A relatively small amount of futures volume is speculative. Most players are using futures against some other derivitive off balance sheet position. That's absolutely correct. If it wasn't so, it would be close to impossible to make the profit. Market would cease to exist (nobody does anything for free in the markets).
assuming someone can already trade - one of the keys to really making money is to obtain the absolutely lowest commision rate that you can - so that if you scratch a trade at zero loss - the commission has a minimal affect on your p&l far from overtrading being a negative ( an old idea based on high commisions and lack of liquidity) - i feel it is undertrading which will stop you making the big bucks as you will miss too many good opportunities and before i get beaten up on this - if how you trade works already - great - but i kept trying to develop a strategy based on a low amount of trades - and i was succesful - but then when i was succesful - i realised that the more trades you make, the easier it is to make money - especially as it keeps you in the market and awake! - so i do feel a bit evangelical about this but key to "overtrading" is a) knowing when to get into the market and when to get out b) having a low commission level
and before i get beaten up on this - if how you trade works already - great - but i kept trying to develop a strategy based on a low amount of trades - and i was succesful - but then when i was succesful - i realised that the more trades you make, the easier it is to make money Well, I am not going to beat you up. Perfect example of what you are saying is casino. Miniscule edge, huge turn over. Commission, though, even small can add up fast.
Cesko i tried to make it clear that high volume trading is not instead of expertise in trading, it is part of a trading methodology, which uses expertise in taking high reward/low risk trades - where the commision fee is calcuated into risk/reward - and therefore the level of commision has a direct and calcuable input to the risk/reward
Understood Since I used the casino example of the same principle (mathematically), I had to mention the commission. I don't want to be accused of comparing trading to gambling.
One further question....based on my strategy of netting 1 pt per day, what would be an appropiate stop loss to place when I enter a position. I'm thinking maybe .5 to .75. Any opinions???
Cesko i always compare trading to gambling - and whats wrong with that - as exactly as you described - casinos make money from gambling by ensuring the risk/reward is with them and some gamblers use casinos to relax,some are hooked, some might use it to impress a girl ( a sort of arbitrage position ), and some are just plain stupid - all in all - there is always a reason why someone takes the other side of the trade the great thing with trading is that taking what turns out to be a losing trade is jsut part of what actualy makes you money, if you use risk/reward analysis and trading skill - where as in a casino - over time there are only losses by the way - i believe we are agreeing!