DAX Future (FDAX) Day Trading

[shortbleu 10]

Hi all,

 

 

This is my first post on this website, I read a few threads here and I really like Traders Laboratory Forums.

 

 

Just to introduce myself:

 

I am not new to Equity Index Futures trading (FCE CAC40) that I've been trading as a long term investor, holding positions from a few months to over a year and rolling the contracts every month when they expire.

 

 

I am quite new to day trading however, I worked for a prop firm 5 years ago for just about 3 months and I left because I was "forced" to scalp financial futures like bobl, bund, and eurodollar on a tick by tick basis (very short term scalping) and I hated it. Just to put it right, I am not and will never be a short term scalper looking for a tick target beccause 1) I don't have the skills and aptitude to do this, and 2) I don't have any interest in this kind of extremely short term day trading.

 

 

Basicly, I can't trade financial futures in a trading range as it does not fit my personnality. I am a trend follower and I like equity index futures because they are less likely to trade in a range, they are more volatile and large moves can easily allow a single trade to capture between 5 points (10 ticks) and 50 points (100 ticks).

 

 

I am very new to equity index futures day trading, I started 3 days ago on the future dax with only 1 lot at a time and I have a few questions for you.

 

 

1) Am I trading the correct equity index future (Dax) or should I trade the CAC40?

 

 

Although I have a better knowledge of the CAC 40 than the DAX, I thought the Dax would be better for me because his movements are a bit larger than the CAC40, eg. when the CAC40 takes 5 points, the dax might take 6 points, so i thought the larger moves would suit well my approach. Also, I thought about the ratio commission / profit which is I believe better for the Dax as the Dax has a larger nominal. My reasoning is has follow:

 

 

If it costs me EUR 4 round turn and I make 5 points on CAC40, the ratio commission / profit will be: 4/(5*10)= 0.08

 

Comparing with Dax, if I make say 5 points on Dax (could be 6 points), the ratio will be 4/(5*25)=0.032. Therefore my conclusion is the Dax is lot more cost efficient because the nominal is a lot larger: 4700pts *25eur = 117500 eur for dax against 3200pts*10eur = 32000eur.

 

 

I'd like to know if other people have the same reasoning and if you look at profit / commission ratio in the same way? Can you please confirm the Dax will suit my trading style better than the CAC40?

 

 

 

 

2) what margin should I use to day trade the DAX?

 

 

The value of the Dax at the moment is 120,000eur more or less.

 

At the moment, I use a capital of 30,000eur for one lot (leverage 4). Do you think this is conservative enough or too risky? From your experience, is it likely to blow out the capital in a few weeks / months with this sort of leverage? I was thinking the capital to trade 1 lot should be anywhere betwen 24,000 eur and 60,000 eur (somewhere between leverage 2 and 5). I can't imagine myself using a leverage 5 as I really want to preserve the capital.

 

Can you tell me your thoughts, what sort of leverage are being used by profitable trend following day traders who have been successful over at least 2/3 years without blowing their capital?

 

 

I read other threads and read that other day traders were complaning about brokers asking 5,000 eur for intraday margin and they were turning to brokers asking 2,000 eur intraday margin or less for DAX. From my perspective, this is madness as I believe there is a potential to lose 80 points (2,000 eur) in a few seconds on a single trade if the market goes mad on news and a gap / mini krack can happen and people who use 2,000 eur or so would blow out their capital straight away. Am I just wrong or is there something I don't understand? I am asking because I've read threads on other forums where people ask for very low margin and high leverage. I just don't get it.

 

 

Many thanks for your advices.

[monad 10]

Dax indeed does trend well, however it is pretty volatile and if you read another thread on the subject here, the volume on the DOM i.e orders on the offer and bid are not great (20-30 average) and overall the market moves can be pretty volatile.

 

You would be better off with Eurostoxx where the liquidity on the order book is very good, behaves smoothly like ESmini and though the point move may be somewhat less than Dax, you can always increase size to compensate for that

[shortbleu 10]

Thanks Monad for the quick reply. I am aware of the volume on the DOM, it's rarely over 25 lots per price at one time but this is really not an issue for me as I am trading with only 1 lot. I am in the learning process and do not expect to ever trade lots of cars by clip.

If I am doing well with 1 lot, then I will increase the size progressively. I think one can earn good money (over 1,000 eur a day on average) trading around 5 lots per clip.

 

My daily average target would be to make 0.2% a day with a DAX at 4700 pts, therefore 4700*.002= 9.5 points clean after commission = 237 eur per day per contract on average. Do you think this is achievable?

