If you are going to successfully trade ANY market, you must have a sound method and also understand your account size and what you can and cannot do. This is appropriate trading. Having a method that produces net profits (above commish) and also trading responsibly given the constraints of your account size. Just because you have 5k and can physically execute 10 lot trades, doesn't mean you should until you are ready. Every mkt will be somewhat different but they all move up, down and sideways and its the job of the trader to learn the nuances. If the trader meets the above criteria, than it makes sense to trade ES vrs SPY for tax purposes as well as an overall lower cost structure. Yes there are some differences but if one can adjust to those differences the ES is favorable to the SPY.
Ok, I have $10,000 in my account and I trade 1 ES contract. My leverage now is about 4:1. I happened to lose $2,000 and I have now $8,000 and my leverage is 5:1 if I decide to continue to trade 1 ES contract. What should I do now so my trading futures would be considered appropriate by your definition?
LoL, it doesn't sound like you are trading appropriately if you are losing 20% of your account on one trade with the minimum lot size. But IF this did happen then you would expect that you would make it back and then some and be net profitable given the fact that YOUR method would allow for this big draw down because you would expect to make, say 3k, on your next trade. If your method calls for wide stops AND is a sound method, then a 2k loss shouldn't phase you much. Again, my example is based upon the premise that one has a sound method and is net profitable already. If you read back, I said it would be more appropriate for a newb to learn on the SPY before graduating to the ES.
LoL, it doesn't sound like you are trading appropriately if you are losing 20% of your account on one trade with the minimum lot size. Let's say I lost it after 6 months of trading. This should not make any difference. Again, my example is based upon the premise that one has a sound method and is net profitable already. And I am talking about how easier to adjust the risk with stocks than with the futures contracts. It does not matter whether one is profitable or not after 6 months. As long as he lives to trade another day with no higher risk.
So after 6 months of trading 1 lot, you are down 2k in your account? Doesn't sound like you are a profitable trader then, hence I agree with you that SPY is the better route for you. Costs become more important once you BECOME a profitable or at least break even trader. First and foremost, creating a successful method is step one. "Live to trade another day" mantra is one that works for someone who ISN'T profitable yet OR is a trader who "booms and busts". Meaning a trader who can make money but tends to give it all back and whose equity curve isn't steadily rising but rather looks like a sin wave. If you have a steadily rising equity curve, or rising in general, "live to trade another day" isn't something on your mind. What IS on your mind is executing your game plan the same way all the time and, possibly, refining your approach to further enhance your curve.
You have to own an IOM seat to get an all in rate for ES close to $0.55 RT. Seat owners pay CME fees of $0.19 RT and leasees pay CME fees of $0.42 RT plus clearing firm commissions plus daily Globex fee cap of $50.00. CME fee schedule is at http://www.cmegroup.com/company/files/CME_Fee_Schedule.pdf Last IOM seat sold for $317,500 and a seat lease is currently $2400 a month. Note that being a member of a futures exchange makes you subject to FICA tax. The SIPC only covers $100 K in cash, so the majority of your 300K- 500K is not covered by the SIPC. Securities and/or futures accounts with large sums of cash are only really protected by the capital of the clearing firm used.
Pardon my ignorance here, as I haven't been trading in a bit, but IB is my broker, and I don't see any indication on their website of any price increases for stock commissions (either now or for in the future). Will this be forthcoming, will this be a "tax" added onto every transaction fee, or will IB be absorbing these additional costs ? Also, will this effect ETF's ?? Thank you in advance.
The sec has plenty of money they have gotten in fines, and they've never given to the shareholders of the companies. Also, if they just levied the proper fines when wrong doing occurs by Goldman and a few others, they could fund operations, and the War in Afghanistan. This is just nonsense. We have enough problems,now they are waging war on part of the industry that has nothing to do with this mess.
"Memberships are expensive costing about 750k. Leasing a seat would be about 1k/month. " if the seat costs $750000 $1000/month to lease seems way too low. you sure u are not missing a zero?