Oldtimer said it best. The problem with the futures is the leverage. Leverage is a killer for 95% of the retail traders out there. Overtrading (combined with the leverage) is the other killer. I note that the real money Rydex traders ( primarily leveraged mutual funds) monitored by MoniResearch have a less than mediocre record over the past three and five years with over 50% being net losers. And the Rydex newsletter writers who have been followed for more than a year by Hulbert have an atrocious record with a nearly 90% long term loss rate. But not so the Fidelity and Vanguard (non-leveraged funds) newsletter writers. The point here again is that leverage is a killer.
Just curious, for those of you day trading just the ES and nothing else, what kind of leverage is common? 5x1 or so I'm guessing? Personally I'm a just learning bits of day-trading, haven't started doing it. My trades are purely EOD and I limit leverage to the equivalent volatility of 2x1 leverage on QQQ when maxed out. -Taric
I just got a quote for ES at 1116.25. The value of one contract at that price is $55812.50. With a margin requirement of $3399, the leverage is 16.4 to 1.
Actually I'm more curious not just what the SEC,exchange, and/or brokerage firm's maximum leverage is, but more of how much leverage do individual day-traders typically use? Will they typically max out at around 16x? (This is of course assuming a trader has 100K + in their account so they can choose to reduce leverage. I know if you only have the minimum margin of 4K or so and you buy the contract you have no choice but to use the maximum 16x leverage since you can't buy less than 1 contract.) Buy I'm more curious given the choice for experienced, generally profitable, 100K+ account-size day traders trading just the ES do they typically trade max leverage (16x) or will they reduce that to 5x or even 2x or so? I know it depends on comfort level and money management strategies to a large degree but I'm just curious how much most traders end up using if that the cash in their account representes their entire (retirement) portfolio. Thanks, -Taric
I trade mutual funds and futures.... 1. For day trades, < 100% of equity exposure. 2. For fund trades, 1.5X max, with futures in reserve to at least partially hedge intraday should I feel like I'm getting trapped.