 

What about the margin question I asked above, any advice on this please?

Many thanks

[shortbleu 10]

also, what about my profit / commission reasonning, does it make any sense?

[bathrobe 10]

I agree with Monad, the Eurostoxx contract has less of the hyper-volatility than the DAX contract and many of the setups used to trade the ES work on the Eurostoxx50 also.

[shortbleu 10]

Thanks, I'll do some research on the Eurostoxx50 also then?

What about the other questions?:helloooo:

[uexkuell 10]

Hi all,

I am quite new to day trading however, I worked for a prop firm 5 years ago for just about 3 months and I left because I was "forced" to scalp financial futures like bobl, bund, and eurodollar on a tick by tick basis (very short term scalping) and I hated it. Just to put it right, I am not and will never be a short term scalper looking for a tick target beccause 1) I don't have the skills and aptitude to do this, and 2) I don't have any interest in this kind of extremely short term day trading.

 

Ok, sounds as if you found your personal style and what you do not want, which is very important.

 

 

 

Basicly, I can't trade financial futures in a trading range as it does not fit my personnality. I am a trend follower and I like equity index futures because they are less likely to trade in a range, they are more volatile and large moves can easily allow a single trade to capture between 5 points (10 ticks) and 50 points (100 ticks).

 

This is unfortunately incompatible with your first statement cited above:

If you prepare yourself to go for 5 points this means, that you are heading towards short term daytrading.

In these days DAX makes sometimes 200 points a day easily.

 

 

If it costs me EUR 4 round turn and I make 5 points on CAC40, the ratio commission / profit will be: 4/(5*10)= 0.08

 

Once again incompatible with your opening statement.

If you go for (large) interday moves commissions will only be peanuts for you.

There are other things that have higher priority.

 

 

Alltogether:

DAX is a wild beast that will rip you apart in seconds if you do not know what you do.

Therefore it is essential to know what kind of trading style suits you well and where you are profitable.

 

If you don't have quite deep pockets DAX is nowadays only for short term trading (seconds - 3 hours) and you have to be ready to take actions immediately.

 

Otherwise (as said above) ESTX is perhaps more suitable.

[bathrobe 10]

What about the other questions?:helloooo:

 

I trade one ES contract for every 2,500 USD in my account. In the past I have leveraged up very 1 per $500, but only if I feel strongly about the position.

 

Your personal risk assessment must be made by you, not an anonymous poster in a chat room. Otherwise you could talk to a registered financial rep.

[shortbleu 10]

Hi uexkuell,

Your answers are very useful.

I was talking about 5 points (10 ticks) in a slow market when nothing happens, I find it still better that doing tick by tick on BOBL.

If the marker moves well, and if can surfe the wave, the game would be to take upto 100 ticks.

 

I will definitely look into FESX. I had a look on the Eurex website and it quotes in full points (no half point) worth 10eur / point, so one tick = 1 point.

So I am wondering if the trading range would be big enough for my trading style? At least, since the nominal of this instrument is smaller than FDAX or CAC40 there is less money to loose, which can be good for a beginner in the learning period and my pockets are not full of money to throw away (only have 30,000 eur to play with). I've just read a post on FESX saying it moves a bit like the BUND these days and I know the bund does not suit me because it's more for trading range scalpers and does not move much. is this affirmation accurate, what do you think?

 

What about the margin / leverage question?

 

Many thanks

[uexkuell 10]

Hi shortbleu,

 

thank you for appreciating my words.

 

So I am wondering if the trading range would be big enough for my trading style? At least, since the nominal of this instrument is smaller than FDAX or CAC40 there is less money to loose, which can be good for a beginner in the learning period and my pockets are not full of money to throw away (only have 30,000 eur to play with).

 

Extremely helpful to know where one is standing.

 

If you never traded some of these (DAX, ESTX) before live I strongly recommend papertrading them until you get profitable at least for a month pretty much every day (if intraday-trading which you seem to be up to).

If starting to trade right away without sufficient training unfortunately loss of precious liquidity is sure.

 

When you papertrade you can just go right for the DAX it sure is more fun than the slower-moving things. And if you succeed there nothing else is going to scare you any more.

 

After papertrading for a sufficient time-span you by yourself will exactly know, what trading style suits you best, which instrument, how much margin you need, what your odds are and many more things.

Nobody else can tell you because they don't know how you trade and how your personality is structured.

 

 

I've just read a post on FESX saying it moves a bit like the BUND these days and I know the bund does not suit me because it's more for trading range scalpers and does not move much.

