Hi guys, I am a newbie looking to trade Emini S&P 500 futures. I have some questions about this from the experienced guys here. 1. Do you guys trade ONLY during regular market hours (8:30 AM to 3:30 PM ?) or are you also okay to trade during non-regular hours (6 PM to 830: AM) ? 2. What is minimum amount of money you need to have in order to trade this instrument for a living by day trading it? 3. Do you guys use options-on-futures to hedge your futures positions ? 4. From a strategy standpoint, is it possible to rely on the technical indicators for ES ? I ask because something an ES would also be impacted by things as quarterly results or tweets etc. How do you manage to do technical analysis on this ? Thank you
1. You need to develop a strategy that works for you and determine what time of day you have the highest level of confidence. 2. This question is too general. No one can really answer that for you. 3. If you are going to use options to hedge the future, it would make more sense to use long calls or puts instead of the future as a proxy for your long/shorts--skip the future. 4. See #1...no easy way out of #1.
1. The main issue with trading outside regular market hours is liquidity and data releases. Many US data releases come at 8:30 AM, EST, so unless you want to try to play the release, it's a good idea to stay out during that period. Same thing with euro stuff in the early morning and Asian in the evening. Generally there is pretty decent liquidity in the overnight, particularly the morning. 2. Wrong question. You could have millions in your account and lose money. The right question is how much account equity do you need to safely trade one contract. My opinion is $20k. That's for trading one ES contract and it assumes that you are a newbie but have some idea what you are doing. Obviously brokers will let you trade with a lot less. Good luck with that. 3. I don't. If I'm daytrading, I want to get out of a bad trade, not hedge it. Hedging with options gets expensive. Like Robert Morse said, if you want to do that, why not just trade the options? 4. Generally newbies go through a learning phase where they are obsessed with technical indicators like Stochastics or RSI. If you backtest them, you will find no edge. They look good on a chart but in real time, you will get a lot of bad signals. They also encourage you to think counter-trend, which is the wrong way to approach the market. An oscillator will kill it in a choppy sideways market and it will kill you in a trending market. Unfortunately you don't know ahead of time which market it is. The one thing I do look for intraday is oscillator divergences. Otherwise for me it is all about price action, S and R, significant prior levels, opening gaps, etc. I believe the best way for a newbie to get started is to get some backtesting software and spend a lot of time fooling around with all sorts of strategies and seeing the effect stops have on profitability. I also think it is a good idea to split your trading stake into two piles and put one in a back account or somewhere that it is unavailable for trading. Then if (when) you lose the first half, you have to make a deliberate effort to put the other half at risk. Good luck.
Hi Beltway, is it possible to back test manual strategies or can it be only done on automated strategies ?
To do it with s/w you have to be able to code it. If you can't define it tightly enough to code it, is it really a strategy? You can always backtest it by eyeballing a chart but that is labor intensive and you have to be very careful not to make wishful assumptions.
Back testing does not necessarily have to be done with a computer. You could also do it with pen and paper. It might even give you a deeper understanding of your trading rules if you do a manual back test.
I thought about that , since there are weekly options, but then again, Protecting a long ES position with a ATM or slightly OTM PUT = purchasing a CALL! Perhaps you can partially protect a Es position with a Option spread either using Exchange Traded Option spreads or something like Nadex spreads!
Ditto on all... except I see value in Stochastic and RSI when properly understood and used. Most don't get the the "properly" part before giving up on them from a bad experience or two.