Futures Vs. Stocks - Trying to Decide What to Learn for Day Trading

[mangolassi 11]

Hi all,

 

I am looking to start seriously paper day trading either stocks or futures (I have dabbled here and there). Now, my eventual goal is to learn and go live with whatever I am papertrading (whether it be stocks or futures). I have been reading technical analysis and trading psychology books, and have most recently been going through Al Brooks' books on price action trading.

 

I want something that I can be successful on at a lower timeframe (such as 5 minutes) for day trading, and something that follows the principles of price action in a reliable way.

 

I have some questions for those of you who have had experience with either stocks, futures, or both.

 

1) I have heard that the futures day trading market is for "professionals only". Is there any truth to this? When you compare futures to stocks, is any one market in particular more or less difficult for beginners to learn from?

 

2) I have just started trying out Lightspeed Trader, and so far I love the platform. Really efficient for day trading stocks. Is there any similar platform for futures day trading?

 

3) Can someone give me a quick overview of the difference in futures and stocks with regard to volatility? It seems people argue both sides - some say that futures are more volatile, some say that stocks are more volatile.

 

4) Do different futures have their own "personality"? Basically, how easy is it to take a strategy from CL for example, and apply it to ES or NQ? In stock trading, it seems that the stocks behave very similarly (with regard to technicals), and you can apply strategies broadly. Is it the same with futures, or is that more difficult?

 

Thanks in advance for any replies.

Edited December 9, 2014 by mangolassi

[zdo 20]

message too short make it at least 20 characters

 

Hi all,

 

I am looking to start seriously paper day trading either stocks or futures (I have dabbled here and there). Now, my eventual goal is to learn and go live with whatever I am papertrading (whether it be stocks or futures). I have been reading technical analysis and trading psychology books, and have most recently been going through Al Brooks' books on price action trading.

 

I want something that I can be successful on at a lower timeframe (such as 5 minutes) for day trading, and something that follows the principles of price action in a reliable way.

 

I have some questions for those of you who have had experience with either stocks, futures, or both.

 

1) I have heard that the futures day trading market is for "professionals only". Is there any truth to this? When you compare futures to stocks, is any one market in particular more or less difficult for beginners to learn from? Trial them both... Which one is best depends on YOU. Your proclivities, inclinations, talents, feel, methods... You are a sample of one

 

2) I have just started trying out Lightspeed Trader, and so far I love the platform. Really efficient for day trading stocks. Is there any similar platform for futures day trading?

Trial the top three or four futures platforms... for the one that fits you.

 

3) Can someone give me a quick overview of the difference in futures and stocks with regard to volatility? It seems people argue both sides - some say that futures are more volatile, some say that stocks are more volatile. Instead of exploring differences in Volatility btwn... best to initially focus on differences in Leverage...

 

4) Do different futures have their own "personality"? Basically, how easy is it to take a strategy from CL for example, and apply it to ES or NQ? In stock trading, it seems that the stocks behave very similarly (with regard to technicals), and you can apply strategies broadly. Is it the same with futures, or is that more difficult? Different futures do have different 'personalities' but your own perceptual acuities or lack of them, the method, system being applied, etc. may dull / shroud those differences. Across time I learned I can make all futures "behave very similarly" by using different chart time frames for each one ... hth

 

Thanks in advance for any replies.

[mangolassi 11]

Thanks.

 

Is there anyone else who can offer some input? If someone has been successful at futures day trading for some time, I'd like to hear your opinion, as well.

[jpennybags 11]

Hi all,

 

I am looking to start seriously paper day trading either stocks or futures (I have dabbled here and there). Now, my eventual goal is to learn and go live with whatever I am papertrading (whether it be stocks or futures). I have been reading technical analysis and trading psychology books, and have most recently been going through Al Brooks' books on price action trading.

 

If you are studying Al Brooks, you may also want to explore Bob Volman. Both authors offer up good information concerning price action. Bob Volman is easier to read and understand (personal opinion).

 

If you learn to trade price action, you can trade anything...

 

Some stocks are more volatile than others, as some futures markets are more volatile than others. Exploring markets to find a proper fit for yourself will take some time, but I would focus my learning on trading the less volatile vehicles as a beginner.

 

Day trading stocks will require a much larger account balance (25K minimum, but you will need much more than that). Shorting stocks is more difficult than shorting futures. There is also a tax advantage with trading futures.

 

I've traded both... my preference is futures.

[mangolassi 11]

Thanks for the help.

 

Are there any particular reasons why shorting stocks is more difficult?

 

Do you think the ES is too volatile to start observing/paper trading with? Since Al Brooks uses it primarily as an example in his price action books, I have been noting down my observations on the 5 min chart starting at 9:30 in the morning, just seeing how the thing behaves and moves. It seems like the perfect day trading market to get into, since it has amazing intraday trends, breakouts, etc. When I look at NQ or YM, it seems that these guys are really too slow for day trading. Haven't really looked into CL (yet).

 

Which brokers should I look into? I have been using NinjaTrader with a demo from AMP, and I like the NT platform.

