@brownsfan019: thanks for sharing...how would u compare the tax advantages between futures and stock/options/currencies? if u don`t mind me asking...would u choose opencry over IB? @volente_00: @Arthur Deco: thank u for the analogy, completely made sense specially cuz I love playing poker lol...lemme see if I get it straight: so I pay $2 for every NQ contract, I first deposit $1875 into my futures account to be able to buy with a 20:1 leverage ratio buying power...and I get paid 20:1 if goes up, but what happens if I lose on the position, would I lose 20:1 or just a small percentage of what I initially deposited($1875)...just want some clarification on that... ...and why would the payoff change from one index to another, as u said earlier: "Payoff is 50:1 for ES and 20:1 for NQ"? thank u all for ur help, I`m really learning a lot with all of u...
This is my experience. Overleverage will destroy your account and the volatility on index futures is wild for a beginner. However, I agree with Art on the benefit of futures over stocks. So... my advice is trade index futures with a spread bet firm (look at the US offering of IG index. Some spread bet firms are awful but I've found IG's one click trading is fair and accurate). You can lower your exposure to 25% of the full emini contract and go for nice extended moves, using macro economic data and earnings news trade off of a 30 min chart (I use IB data feed but eSiganal or Kinetick is good). You can learn the trade with lowere leverage and higher time frames without getting stripped of your account within 1 month. Good luck.
Sorry I wasn't clear. First you buy a $5000 gambling card from the house (your opening desposit at the brokerage). When you place your bet the house (the brokerage) takes $1875 from your trading card and they hold it so all the players (traders) you are betting against know that you are good for it. And yes. the 20:1 cuts both ways. Why are the payoffs different for different games (index futures)? Why is roulette worse than blackjack? Because the house makes the fucking rules, not you. It is up to you to figure out which game is the least sucker play. For example, if you run the numbers, NQ is a better game than ES.
No disrespect, but I have never understood that mindset. So I don't trade NQ. I buy a basket of $45K worth of NQ stocks. I make or lose the same amount of money either way. Nobody forces him to open a $5K account rather than a $45K account. The leverage is there not so you can trade with a smaller account but so you can invest or position trade the money not in a futures trade.
We should complete the trading analogy by discussing the spread. Suppose you sat down at the card table and there's a house player (a limit order trader) whom all the other players (market order traders) must bet against, not against each other. You fork over $1875 worth of chips, but he says "Give me another $5 chip (the spread) if you want to play against me." Win or lose, when you take your pot, he says "Not so fast! You owe me another $5 chip (the spread again) for the privilege of playing against me." We won't even go into the fact that the house player plays cards like it was a shell game. Like as not there is no pea.
Leverage is great if you are comfortable with it. It is nice not to have tens of thousands sitting in an account, redundant. But my assumption is that the thread starter will be scraping together only a few thousand and I think being comfortable with losses is important. If the atr of a 30 min bar is 6 points (NQ) this is a potential loss of 120~140 dollars/ trade. I think ideally you'd have $20,000 to trade one contract (especially if you were relatively green). Just my opinion, Art.
I certainly agree with you about the size account you should have to feel comfortable trading one NQ. It is a tradeoff with the fear that your uninsured cash could vanish with your broker. I think you also are presuming that a noob cannot backtest to discover that a $120-140 loss is not optimal. Anyway, the more losers we have, the less likely that winners will be taken to task by market makers.
I don't mean to rain on your parade ( op ) ,but if you have only 2k you should not be trading. Not only it will take you a while before you learn to make money consistently, but with 2k you have very limited staying power ( financially ). In other words there will be time where you will have to get out although you in a longer time frame you would have made some money. Making an extra 2k for you will be making 100% for your account and its' very unrealistic to have that kind of return in a consistent way unless you act like a gambler. Even if you do make the extra 2k certainly won't be a source of income and it won't be worth it considering the amount of time you need to spend to become good at trading. Last but not least an online forum is not the best place to ask such questions. It is surprising that after you said you have 2k to trade some people still give you tips on how to get started.
I started with $2K years ago when futures margins were much lower than they are now (I am thinking NQ was $850). How many times I replenished that $2K I will not tell. But I believe it is better to start small and gain experience than not to start at all. With tight stops you can last a long time while you learn, and maybe even make a little money randomly.
I trade index futures exclusively for many of the reasons stated above. These days no need to pay for data when practicing. Go to mirus futures website and subscribe to a free zen-fire feed with NinjaTrader as front end.. This will give you all US and European markets. If you leave is US, I would suggest looking at KOSPI 200 futures that trade during US evening hours, thus you would still be able to work during day, while learning how to trade. You would need to open an account at IB to get access to this product. Regards, redduke