 

Yes, sure, for me BUND is boring too.

 

FESX and DAX are mostly absolutely parallel. Exception are spikes that happen in the DAX sometimes and take it away from the mainstream in seconds. If you don't have yet so much liquidity and experience these can make you behave irrational.

[sep34 10]

DAX ,TF(ER2), HSI, are all very volatile markets within the relm of Equity Index Futures...therefore One really has to understand and respect The inherent nature of these markets.

Also I believe DAX is a favorit of lots of veteran traders retailer & professionals alike--so you better be good or it wont be fun.

 

As others have mentioned the Euro-stoxx 50 is a behaved Market and better suited for someone new to daytrading...but it all really depends on your Strategy and the effort you put into backtesting some data to see how you would have done on any of these instruments...thats how you really will get your answer and thats how you can make the optimal choice of which to trade.

For example I need volatility for my trading approach so the DAX would be better suited in comparison to Eurostxx 50. I can achieve positive outcome on both but I would make more on the DAX for the same time spent.

 

Regarding Margin: I hate to comment on this because it really depends on your Strategies and your personality. Do some searches on your favorit Forums on the subject Money management or margin to get some ideas of what considerations to make.

[monad 10]

also, what about my profit / commission reasonning, does it make any sense?

 

Besides profit/commission, the other crucial issue is the timeframe you wish to focus on and the risk factor i.e stop loss and slippage. Dax being volatile, you are likely to get more slippage and get stopped out more often unless you employ wider stops in which can you take on board more risk.

 

The average range on Eurostoxx is approx 70 compared to 140 on Dax. Hence there are enough trading opportunities on Eurostoxx. Don't be fooled by the wide range of Dax. It appears enticing but can deplete your account fast.

 

Finally there is no substitue for experience. why not try out a simulated platform but remember on these, you may not experience slippage etc if you enter orders on Dax for example -different from live platforms.

[TraderJean 10]

I tend to agree with the group here on this, but with one exception. It's not the volatility of a market that causes problems. Volatility is good it's what we as traders want - a market that will move giving us an opportunity to profit from the movement. What I avoid is markets that are thin, or illiquid. DAX, TF, YM , due to their thinness make it extremely likely you will experience slippage when trading. Slippage is bad it is like the market stealing money from your account. My advice to you is avoid thin markets. Stick with ES, FESX.

 

As far as Margin is concerned I keep my account well capitalized and use very little day margin keeping it close to the exchange required levels. Even at $6000 for 1 ES the product is plenty leveraged. I think anyone who trades futures using extreme margins is going to end up tanking their account.

 

TraderJean

[monad 10]

Traderjean, you are right, it is not volatility per se, we want markets to move and not be dull, guess the right word would be spikey, choppy on individual bars, otherwise both Dax and Eurostoxx move in tandem with each other in the morning session and then with the ES in the afternoon session.

Slippage and being stopped out is the main problem with Dax. Last year when the prices were tumbling, there was much more vol, and less of such problems,

With Eurostoxx, the volume is consistently high like ES, hence this is not much of an issue.

[ESTRDR 10]

i agree. eurostoxx50 is pretty much comparable to es and ym, in case ym does not freak out due to some guys sweepordering thin liq

[monad 10]

18TH MAY EUROSTOXX 15MIN

 

Over 100pt move and still going, what more can we ask;)

[programmer 10]

Very strange, your initial statement totally negates the nature of the Dax, yet you wish to trade it with predefined targets? For me this is madness (No offense meant).

 

What I suggest is for you is to paper trade it for at least 6 to 12 months before even starting to day trade it.

I have the most complex systems out there for trading futures and I still get whipped many many times.

Avoid news times at all costs.

Yes 10-20k Euro is ok for 1 lot!

 

The Dax is a crazy beast, it can wipe your account in a blink.

If I were you,I would start with the Fesx for the first 6 months, than start watching the Dax if at all!

 

Also, take special note that the Dax volume is very misleading, so maybe you should try to follow some Dax stocks to get some insight into the contract .

 

Best of luck

[bathrobe 10]

Very strange, your initial statement totally negates the nature of the Dax, yet you wish to trade it with predefined targets? For me this is madness (No offense meant).

 

 

 

The Dax is a crazy beast, it can wipe your account in a blink.

If I were you,I would start with the Fesx

Also, take special note that the Dax volume is very misleading, so maybe you should try to follow some Dax stocks to get some insight into the contract .

 

Best of luck

 

I agree with the above statement. Another thing, just because you want to trade the DAX does not mean you should.