 

If I eventually want to get into automated trading, are there some advantages/disadvantages to the various platforms?

 

Sorry for all the questions, and thanks for helping me out.

[jpennybags 11]

Thanks for the help.

 

Are there any particular reasons why shorting stocks is more difficult?

 

Do you think the ES is too volatile to start observing/paper trading with? Since Al Brooks uses it primarily as an example in his price action books, I have been noting down my observations on the 5 min chart starting at 9:30 in the morning, just seeing how the thing behaves and moves. It seems like the perfect day trading market to get into, since it has amazing intraday trends, breakouts, etc. When I look at NQ or YM, it seems that these guys are really too slow for day trading. Haven't really looked into CL (yet).

 

Which brokers should I look into? I have been using NinjaTrader with a demo from AMP, and I like the NT platform.

 

If I eventually want to get into automated trading, are there some advantages/disadvantages to the various platforms?

 

Sorry for all the questions, and thanks for helping me out.

 

Read up on the requirements and mechanism of shorting stock... you'll understand.

 

Successful day traders make money on the YM or NQ. It may be that you just don't recognize the opportunities as yet.

 

Look into all brokers. You don't know enough yet to pick apart trading platforms... NT is fine.

 

Automated trading... don't know.

[mangolassi 11]

Thanks for the replies. I am opening an account this week with NinjaTrader and buying their platform. I will probably be opening a trading journal soon to get feedback on my progress.

[Ammeo 10]

I am a big fan of stocks so i would say stocks. I have seen traders make more money in stocks than in futures. This is my general observation and may vary for other people.

[mangolassi 11]

So I opened up a Ninjatrader account this past week. Now I'm getting ready to fund it. I think in a couple of weeks I'll fund, and until then I'm just sim trading and documenting my progress on an excel spreadsheet.

 

When I go live, I think I'm going to start very small just to practice 1 contract on the ES. Do you guys think putting $6,000 is OK just to try and break even and practice? For ES, Ninjatrader requires $5060 initial, and $4600 maintenance.

 

At this point, I am more concerned with learning to manage my trades and not over-trade. I have been backtesting and sim trading two strategies that I worked out from Al Brooks' price action books, and so far it's been working out well on the indexes. With these strategies I am just trying to scalp 1 point from the market per trade during trends, and with 1 contract and the stop loss I typically place, my losses likely won't exceed $100 per any given day. For the first month or so, if I can enter trades that fit my strategies, and learn to manage my stop losses and profit targets, if I can just break even I'll be more than happy with that progress. Then I guess I can fund more money and work up to 2 contracts so that I can swing half of my position for more profits after scalping a point from the first half.

[mangolassi 11]

Oh, nevermind, $500 intraday margin. So... is $2000 enough for the break even goal?

[tradelab 10]

At the risk of repeating ourselves, it's important to note that futures trading is not for everyone. You can invest in the futures market in a number of different ways, but before taking the plunge, you must be sure of the amount of risk you're willing to take. As a futures trader, you should have a solid understanding of how the market and contracts function. You'll also need to determine how much time, attention, and research you can dedicate to the investment.

 

As an investor, you can trade your own account without the aid or advice of a broker. This involves the most risk because you become responsible for managing funds, ordering trades, maintaining margins, acquiring research and coming up with your own analysis of how the market will move in relation to the commodity in which you've invested. It requires time and complete attention to the market.

 

Another way to participate in the market is by opening a managed account, similar to an equity account. Your broker would have the power to trade on your behalf, following conditions agreed upon when the account was opened. This method could lessen your financial risk because a professional would be making informed decisions on your behalf. However, you would still be responsible for any losses incurred as well as for margin calls. And you'd probably have to pay an extra management fee.

 

A third way to enter the market, and one that offers the smallest risk, is to join a commodity pool. Like a mutual fund, the commodity pool is a group of commodities which can be invested in. No one person has an individual account; funds are combined with others and traded as one. The profits and losses are directly proportionate to the amount of money invested. By entering a commodity pool, you also gain the opportunity to invest in diverse types of commodities. You are also not subject to margin calls. However, it is essential that the pool be managed by a skilled broker, because the risks of the futures market are still present in the commodity pool.

[tradelab03 10]

Whether a trader decides to use stand-alone options, stock futures, or a combination of the two requires an assessment of individual expectations and investment goals.

 

One of the first questions an investor must ask is how much risk they are willing to take on in their investment strategies. Option trading provides less upfront risk for buyers given the lack of obligation to exercise the contract. This provides a more conservative approach, particularly if traders use a number of additional strategies like bull call and put spreads to improve the odds of trading success over the long term.

[divyanshisharma 2]

There are some definite differences between trading stocks and tradingfutures. ... A company value is reflected in its stock price and commodity futures values are derived from the underlying price of the commodity: A stock is simply a partial ownership of a company. The value of the stock is reflected in its price.

[CrazyCzarina 17]

Most of the time, futures open at a much different price than where they closed the previous day. Price volatility means that the chances of unexpected losses or profits rise when positions remain on the books at the end of a trading session.