First of let me dispel one myth. TRADING EMINI'S IS NOT EASY OR UNSTRESSFUL. Trading the NQ or ES is not easy and requires a lot of work. There are many reasons why this is true. 1. Leverage ( as Hitman put it I believe ) is a double edge sword. Increased leverage brings with it increased risk which is a newbies worst enemy. 2. The majority of futures traders are pros and these are the ones you are competing with every day for the $$$. Trading futures is a competition every $ you make someone else has lost. 3. When trading a single instrument there is the pitfall of forcing trades. When trading stocks you have 1000's to choose from to find entries, trading futures narrows your scope and requires patience to look for just the best opportunities. 4. Overtrading is another pitfall to the futures, with low commissions and ease of entry/exit overtrading is often the downfall of many newbie futures traders. Let me go on to say I trade the Emini NQ and believe it is a great trading vehicle. What I don't want to see is people enter this market thinking that it is easy and not completely understanding the risks involved in trading futures.
Trading Emini First of let me dispel one myth. TRADING EMINI'S IS NOT EASY OR UNSTRESSFUL. Trading the NQ or ES is not easy and requires a lot of work. There are many reasons why this is true. 1. Leverage ( as Hitman put it I believe ) is a double edge sword. Increased leverage brings with it increased risk which is a newbies worst enemy. ** I understand leverage. My comparison was between trading eminis or trading at a prop firm. Advantages or Disadvantages** 2. The majority of futures traders are pros and these are the ones you are competing with every day for the $$$. Trading futures is a competition every $ you make someone else has lost. ** True, but, in comparing charts of eminis to QQQ or SPY, trendlines are either continued or broken and s/r held or broken in the same way. If one uses TA to "swing-trade" intraday I see no reason why the emini would behave fundamentally different. Other traders are looking at the same charts in the same time frames I am and are reacting to the chart depending on what they anticipate to happen technically(fear/greed). ** 3. When trading a single instrument there is the pitfall of forcing trades. When trading stocks you have 1000's to choose from to find entries, trading futures narrows your scope and requires patience to look for just the best opportunities. ** Even in a non trending, flat day, there will be some range to trade in. Since I've followed the emini charts I haven't seen a day I have said would be impossible to make money if followed strict exits and followed the trend or S/R ** 4. Overtrading is another pitfall to the futures, with low commissions and ease of entry/exit overtrading is often the downfall of many newbie futures traders. ** I am considering more of a swing-trading style based on 5-min charts entering on 1-minute charts. This would limit trading and emphasize identifying longer term trends. Ideally, I would like to trade 1-4x per day. Average range last 5 days is about 14 pts and trends intraday have been very strong. ** Let me go on to say I trade the Emini NQ and believe it is a great trading vehicle. What I don't want to see is people enter this market thinking that it is easy and not completely understanding the risks involved in trading futures. ** Why emini NQ over ES?? Just curious if it's more than just volatility. Do you think an intraday swing-trading strategy would work more effeciently on NQ or ES? **
IMO they are different entities and are traded differently. The strategies I use to trade the NQ do not work in the ES and for that matter I am yet to meet someone who trades them both well. This is not to say you cant, just to say that i don't know anyone who does. Another question I have is what size account are you considering using to trade the futures and what type monthly returns are you looking for, this may answer some questions ( or ask new ones ). As many who enter futures trading ( and stock trading for that matter ) have unrealistic goals when it comes to trading income and returns on capital. I will disclose that I run a chatroom, and while many on this board bash chatroom operators for "suckering in newbies", I honestly just enjoy teaching and continue to derive the majority of my income from trading. My focus is to teach traders how to trade for realistic gains in a difficult market. What i have seen to be a majority of traders downfall is the unrealistic goals they have upon entering trading. Having goals set too high forces, again in my opinion, traders to take on excessive risk to achieve these lofty goals. If you are serious about trading futures, which it sounds like you are, I will offer the following advice: 1. don't overtrade, even if scalping look for only the best opportunities. 2. Set realistic goals, reward is in direct correlation to risk keep that in mind when setting income goals. 3. Discipline and capital preservation are the most important thing you can ever understand in this business. 4. Learn when to push your bets and when to adjust your strategy this is a part of #3. All the best, AllenZ
My initial goal is to net +1 point every day on 1 ES contract. On a 14pt daily range with many more intraday total pts I consider that modest but only someone who actively trades them could tell me so. I look at it like capturing less than net 5% of total volatility on any given day. Thanks for your help.
Also, I am not be trading for income or beer money. This is a trading account I will try to grow over time to 25-30k. I have a job that pays all the bills and affords me enough time to trade the times when entry postions are likely. (i.e. 9:50-11:30 & 1:50-3:50) My short-term goal is to scale up # of contracts gradually after I can consistently trade 1 ES.
``Trading futures is a competition every $ you make someone else has lost.'' I sure wish people would stop saying that. There are many many traders of all shapes and sizes, trading the market in all kinds of different time frames with a different system for each user. When I close a long daytrade for 40 points, the buyer on the other side is an anonymous player with his or her own system. They could easily be covering a week's swing trade for a much larger profit than mine. Or perhaps starting a long that will run for weeks and net them hundreds of points. Perhaps my 40 point bounce was their entry signal. These `competing' traders could easily be making some of their best trades at the same time as those taking the opposite side. If the intent is to state that trading the futures markets is hard, fine. If this competition myth helps your trading then fine. If you happen to choose a system that a large number of others share then there might be some competition. (Perhaps that's not the best system.) Every once in a while, as you take a profit, the player on the other side may be taking a loss. You will never know. It's possible, even likely, but it's not even close to a certainty. Richard
futures are marked to market each and every day at settlement, with credits and debits exchanging hands among the traders. It's a zero sum game that were all existing positions summed equal out ot zero. there is always a winner for every loser. Because you liquidate for your profit doesn't change this.
All I am saying is every point you make is a point someone else has lost whether through an actual trading loss or from missed profit. Futures are simply a two way market for every winner a loser exists, either true loss or unrealized profit.
Your approach to the market seems sounds to me. Realistic goal and intention to not need to make a living off it will absolutely be a benefit in the start. My comments were never meant to disuede you in any way, only to encourage you to be realistic and sound in your approach which you appear to be. Good Luck and all the best. AllenZ
While true from a mark to market, or clearing house standpoint that futures are a zero sum, that is not the reality in total. Commercials i.e. funds or arbs may take a loss in futures against a gain in cash or spot. A relatively small amount of futures volume is speculative. Most players are using futures against some other derivitive off balance sheet position.