Financial instruments and daytrading

Discussion in 'Trading' started by daydreaming, Feb 7, 2003.

  1. Do you think that daytrading listed, nasdaq, futures on equity indexes, FX and commodities is pretty much the same? Any advantage trading a particular instrument?
    Did any of you traded more than one instrument and has some bad and good experiences to share?
  2. I don't think they are the same.

    In fact...too many traders (not all...but most) get into trouble when they apply trade strategies for one thing into another.

    My reference is to traders that attempt to apply trade strategies to the Eminis that they had been using in stocks.

    Trade Strategies like BreakOuts/BreakDowns, Gaps, Volume, Level II (Market Depth) and so on.

    Also...I take my hat off to any trader that successfully made the switch from Equities -----> Eminis while using the same trade strategies.

    Just my opinion.

    P.S. Of course there are some advantages or disadvantages of one over anther because not all trading vehicles are suitable for a traders personality.

    Thus, find one that fits your style of trading.

  3. I agree, they have significant differences. I believe you can use the same basic approach to trading them intraday, but there are nuances that can be important, such as executing against a specialist versus globex. Another big difference is the amount of leverage available and how you choose to use it.

    I think the simplest instrument to trade is the e-mini's. Just your basic point and click. Fast execution with lots of liquidity and no specialists playing games. However, my experience has been this is the hardest market to be successful in for most traders. I believe it was Joe Ross who described the S&P futures as analgous to being in a ring full of rattlesnakes.
  4. Since Index is an average of n stock it is approximatly SQRT(n) less volatile (approximatly only since stock variation are not independant but this give an order) so it is less volatile compared to stock. For speculation we look for volatility, so in this sense it is better to trade stock but an average is also less noisy so for stop (risk control) above all for scalp it is better and also for prediction if one use a system based on a model. Index future has much higher leverage so that this compensates its lower volatility. All in all index future is better except if you are undercapitalised and statistics show that it is the first reason of people's failure in future's trading.

    So if you want to trade future and you are not capitalised enough chose carefully your market. For example Commodities generally need less deposit and margin than e-mini but I don't think their liquidity are suitable for all styles of daytrading: avoid scalp and only swingtrade. If you have enough capital say at least several thousand dollars big contract is in fact more easy than e-mini because slippage in e-mini is relatively greater. This is in fact true for scalp, for swingtrade it is preferable to chose e-mini because of position sizing management which is better applicable with small lots than big lots. If you are undercapitalised and you chose the big contract then you want to kill yourself.

    Now there can be specific reason to trade stocks for example strategy of arbitrage but I speak only for general cases. Also avoid highly leveraged future if you don't feel at ease with Technical Analysis since this is highly technical and sensitive to market timing.

  5. You got this backwards. Slippage in the emini S&P is virtually nil (1 tic spreads and its electronic with massive liquidity). My stops get filled better than expected just as ofen as the other way around. This results in virtually zero slippage.

    The big contract is pit traded. All sorts of nasty things can happen there (its not first come first serve like electronic trading). I traded the big contract for years. Slippage is much greater there.

    If you chase a fast market with market orders, you will get slippage both places, but the electronic market takes a second to get filled where a pit order may take a minute or longer.

    The pit contract is better for really big size if you want to save on commissions, otherwise I would stay away from it.

  6. I traded listed for several months and ES for a couple. I think that Jay is right about limit and stop orders. I also think that speed of execution depends on the platform you use. From my experience, ES fills on limit and stop orders are much better than fills for listed stocks. Specialists can really screw things by spreading up and down! ES can move very fast, but I have never seen more than a two ticks spread. Limit and stop orders get filled most of the time. Only between 4 and 4:15 EST, I have seen strange things happening.