why trade prop when you can retail daytrade futures with same 20:1 margin

Discussion in 'Prop Firms' started by jammy page, Mar 4, 2008.

  1. After considering trading prop for some time now, I don't understand what the real appeal is given that you can retail daytrade futures with basically the same 20:1 margin that the average prop firm will only give you under very limited conditions AND if your trade fits within their strict risk parameters?

    Also, trading futures retail you would seem to get a much better deal on commissions than the starting commissions rate that I hear is standard for the more respected prop firms.

    Also, no silly series 7 licensing requirement needed to retail trade futures.

    Also, much more favorable 60/40 tax treatment for futures than for most stocks (although some ETFs may qualify for the same treatment).

    Finally, I am very mindful of the fact that at least 75% of the average individual stock price movement is determined by the overall market, and that you can trade the overall market movement with futures.

    So what am I missing?

    (I know there are some pseudo-market-making, "opening order" and other strategies that are unique to stock trading, but I don't see myself really getting into those anyway. Also, I'm not really looking for someone to train me or let me in on their "winning strategies," and I certainly don't want a big brother monitoring mine.)

    Thanks for your thoughts.

    Jimmy P.
  2. There are thousands of stocks out there, the programs and funds can't play games with all of them.

    If you prefer to trade with 20:1 margin vs the smartest traders out there in a single market, then all the more power to you. But easy (or easier) money is the same color as hard money last I looked :)
  3. Point well taken with much respect. I'm only looking at trading very liquid, well-known stocks or futures.

    Here's a recent video I saw that summarizes my views on this issue quite well (I have no affiliation with these guys, and I don't subscribe to their services, but they do have some interesting things to say):

  4. you're missing relative strenght/weakness of stocks that make them a lot easier to trade than an index.

    when an index is sideways there is always a stock or a an industry group wich is trending...
  5. You're right, I totally agree with this. As a practical matter however, I personally have a difficult time watching or trading more than one instrument at a time, and switching between instruments during the day only makes me lose my bearings.

    I would prefer to watch one instrument over multiple timeframes than watching multiple instruments.
  6. Here another point you are missing. In futures a position requires a minimum capital. For the same capital, you can scale when you enter and exit using a stock etf that indexes well with a future contract. You can not do that if capital is low and you use futures, unless a fractional future is possible but I do not know if such a thing exist or not.
  7. I can't wait until the day the single stock futures because very liquid
  8. This is the wrong forum to be asking this question.

    1. Most of the people who read this form are prop traders so of course they will be biased.

    2. Most of the people are stock traders and have little to no experience in the futures market....or they could never make money in the futures market in the past.

    In my opinion, the majority of successful futures speculators who last, will ultimately end up on their own. .. so you better get the capital and figure it out sooner or later. There's no future in sharing your profits with other people...it defeats the purpose of this occupation. Your purpose is to steal money from other people...not share it.

    I stress the point that you better be well capitalized stepping into this arena...or tread very lightly with something like the YM, or else you'll crash and burn quick....and never get the chance to truly experience 'the fastest game in town'.

    Don't over trade or your commissions will eat your account up over time.
  9. I agree that the increments of scaleability/leverage are much finer with stocks than with futures--with futures you're working with larger chunks of capital for each increment that you scale.

    In other words, for say $50,000 in capital, daytrading futures you could work with a range of say 1-20 S&P e-mini contracts, and prop trading stocks you could work with a range of say 1-7,400 shares of SPY.

    This is clearly a point in the favor of prop trading stocks. Again however, for me at least, it's not a huge one because, as shown in the example above, 20 increments of leverage for the e-minis is already a lot.

    Anyone else care to chime in....like Don Bright??
  10. JP,
    you raise very valid points and I fully agree with your observations.
    My biggest problem would be the prop knowing everything about my trades which will make it very easy to reverse engineer 2 decades worth of R&D!
    If it weren't for that I would have loved to join one of them for my equity and option needs when I'm pairing different instruments.
    #10     Mar 5, 2008