Hi, I am trying to adopt a long term trend following approach to futures trading. how much starting capital does one need for that? a couple of hundred thousand?
JMO futures do not lend themselves to long term...anything..simply because of their structure (rolling over). Your better off in the ETFs, or stock for that purpose. If your time frame is less..... daily, weekly even monthly then futures are great for the smaller trader. 100K would be a comfortable amount to have...even 50K but the trade needs to be very small 1 or 2 contracts until you have a good "feel"..or track record of the instrument(s) you trade. GL I do have a little experience "trying" a long term. I bought an ES(as a long term hold) thinking I would sell the weekly against it...eh..didn't work. I didn't like the daily drawdown when things went south. Now I just sell the straddle's/strangles (ES options)and occasionally buy/sell ES as a day trade. just seems to work better for me.
Can you define long term? What do you anticipate your average holding period to be and what holding period would you expect to encompass 80% of your trades?
Mirus futures offers $500 margin for 1 ES contract, with 10,000 you could trade 20 contracts, its awesome, I highly recomend.
There are things that should be addressed in this post. One, most long term trend followers do NOT buy the front month contracts. They usually buy the EOY contracts so there is no rolling. Two, the ETF's behave the same way as the front month contracts in terms of roll cost. Yes, the ETF's will save you the hassle of doing a transaction, but most trading platforms now days let you do the roll as a one order submit. But again, I don't know any long term trend followers who trade the delivery month. Three, I don't know if the OP was implying he is only going to do this on index futures, but commodity futures lend themselves VERY WELL to trend following due to the long term fundamental trends in commodities. And four, no, I would not think trading only one product (spoos) would work well for trend following. Trend followers NEED diversification to keep their overall volatility down. One product trend following is a recipe for disaster.