100%, but gain 100% or more. Could you sleep at night if the worst case happened? If the answer is a solid no, you probably should stick with the lower risks, but lower potential gains.

    Everyone who gambles eventually loses, but not everyone who gambles eventually wins. Don't do what makes you really uncomfortable and worried, especially when that risk may lose your nest egg too.
  3. Why are you even investing in futures when you could be making a fortune with all that research on yahoo that you do for hedgefunds?:D :D
  4. qll


    it is not fast enough.
  5. manyit


    Faster vs more risk...