The main question that is still unanswered is: Is it more difficult to learn/trade futures versus stocks and if I failed with stocks will I also fail with futures? I've heard that many went on to futures after they for some reason stopped making money in stocks, why is this? Also, what do you guys think is the minimum to trade futures? I only trade 100/shares right now and don't risk more than 5-10 cents/trade. I think with futures my risk will go up much more.
I just started trading futures and place my first one last night. One big difference is that maximum loss for long stock positions is your initial investment, with futures maximum loss on long and short positions is UNLIMITED, so you must have stops in place for both long positions and short positions or cover with long calls or puts. Also if you don't have enough margin a position might be closed out early and rebound later without you. With stocks you can wait out any downturn.
becomes a mute point (unfortunately) when you get up into the equally desired/dreaded AMT level of income. the AMT is a joke- a very bad joke... a painful joke...
Futures, Index or otherwise put more pressures on the unsophisticated trader. Everything you need to trade stocks successfully, you need to have refined to a crisp degree with futures. Especially your money management. If you have a difficult time with stocks, you will lose allot of capital trying to trade the ES/ER2. Unless you have allot of money,time and a rock solid support to fall back on, you will grind your account down to peanuts before you figure out what you are doing right and wrong. The analogy of major league vs. minor league baseball is spot on.
Advantages of trading fut's over stocks: 1. No inventory problems 2. No uptick rule 3. Massive liquidity if you trade indexes 4. Favorable tax treatment -->> 40% is ST, 60% LT. With stocks it's all ST. 5. Small capital requirements Disadvantages: 1. <b>Huge Risk</b> You better know what you're doing before you enter this market or you'll blow up your account in a week. I recommend trading on a simulator for at least 2 months. Not so much because this will teach you how to trade but it will teach you how this market moves and hopefully you will appreciate the risk. I trade on a Sim for 2 months, turned 40k into 80k the first month then turned 80k into -100k the second month. The second month was when I really learned how to trade this market. Good Luck!
Hey YoungOne, aren't you that 17 year old kid who wanted to manage money for others? I could be wrong but if you're that same guy you need some serious hand holding. I don't mean that in a bad way, you're just so young you have no experience. You gotta give yourself time to grow as a trader, like any other profession. I don't think I've ever seen a 17 year old doctor besides Doogie Howser. You gotta go through the training first. It takes years, many years but time is on your side.
You don't necessarily have to be successful trading stocks first but it would sure help. Your best bet is to either find someone to teach you or Sim trade for as long as possible. The biggest advantage for me.....since the capital requirements are low ($500 per contract) I can "build" positions. I don't have to throw my whole line on at once so I can nibble over time. This way my timing doesn't have to be perfect. It's hard to do this on stocks because if you nibble and don't get another entry you'll pretty much make 10 or 20 bucks, whereas, the same situation could make you 100 or 200 bucks in the fut's market because of the leverage. The problem....that leverage cuts both ways so you really need to be good to make money in this market.
Nope not me. I've been trading equities for a year now. I'm starting to get the hang of it but I just really don't like to have to constantly screen for new stocks. A lot of times I miss a good move because I wasn't watching that stock. I was just wondering if people who have traded both for extended periods of time or people who switched from one to the other could chime in and talk about the "trading" differences. I think since I'm not well capitalized, I'll stick with equities for now. I only risk 5-10/cents a trade on 100 shares so thats not much, with futures it seems like I must risk a lot more. Thanks everyone for the input.