Granville, Here's my understanding: 1. To open an account you need to deposit with them a certain minimum, e.g., $5,000; 2. In order to trade the NQ, you need a certain margin per contract, e.g., $4,500/contract - with which margin you are allowed to take a position overnight; 3. After you open a account and trade it a little, your maintenance margin is allowed to drop a little, like, if the broker had a margin requirement of $4500 per contract for overnight positions, now, after losing some money, they will allow you to continue trading one contract with just $4,000 remaining in the account; 4. If you just daytrade, or for positions kept strictly for the day (e.g., liquidated by 4 pm ET) the margin is often about half of the margin required to maintain for overnight positions; 5. They strongly advise you to always have a stop loss order in the system for each open position. In practice that means that they may monitor your trading (especially in the beginning) and complain if you don't do that (which, of course, is an excellent way to trade, don't trade without doing it), but even more importantly, if you have no stop loss in and Sadam or UBL does this or that and the market does that or this in return, and the damage to your account is greater than the amount you had in to start with (say, $50,000 for a $20,000 account) they can sue you for the rest and you cannot say that it was not your fault. Remember, in trading futures, you can lose a lot more than you had initially. Also remember that there are tools like bracket-trader or futures-trader that place a bracket automatically upon opening a new position --- and you can define the bracket to be wider than necessary (say, you want to go for a 2 pt gain and you'll monitor your position like a hawk to finetune profit target and stop-loss, but the tool can place a 3-5 pt PT/SL just for safety.) I have been trading the ES/NQ and other futures for a number of years now. My advice is not to listen to unscrupulous brokers who try to attract your business by offering very low margins (down to $250/contract in one instance.) My strategy has been to budget at least $10,000 per contract traded, although my broker (IB) only demands the $4,000 / $2,000 for the ES/NQ which is the [more or less] standard in the industry. Hope this helps - good luck!
Thanks a thousand Yannis! Getting advice from someone who has been trading these instruments for a long time is very valuable! I have about 30k in my equities account now and plan to transfer about half of it, 15k, to a futures account. With the margin, I can buy up to 6 contracts with that amount. If I ever get up to 6 contracts, I still have the 15k in the equities account to protect me - I'd never take all 30k to the futures account and buy 12 contracts... With up to 6 contracts, my plan is to start with 3 and if the position proves right, add another 2, and then again if still right, add the last one to total 6 contracts. Just read this great thing called "Phantom's gift" explaining adding to your winning positions as one of the main rules for successful trading (the other main rule being to assume an opened position to be wrong until proven correct). Thanks again!
Granville, Forgive me if I sound like a teacher or a priest here... But my strong advice is to first use a simulator for a few weeks and then trade no more than 1 contract, until (after a couple of months or more) you are really confident. The ES and the NQ are not like stocks - they are more agile and often jump unpredictably, and, since they lead stocks, you have nothing to warn you of an impending move (like you can use the NQ to help you with trading, say, INTC.) I have seen very capable stock traders blow their entire trading accounts in a week by trading futures. My analogy is that a stock, even the Nasdaq high fliers, are like dogs, but the ES/NQ are like cats, sometimes like bobcats. Watch out - the thing may show you a few $thousand loss in seconds and you may panic, miss signs that the prices are bouncing back and exit with a huge loss. Observe them patiently in the beginning - look how they behave and what technical analysis that you already know (not everything, there are differences) can be transferred here. Then, use a simulator like futures trader for a while, perhaps a few weeks. Then trade a single contract. If you think you really know how to trade, grow your trading (number of contracts) according to your profits (like, add a contract for every $4,000 in profits, etc) Be patient and learn gradually - you may know how to drive a Ford, even a BMW, but driving a Ferrari or a Formula is a different matter
Thanks for the advice! The 3+2+1 contract is something I won't do until I feel confident with trading just one contract, and before even doing that I'll papertrade and simulate trading a while, that's been the plan from the beginning. The simulation I've done so far is on TradeStation, stepping forward a minute at the time, but what you suggest sounds intresting. Where do I find futures trader - do you have a link? Also, I've thought about the pros and cons trading NQ vs QQQ, and the few I cons I've found are: - minimum trade larger on NQ - not having NQ/ES as a leading "indicator" as is the case when trading QQQ - just as you point out. This is the one negative point I'm most concerned about as it has helped me plenty in trading QQQ. Thanks again!
Yannis, sorry I misunderstood "use a simulator like futures trader for a while" for a simulator called futures trader... What I meant to ask is if you know of a simulator for futures trading?
Granville, Go to "Forums âºâº Tools of the Trade âºâº Software âºâº Futures-Trader, a Simulator for papertrading your IB account" This (futures trader) is one of the very best simulators/trading add-ons for IB I know. Depending on what strategy you use, Ensign can also be extremely useful - for example, take a look at www.nqoos.com/Steps_to_Be_a_Profitable_Trader.htm Hope this helps - good luck!
Thanks Yannis and Trader42! However, I'm trading with TradeStation, so these simulators won't do me any good unless I change to IB... Do you know of any simulators that work with TS?