 

I originally heard the DAX being chatted up on many boards, most people sounding like pros, then I read in Trader Monthly magazine that a trader under 30 traded 250,00 contracts in a day. I was under 30! I had to get in on this action! Luckily I paper traded it first, and found quickly other instruments are better suited to my style of trading.

 

If you are still uber-excited (had to insert German word) there is a mini-DAX or there was going to be one, google it. contract out that may be better to get your feet wet with, but I still recomment the Eurostoxx50 for the European timezones.

[shortbleu 10]

Does anyone know what happened today at 13.30GMT? The Dax dropped by almost 20 points in a few seconds. I did not have any news on my economic agenda, but fortunately was not in position.

[monad 10]

Most likely a reaction to the Housing Start Report which came out in US 8,30EST, it has a tendency to do that. Similar reaction on Eurostoxx and Ftse as well

 

"Highlights

Housing starts in April fell sharply to a new record low for a series going back to 1959, largely on cutbacks in multifamily construction. Starts dropped another 12.8 percent, following an 8.5 percent decline in March. The April pace of 0.458 million units annualized was down 54.2 percent year-on-year and came in well below the market forecast for 0.540 million units. April's decrease was led by the multifamily component which plunged 46.1 percent while single-family starts edged up 2.8 percent.

 

By region, the fall in starts was led by a monthly 30.6 percent drop in the Northeast along with declines of 21.4 percent in the Midwest and 21.1 percent in the South. Starts rose in the West jumped 42.5 percent.

 

Permits also declined at the national level, falling 3.3 percent in April, after dropping 7.1 percent the month before. The April permit pace of 0.494 million units annualized was down 50.2 percent on a year-ago basis.

 

Equities should be disappointed by today's starts numbers. It appears that many have forgotten that starts are far downstream in the list of housing indicators. It should be expected that improvement in indicators such as the homebuilders housing market index or mortgage applications will take a long time to trickle down to actual new construction. This is especially the case as a spike in foreclosures is threatening to delay the sell down of housing inventories. Homebuilders clearly understand that any new construction will likely sit on the market for some time, having to compete with fire sale prices on foreclosures"

 

Talk about spikes, absolute crazy moves of 30pts on 1min on Dax compared to somewhat manageable 9-10pt moves on Eurostoxx

Edited May 19, 2009 by monad

[shortbleu 10]

Thanks Monad, great info.

Can you please let me know where I could find a useful and complete economic calendar?

Thanks v. much

Shortbleu

[Tams 20]

bloomberg

 

Bloomberg.com: Economic Calendar

[shortbleu 10]

Thanks Tams.

 

I've been looking at the DJ Eurostoxx 50 but believe it's not for me. It needs too much focus on the depth of market and the return / commission ratio does not look great as I am paying commish at retail price. But thanks for the suggestion, it was worth to have a look.

I've been trading the DAX in the morning and did well. Only problem is that I'll have to go back to work now and will not be able to trade in the mornings anymore. I can only trade from 7-7.30pm onwards London time and at that time the Dax is pretty dead until it closes at 9.00pm London time.

 

Any idea of an Equity Index Future that is tradable between 7.30pm and say 11.00pm London time? Will continue to trade Dax in the morning but only when I can, perhaps once a month or so as I've got a full time job :crap:

[rigel 10]

Interesting Shortbleu,

When you say you traded Dax in the morning, presume it was after Cash open as Dax futures open 1hr before that and vol is pretty low during the 1st hour but jumps up significantly once Dax cash opens.

 

Moreover was it on a simulation platform.

If not did you not encounter any slippage.

 

The volume on Dax is low in the evenings, however the future prices follow the US market bar by bar as is the case with Eurostoxx.

 

e.g Dax dropped 40pts after 7p.m (GMT) in line with falls on ES, Ftse also 40pts

Eurostoxx approx 20pts. and in all the 3 markets, the vol dwindles after 4.30-5pm GMT but still tradeable.

 

When the bonds close in US 8p,m GMT there are some great runs into the close on ES and the European markets all follow that. so there is no reason why you cannot trade in the evening.

[BlowFish 10]

Does anyone know what happened today at 13.30GMT? The Dax dropped by almost 20 points in a few seconds. I did not have any news on my economic agenda, but fortunately was not in position.

 

I always like the 20 down 40 up and 20 down again (to leave you where you started!) on the DAX.

 

Have you looked at the FTSE another day traders favourite, not quite as wild as the DAX but plenty of movement. Depends a lot on R:R volatility etc. etc.