I've been only trading futures and spot currencies. The only way of creating a good risk/reward ratio with stocks seems to be in short-term to intermediate horizon combining a bit of fundamental.(to me) Sure, futures has a more inherent risk due to leverage. But that could be controlled with a proper money management in my opinion. Yet, I see many people day-trading only stocks. Granted, each has its personality/characteristics but is there any prominent advantage to day-trading stocks over futures generally? I am just curious to know what you all think of this subject.
it really depends on what you understand. Some prefer stocks and some prefer futures. Few people make good money, so it really is more of WHERE CAN YOU FIND A TRADING EDGE??? rather than the particular instrument
I tried options for a while until I realized the problems with liquidity and large spreads were just not appealing to me. I tried trading stocks that had similar moves to the S&P 500 but larger moves, in other words, high beta stocks. But, I noticed sometimes those stocks followed the indices and sometimes they seemed stubborn. So, I ended up trading symbol SSO partly because I could get in and out using the ElectronicCommunicationNetwork BATS with open market orders with a spread of one penny. However, I don't like the trading gaps in the stock market and ended up choosing Forex. I wrote a long message on how I view risk in Forex and various ways of managing your trades. It's here: http://www.elitetrader.com/vb/showthread.php?threadid=176782 I haven't completely considered futures partly because the only google searches I found on trading volumes in futures showed the most active contracts only trade 2 million shares a day. When I traded stocks, I could have a spread of 5 cents for stocks trading between 3 and 6 million shares a day (whether NYSE or Nasdaq) with an open market order. If I tried to use a limit order, I had to chase stocks sometimes 20 or even 50 cents before getting a fill. You can always try leading limit orders but I prefered using open market orders on SSO which at the time traded I think at least 90 million shares a day and BATS had around one third the volume (at the time) which meant probably 30 million shares a day. There's a thread on liquidity on Forex here: http://www.elitetrader.com/vb/showthread.php?s=&threadid=176689 where it's pretty clear that in Forex, you could trade 10 standard lots at a time fairly easily which could possibly make you $10,000 in profits a day in a single large move. Anyway, I've been having pretty consistent fills with my mini lot account at GFT Forex.
Can't hedge trade in futures.. Market direction = random, so hedge out market direction through different stocks.
This is extremely flawed logic. There is way, way more liquidity in futures. One contract is worth way more than one share in dollar value. Consider the S&P eminis... trading at 1060 there is a dollar value of $53k per contract, which at 2 million contracts per day is the equivalent of a $53 stock trading 2 billion shares a day.
Yeah personally i think they keep the info on futures so limited because they don't want a rush of people to go in and then they have to change the tax laws on them. The biggest advantage ends up being the 60%, 40% split on your taxes even if you day trade 'em 60% is still considered long term gains while 40% is considered short term gains. In stocks 100% is considered short term Correct me if I'm wrong. I've traded a few this year but I'm stll working my way into them and I haven't had to deal with the tax issues yet.
60/40 don't mean diddlly if you don't make money... I learned all my price action patterns from trading futures... I make money on stocks using those price action pattern. I lose money in futures using the same patterns. Probably because I'm not hedged long short and betting oneways.