Why Trade Futures?

Discussion in 'Trading' started by Equanimity, Jan 8, 2013.

  1. Why do most professional intraday traders trade Futures? Why not Stocks, Options or Bonds? What is it about the ES, CL, GC, ZB that draws the crowds?
     
  2. Leverage!!!!!!
     
  3. Leverage! that's it. What about Technical Analysis of the Futures markets? Is there something about Futures TA that gives the trader the edge?
     
  4. I trade SPI and for me it's about being able to read the signals.
    Stocks are too unpredictably volatile.
    Volatility is OK if you can catch it as it moves in slow motion, but if the moves are all over the shop like a mad woman's shit, well....you get the idea...
     
  5. Brighton

    Brighton

    I don't know if "most" is correct because I don't think anyone has counted, but some of the appealing characteristics of futures include:

    1. Leverage
    2. Potentially lower tax rates on section 1256 contracts. Depends on your filing status (business entity structure).
    3. Large contracts. Depending on trading style may result in lower commissions.
    4. Shorter trading hours. When the pits dominated trade, most were typically open 4 to 5 hrs vs. 6.5 hrs for equities. Some of the more popular futures now trade nearly 'round the clock so maybe this isn't in the 'pro' column anymore.
     
  6. Tax benefits.

    In fact, there only negatives of futures are:

    1) forces you into leverage. Want less than $12.50 per tick on the ES? Too bad.

    2) they expire. Want to hold a position for 6 months? You'll have to buy and sell periodically when each contract rolls over.
     
  7. irniger

    irniger

    Currency trading in the cash market is much better. One can choose the leverage and the volatility is manageable plus no commissions or other fees. Plus 24h trading and the biggest market - 4 trillion/day. Many swing traders come from stocks via futures to forex and are very happy and profitable with it.

    Felix
     
  8. great point.... i trade small odd loTs in eur.usd.......most futureS are over positioning for me... big killer for beginning traders... over positioning.... directional trading is hard to learn when you reduce your ability to survive by over positioning...
     
  9. yes, leverage, but also the reduced day trading margin, and, profit potential

    I went from fx to the 6E Euro FX contract Because of the leverage; but there's also the
    M6E - micro fx contract, although volume is low - 5,468 v 227,064 for the 6E on 1/8/13
    however even if a 1 or 2 pip fill difference from the 6E, still very tradeable

    plus one can 'short' the contract - Sell just as easily as Buy since there's no additional
    requirements as with shorting stocks. then there's the daily profit potential which in
    general, day to day is much higher than can be obtained trading any single stock-

    for instance: yesterday the 6E dropped 84 pips from its HH to LL = $1,050 which is a
    200% return on the day trading margin, And rose another 30 pips/$375 before closing
    try and get anywhere near that sort of intraday profit trading a stock

    BUT, leverage is the account killer for everyone who doesn't have a robust intraday
    trading system or method; much better to trade Day-to-Days-to-Weeks

    Euro FX 6E: Initial margin - overnight: $3,300 ~ Day trade margin: $500
    contract size: $125,000 - H M U Z - pip/tick value: $0.0001 ~ $12.50 comm: $4.87
    spot fx eurusd @ 1.30787 @ 50:1 leverage $3,269.68 - no lower day trading margin
    commission is variable and based on the spread: eg: @ 1.7 = $21.25

    Euro M6E: Initial margin - overnight: $330 ~ Day trade margin: $100
    contract size: $12,500 - H M U Z - pip/tick value: $0.0001 ~ $1.25 comm: $1.99
    spot fx eurusd @ 1.30787 @ 50:1 leverage $326.97 - no lower day trading margin
    commission is variable and based on the spread: eg: @ 1.7 = $2.125

    ES Initial margin: $3,850 Day trade margin: $400.00
    contract size: $50 x Index Value - H M U Z - tick value: $0.25 ~ $12.50 comm: $3.92

    futures info via http://www.ampfutures.com/ ~ account minimum $500
    fx info via http://fxtrade.oanda.com/analysis/margin-calculator ~ no account minimum
     

  10. no Mickey Mouse bullshit like in stocks - no twenty dark pools fucking with your orders; no HFT messing w/ your best bid /offer by one tenth of a penny.

    Transparent, centrally-located liquidity and 23-hour per day trading.

    Overall, the fairest game of them all.
     
    #10     Jan 9, 2013