It's risky just driving a car down the street! It's how you manage the risk with futures. http://www.proedgeonline.com/joebarry/default.asp
STEVET's post on the bottom of page 3 is the most sensible statement to come out of this thread to date. Any viable futures contract works because of commercials that are basis trading. Refco comes into the S&P pit to sell x cars down to price y, because he just got hit on 250,000 shares of General Electric in a moderate-size block trade with Goldman-Sachs, and he wants to be long the fair value index spread at that particular level. Cantor buys 500 TY notes up to price x, because he just got lifted on $50M of the 02/2010 cash issue at price z. Williams sells 100 June NG down to price x because the price x is 15% above his Henry Hub delivery cost, and he is locking in profit on part of his deliverable. Trust me, this stuff goes on all the live-long-day. Slippage and leverage in these heavily arbed markets is not an issue. In fact, commercials typically go to the futures FIRST, because execution is cheaper, and you can get more size off because some big dumb local in Chicago will take a thousand-lot in the Notes. All of the commercials have booths on the floor, with direct lines to brokerage clerks in the pit with headsets, or they flash orders to the brokerage clerks.
And with the E-mini futures your stoploss is almost respected + or - .25 points, there is ALWAYS tremendous liquidity. The cumulative size 5 levels deep is around 1000 contracts. Even when you are trading 250 contracts, no problem. No market makers backing away when everybody tries to get through the same door...
the fundamental difference between stocks and futures - is that although both are manipulated - you get to see the manipulation in the futures and can ride with it
---------------------------------- " Even when you are trading 250 contracts, no problem." Sabena..may I ask why you are still waiting to start your LW challange..?
Mbt3, I have said that before ; the trend of the average contract size at the bid and offers is still up, when that levels out it's time...
---------------------------------------- Sabena Thx for your reply..I was only jiving.. I wish you success whenever you start. mbt3
OFTEN!!! While this can be true, in 4 1/2 yrs of futures trading, I have never been in such a position and believe I have seen it maybe once or twice. Thus I would call this happenstance a RARITY!