You will absolutely do the wrong thing at the wrong time and you will know when you are doing it that it is wrong but you will do it anyway. Thanks. I thought it was just me!
good questiong regarding the 60/40 on the taxes.....yes there is an advantage over trading stocks in regard to the tax consequence: Tax rates on commodities vs. securities, pre- and post-2003 Tax Act: Commodities are section 1256 contracts taxed 60 percent at long-term capital gains tax rates and 40 percent at short-term capital gains tax rates (i.e., ordinary income tax rates). Pre-2003 Tax Act: 60 percent multiplied by maximum long-term capital gains tax rate of 20 percent = 12 percent. 40 percent multiplied by maximum short-term capital gains tax rate (ordinary rate) of 38.6 percent = 15.44 percent. Net 60/40 blended tax rate = 27.44 percent. Post-2003 Tax Act: (the 60/40 split survived a last-minute attack from the Senate) 60 percent multiplied by maximum long-term capital gains tax rate of 15percent = 9 percent. 40 percent multiplied by maximum short-term capital gains tax rate (ordinary rate) of 35 percent = 14 percent. Net 60/40 blended tax rate = 23 percent. The 2003 Tax Act provides a rate reduction for commodities traders of 4.44 percent. Securities are usually all short-term for traders, because they hold positions for less than 12 months. Pre-2003 Tax Act: Maximum short-term capital gains tax rate (ordinary rate) of 38.6 percent. Post-2003 Tax Act: Maximum short-term capital gains tax rate (ordinary rate) of 35 percent. The 2003 Tax Act provides a rate reduction for securities traders of 3.6 percent (for short-term tax rates). For investors, long-term capital gains tax rates were reduced by 5 percent or more. Notice that the reductions for securities traders (3.6 percent), commodities traders/investors (4.44 percent) and securities long-term investors (5 percent) are similar. It is important to note the net tax rates, which are significantly better for commodities traders vs. securities traders (23 percent vs. 35 percent, respectively). So bottom line is if income is equal your net is 12% better if you had traded emini v. stocks......
If I do trade the S&P e-mini, I won't be using my full 100k. I would start small, trade 1 contract until I can be consitently profitable for at least a few weeks and then slowly add contracts. I still have a strong passion for the stock market so I will probably continue to swing trade equities as well, which is were the bulk of my trading cash will be. As a digression I'm posting my thoughts regarding my YTD equity swing trading performance. In June my account equity was up 21%, putting me on track to beat 2004's performnce (24% total for 2004). I did this in a cash account (100k in Jan.), usually 5-7 positions at any one time, only long positions. I was hungry for more and assumed I was ready to step up so on July 1st I transitioned to a margin account (still using Scottrade). That's when the problems began and I started to overtrade. I was able to stay afloat with only a small loss for July. In August, my wife and I talked about me reducing my hours at work (as a consultant I have flexibility) to focus more on trading. My work was pretty stressful so my wife suggested I take 4-6 weeks off from consulting to take a break....with the idea that I may or may not return depending on my trading performance. Well, with the increased buying power from margin and more time on my hands I was a like a kid in a candy shop and went hog wild....jumping in and out of trades, committing the typical amateur mistakes of not executing my mental stop losses and then becoming fearful of losing gains on other positions and not letting my winners run. I would have 10-15 positions at any one time. Then another mistake....we went on a 1 week vacation near the end of August, I reduced my positions down to about 7-8 versus moving to all cash and spend time away from the market to re-charge and get some perspective. I had some computer access so I was able to check prices a few times a day. No big losses but the typical low August volume and the lack of buyers caused most positions to drift downward. We get home and I decide to get more aggressive in September. I just wasn't listening to what the market was saying...I wished for a market rally and kept getting sucked into 1 day wonders. Finally, in October I got the courage to take my first short positions and did okay with them, nothing great but did alright. Then I got hit with a few ugly morning gap downs on some longs. To top it off, I tried to make up for my losses by jumping onto some fast runners but of course I piled in too late and took more losses. Sept. and October were ugly, with margin interest and increased commisions (prior to going to margin I was spending about $400 on commissions, now I'm spending closer to $1,000) and losses on my positions I'm bascially back to 100K. I started to consider if all the time I was putting in was worth it....market hours + research hours = 50-60 hours per week on top of my consulting (when I was consulting) I had heard about the 60/40 tax advantage of futures trading. I thought that maybe I coud approach trading in a more mechanical way and not have to spend so much time researching. On a day when I was feeling pretty low I clicked on an ad for a free TI live trading seminar day trading the SP e-mini. The actual live trading seminar happened to be on day when the S&P was rallying and I thought, "Gee, I could be happy with a goal of $500 per day (maybe more later) and not have to worry about morning gap downs and leave the rest of the shenanigans of the equity market behind." This brings me full circle to my original post of asking about the transition from swing trading equities to day trading futures. Based on some of the replies to my original post my initial impression is that S&P e-mini is more competitive then the equities market. I also didn't realize I woud need to learn a whole new game. So, at this point I may dabble in some e-mini day trading but will probably cotninue to swing trade stocks because I think that's where the money is. It seems more futures traders bust then equities traders. However, one thing I do have going for me is my money management approach (at least it was in tact before moving to margin!). I quickly realized a few years ago how important it is and if I do try the fuures world I will be very careful and use my original system.
I am still doing stocks but my focus is on automation/scanning for what I would be looking for manually. Trying to trade off this outpout without e.g watching the book/price action won't work in anything but a bull market, but I will be able to reduce the effort:return when the market is running. Going through 200 chart views every night gets a bit much even in a bull market. One more thing, I am deliberately trying to push the setup timeframes out further again......................
My advice to you Start trading SPY and figure out how to make money with it before you switch to the spoos. If you are overtrading in equities now, then it will really hurt you by overtrading in futures. http://finance.yahoo.com/q/bc?s=SPY&t=5d&l=on&z=m&q=l&c=
xxxskier Regarding your last post: If switching from a "cash" account to "margin" caused you to overtrade or "get carried away". And, if you shorted your first stock in 2005, as you explained. Futures may amplify the bad "human tendencies" you described. Humans act funny sometimes when their emotions override their rationality (both in taking extra risk and in not taking enough risk). If you quit your consulting work - you may experience additional pressure to make trading work. This could effect your stress level - and this usually impacts trading performance of a discretionary trader. With equities may shoot your foot. With futures you can blow your brains out.