My Graduation from Forex to Futures

[Sledge 13]

I have been away from the forum for quite a while but I had a story I wanted to share. I hope that my story helps just one aspiring new trader.. for that will be worth it.

 

I started trading 4 years ago and was introduced to this wonderful world by my brother-in-law. He traded currency futures on the Globex, I had taken a slightly different route and learned to trade with a Spot Cash (Forex) broker. The MT4 platform was simple, all my feeds, my charts- all rolled into one. No external data sources, no "external feeds" it was "easy" and nice to have it all in one package... I'll show you how that saying "if its too easy, it may not be worth having" statement may have come to light!

 

After 20 months of demo's, learning, honing, building my edge in spot forex. I decided it was time. I took the money I had set-aside to build the dream of taking that money and making a living eventually by trading. I was confident because I had proven results, I had a solid edge, I was well disciplined, and I had my money management down as well. I learned all of this using a demo- and took it VERY seriously!

 

I opened an account with a Spot FX broker and began to trade live. The "live" environment and platform was much more touchy and unresponsive than the demo. Fills were no longer "instantaneous" and they had pretty much "prick teased" anyone who wanted to scalp a bit by learning on their demo. When it came to live- you never had a prayer of getting filled live. So on we re-adjust and find a way to work the trades, knowing that scalping on market was out of the question on even the slightest amount of volume. At the start of 2009, they tighted it up even more and made it near impossible even on low volume.

 

After that re-adjustment period of utilizing pending orders instead of trying to scalp at market (when desired) things went fine.. until my profit started coming in. I had made a decent profit on my account when the platform started to slow down, or lose connections, fills became bad, and manual closes started to take up to 2 minutes!

 

You see ladies and gents. The spot broker is taking the other side of your trade because they are obilgated to do so. But I had no idea that it really was more like a casino and gambling than I believed. The analogy that you will see perpetuated on the internet about Bucket shops, or market makers, is true, and I am living proof. I started to take the house and became a liability to them. I was not one of the 95% that would end up burning through my account and leave cursing the trading world, never to return again. Or having some mindset that the entire trading world is dirty and impossible to conquer. No.. my revelation came that once you realize that their are smart places to trade and their are back alley crapholes, the smarter trader you become. Google Jesse Livermore.. his story holds true today- it is timeless!

 

Over the course of probably 2 years a trusted trading friend- Mr. JJ himself, kept saying to me. "Man why are you still screwing around with Spot?" "The fees in comparison to futures is night and day."

 

Example-

Spot FX: Open 1.00 lot Spot FX GBP/USD and instantly down -$30.00 on a 3 pip bid/ask.

Futures: Open a 1.00 lot and start at $0.00. But always know you have a commission either way (generally between $5 and $8 per contract- but boy that is a lot nicer than $30 for the same priviledge in Spot)

 

But I was comfortable I suppose, I was doing well and as they say "why fix something that isn't broken?" But then it became broken. I began to lose sleep at night- wondering "what if this broker goes belly up?" "If they do, my funds aren't segregated like they are on futures- all of my hard work for years my just disappear in the bink of an eye- and I have no recourse!" After the last straw of the buckeshop broker not honoring 3 trades and hosing me out of over $4,200, I finally made the decision that NOW is the time to transition to the real trading world. Trading with real interbank spreads, on the CME.

 

After a month of talking with, and working with, a few different Futures brokers.. I found a home. The broker actually calls me, is responsive, answers any question I have and all but held my hand through the spot to futures transition.

I sleep better at night now knowing:

1. My funds are safe (segregated)

2. My playing field is LEVEL

3. My broker actually cares and is reachable

4. My broker WANTS me to make money. The more I trade, the more money he makes in the longrun. He wants me to succeed, so that I continue to be an active trader and make him money. If I disappear, my commissions disappear too.

5. My broker is not dependant for survival on trying to screw me out of my money in my account, giving me bad feeds, or not honoring trades, if I'm not happy, the broker is not happy- Simple as that!

 

I took my first Live Futures trades on Friday's London session and snagged 40 ticks. I ended up talking with my broker on that Friday afternoon for another purpose, and he was just as excited about my "wins" as I was. Call a spot broker and see if he/she gets excited when you say "I just snagged 40 pips"

(Hint: they won't because you just took 40 pips out of THEIR bank account)

 

The reason for this post was fairly simple. It took me longer to learn the CORRECT place to trade than it did to actually learn how to trade. Their is a lot of conflicting information out there about "what is right" and "where to trade." Spot brokers are VERY GOOD MARKETERS! I know, I have a degree in Marketing, and they are slick, they know what to say, they know how to bait you and suck you in. Please keep this in mind if you decide to step into that world.

 

As for me.. I have finally graduated.

 

Aaron

[diablo272 10]

Thanks for sharing. I've never traded spot currency (or currency futures for that matter), but I know this issue is subject to much debate on many forums. But just to play devil's advocate here, couldn't you trade spot through an ECN to avoid this kind of thing?

[Sledge 13]

You could on a few ECN's yes. I also explored that route as well. In the end, it was best for me to be playing ball on the CME. Just personal choice I suppose.

 

To me though it was a fairly simple transition. I mainly deal in the GBP, and the futures contract price is very close to spot price, it moves pretty much the same.. so the switch has not been overly difficult.

Aaron

[BlowFish 10]

It can be hard enough to maintain focus without having to worry about these issues. I experienced similar when I started, 'trading' CFD's in he early 90's.

 

I hear the new mini FX futures contracts are already picking up volume which gives a great opportunity for those starting out with smaller accounts to participate in a central, regulated market.

 

Oh and well done getting to where you are

[email 10]

Aaron,

 

Congratulations and many returns to you my friend, finally someone that saw the light and took the time to do the smart thing. I am in similar transition myself.

I cannot believe how many thousands of posts I see in forums I belong to of people crying about there Fx broker and how they are so frustrated.

 

If everyone took all that energy and did what you did Aaron they would be mile ahead of the game in the long run.

 

Many thanks for sharing experience,

email

[Sledge 13]

Aaron,

 

Congratulations and many returns to you my friend, finally someone that saw the light and took the time to do the smart thing. I am in similar transition myself.

I cannot believe how many thousands of posts I see in forums I belong to of people crying about there Fx broker and how they are so frustrated.

 

If everyone took all that energy and did what you did Aaron they would be mile ahead of the game in the long run.

 

Many thanks for sharing experience,

email

 

Thank you 'email,' I appreciate it. I have been lucky in life to have people who saw potential in me and urged me to better myself, not just in trading, but in life- and once I take their advice, I am generally happier, for it takes me a while to realize that they are trying to help me. Good luck to you in your transition as well!

 

It can be hard enough to maintain focus without having to worry about these issues. I experienced similar when I started, 'trading' CFD's in he early 90's.

 

I hear the new mini FX futures contracts are already picking up volume which gives a great opportunity for those starting out with smaller accounts to participate in a central, regulated market.

 

Oh and well done getting to where you are

 

Blowfish-

Thank you sir, it really is tough to maintain focus and still profit when you have so many issues on your plate. The entire month of April was spent fighting with the bucketshop broker- and getting no where, and demoing new futures platforms. I made a whopping $10 bucks for the entire month of April on my last trade at the bucketshop. So for an entire month- no trades really, but as one of my closest friends told me.. "Maybe this was the best thing that could have happened to you" And he is right. Inconvenient, but necessary!

 

Aaron

[MCM 10]

I made a whopping $10 bucks for the entire month of April on my last trade at the bucketshop. So for an entire month- no trades really, but as one of my closest friends told me.. "Maybe this was the best thing that could have happened to you" And he is right. Inconvenient, but necessary!

 

Aaron

 

I would agree with your friend. As they say - capital preservation is the most important aspect in trading.

By escaping these clowns - you probably saved alot of future heartache and losses. So perhaps April was a heckuva lot more profitable than just that $10!!

 

Regards

[Sledge 13]

I would agree with your friend. As they say - capital preservation is the most important aspect in trading. By escaping these clowns - you probably saved alot of future heartache and losses. So perhaps April was a heckuva lot more profitable than just that $10!!

 

Regards

 

I could not have said it better myself! Trading is hard enough. When saddled with the extra challenge of running uphill to profit with an unlevel playing field makes it even tougher. Not only are you utilizing your own skill in a tough market jungle, but to have to dodge your broker trying to shoot poison laced darts at you in the process is an uncomfortable feeling. This indeed was the best decision for the long run. And I hate to keep gushing on my broker- but he made me feel comfortable, I eased into it like a comfy chair.

 

I see it like this:

My Forex broker felt, inhuman, cold, and sterile. They took my money and funded the account. When I had questions I felt like I was all alone. Many times I was given No response to questions or had emails returned to me from no one in particular-no standard contact. When problems arose-- NO ONE would sign their name to an email, no one would have the stones to give me their name. I called them after I put in my complaint and had not heard a thing, when someone answered the phone.. he never gave me his name. When I kindly asked the status on my complaint he barked back "How long ago did you send the email?" I said "Two days ago" He retorted "Well its being looked at- expect to hear something within 24-48 hours" I got a generic, B.S., unsigned, email 3 days later.

 

Now lets look at my futures broker. I asked him question after question almost daily (How does this work? How do I do that? I'm having trouble with this.. can you help?) etc. And do you know that this guy would respond to an email at all hours of the day or night. I remember sending an email thinking that I hope to get a response the next day. At 10:29 PM EST via Blackberry he answered the question. I told him I was impressed. Time after time, responsive, helpful and courteous. Hmm imagine that! When I finally felt comfortable to trade live again via utilizing their demo platform.. I never hesitated for a second to wire the funds. I feel like I found a trading partner, so to speak, and someone who is looking out for my best interest. Feels great. I'm 1000% happier in 1+ month, than I was in years at the other place!

Aaron

[brownsfan019 17]

Good to hear Aaron! This is the very reason I have kept my trading on the regulated futures markets. Just cleaner and easier that way w/o thinking... is my broker going to run my stop to get me out or whatever other games those guys can play.

 

Ideally all the FX based futures contracts at the CME will have the volume to support daytrading. I personally focus my efforts on the 6E and 6B, which seem to move good during the 8am-Noon EST hours.

[programmer 10]

Couldn't agree more.

Great post!

[Sledge 13]

Good to hear Aaron! This is the very reason I have kept my trading on the regulated futures markets. Just cleaner and easier that way w/o thinking... is my broker going to run my stop to get me out or whatever other games those guys can play.

 

Ideally all the FX based futures contracts at the CME will have the volume to support daytrading. I personally focus my efforts on the 6E and 6B, which seem to move good during the 8am-Noon EST hours.

 

Bf-

Thanks, I too am focusing on the 6B and 6E, but starting with the 6B, until I really get a firm grasp on it. I have had a couple days where I have had some losses, this puppy moves in a very choppy style, sort of like trading Tokyo. But I'm working to get acclimated!

 

I WISH I would have taken JJ's advice a LONG time ago! That was one of the main reasons I wanted to post the experience. I wasted a couple years of my trading life inside the bucket. I feel like I'm starting over, having to learn new ebb and flow, new platform, new charting packages etc. If I would have just started here- I'd be further ahead.

Aaron

[brownsfan019 17]

Aaron - I think you'll find that the 6B and 6E can provide 1-2 good moves during the hours of 8am-1030amEST. The ideal position being to get in on the move and out before it gets exhausted, but there is usually a move or two to catch then.

 

After 11am or so, the volume can drop off and the movements can get smaller. It's tradable, but not what I am after.

 

So just keep that in mind when looking at charts. If anything, I'd suggest trading a little earlier 7am or so till about 1030am.

[Sledge 13]

Bf-

Thanks for the tips man. I appreciate that! I think I'm hunting what you are- I'm not looking to trade every tick, just some nice "Grade-A" set-ups per day would be great!

Aaron

[metalhead 10]

how are the micro FX contracts? Last time I checked they had almost no volume BUT they might have some potential. And at 1/10 the value of the normal FX contracts, you could afford to make a mistake or two.

 

Has anyone traded them? Or are they only being used by bigwigs to arb against the normal FX contracts?

[Sledge 13]

I don't trade the micro's but my broker had said that, right now, liquidity is thin. Maybe if they morph into things later, they would be viable for a newer trader as an alternative to the spot market for sure!

[VTK 10]

Just mine two cents...

This fact that Spot FX is so unregulated is big problem IMHO.

I have found that there are just two brokers of whole bunch whit which i am comfortable to open an account.Both claim that they have kind of ECN technology to process orders.(IB and MBT)

For now i will trade Spot but have started to learn basics about FX futures and e-minis.Hope that this switch will not be too hard...I am aware that mine strategy is going to be same,but i will have to understand product and market that i am trading very well before i put mine money on line.

Regards,

VTK

[Ingot54 13]

I don't trade the micro's but my broker had said that, right now, liquidity is thin. Maybe if they morph into things later, they would be viable for a newer trader as an alternative to the spot market for sure!

 

I am wondering how the story ends ... the transition has been made ...

 

Has volume picked up in the FX mini's/micro's?

 

Tell me: how is the journey is going?

 

What useful things have been picked up with experience?

 

Do you still trade good setups, or occasionally scalp the tick?

 

This is a good topic ... thank you for the thread.

[BlowFish 10]

Can't tell you how the story ends but can tell you when it ends. Seems like (s)he stoped posting shortly after starting this thread 2 years ago.

[Ingot54 13]

Can't tell you how the story ends but can tell you when it ends. Seems like (s)he stopped posting shortly after starting this thread 2 years ago.

 

Thanks BlowFish

 

Sledge was online at about 7.30am Tuesday morning my time (GMT +10)

 

I hope Sledge continues to post - there is always something learn, something to share.

[BlowFish 10]

Thanks BlowFish

 

Sledge was online at about 7.30am Tuesday morning my time (GMT +10)

 

I hope Sledge continues to post - there is always something learn, something to share.

 

Ahh I just looked at his last post date time, my bad. I guess he decided just to become a lurker. Still hope he is doing well.

[TimRacette 11]

From a longer time frame perspective spot is definitely the way to go as you don't have any sort of rollover to deal with as you do with currency futures. From an intraday and shorter time frame perspective trading the currency futures such as the Euro 6E is much more lucrative due to the single pip spread and extremely fast fills.

[MJFinnegan87 10]

Thank you to the original poster! Your story is very similar to mine. Things were going great, making a great return until one day, my spot forex broker (MB Trading) refused to close my orders with great liquidity available during NY session. Left to go to a different futures broker and never looked back. Only difference is, now I trade GC gold contracts.