FUTURES is where it's at!

[Guest rwalkerx]

Here is a list I have compiled of why I personally trade futures. I posted a similar message in the stocks forum trying to bring users to see the advantages of futures. I figure I'll post it here two because this is a more relevant place.

 

+ I can day trade without needing $25,000+ in the account! I have two accounts with about 10K in them.

+ Comissions are decent $4/round turn trip on the YM

+ Tax Reasons + You don't have to list every sale on your return! (for people in the USA)

+ It's liquid enough. Market orders are instant. No weird fills

+ The spreads are never going to be huge like they can get on stocks

+ Focusing on one instrument day in and day out is less complicated and more productive

+ I can sleep in! As I dont have to wake up at 6am and scan for stocks to trade

+ Share size allocation is easier. I trade from 3 + 8 contracts depending on the setup

+ I've held a stock that plunged 20 pts due to random company event. While econ reports move the futures. It's never been THAT bad!

+ There are always shorts avilable!

+ Comissions are reasonable (I pay around $4.10/round trip)

+ No uptick rule (not that its going to be lasting too much longer)

+ The $5/tick range of the YM makes for lower slippage(ES, ER too volitale=bad slippage)

 

If you guys have any more reasons to add to this list, please reply.

[Soultrader 12]

Great post rwalkerx,

 

Let me begin by saying welcome to our forums. You'll be surprised to see that most of us here are index futures traders. I also initially started trading Nasdaq stocks but that changed instantly when I met the eminis. I havent looked back ever since.

 

The eminis are the future of intraday trading in my opinion. Do you trade the YM primarily?

[Reaver 10]

Welcome to the forums. glad to have you. Nice list by the way:D

[torero 10]

Well, one man's treasure is another's man trash. But don't diss the ER2 just cause it's volatile. Daytraders breathe and thrive on volatility and it suits me just fine. The slippage is never that bad from my experience, worse is 3 ticks when the market was just wild ie. a major surprise fed news, but most of the the time is 1 tick. But the cherry is you get the bang for the buck. But that's just me.

 

Back to the topic at hand, I agree with the list completely in every way and I'll add a few more:

 

1) Bang for the buck. You make 1-3 trades a day and can make as much as the multiple stock juggling stocktraders do.

2) Less stressful, only need to follow 3 eminis max if you so desire instead keep up with 5-10 holdings everyday.

3) Don't have to follow the indices and sectors, eminis ARE the indices. Stocktraders constantly have to follow the cues from the indices to track their positions. That means more eyes to follow all these charts.

4) Less investment in hardware and software cost. I used to have 3 PCs with 3 monitors, now only 1. Used for have 4 charting services, now 1, another as backup and it's free.

5) NO gaps to deal with, market always open. Terrorists attacked London underground early hours of the morning, if you wanted to, could be out in minutes and not wait until open and dump the stocks along with panicking crowd.

6) NO market makers, no games.

7) NO routing decisions to make: "ECN? ARCA? REDBOOK????? Oh man, could have gotten a better fill with ARCA!" Geez, Louise.

 

I'm sure there are more intangibles I haven't mentioned but it certainly has made my trading and personal life much easier to live.

[Guest rwalkerx]

very true.. thanks for the input.. i have a few friends who are day trading stocks. im trying to convert um

[torero 10]

I think they can only this for so long. After a year, I got burned out and wasn't fun anymore. I had to find a way to work less and make more. Eminis was the answer. Took a while to get adjusted but work hard and persistence paid off.

[Guest rwalkerx]

agree. I've had my first profitable year and its been trading the YM every single day

[TinGull 10]

Nice work rwalkerx! Love to see you in the chatroom in the mornings when we trade. Most trade the YM...but there are a couple who brave that tornado that is ER2

[Wallcrawler 10]

Hey guys, As my first post here have to say that it is refreshing to finally find some fellow traders that trade the YM... I traded options (and still do here and there) for years. Thanx for for a great forum thus far... WC

[walterw 10]

rwalk : good list indeed.... I do trade er2 as my principal and I have to add that slippage its not a problem on certain conditions... as an anticipated trader (non xtreme confirmed) I get in not on the great turbulence that will normally give you slippage... if you need to much technical confirmation most probably you will get trigered with the mass and you will experiment some slipagge.... never the less eminis is probably one off the best bussiness on the world if you get to master it.... cheers Walter.

[Robert2617 10]

Q: What are the advantages to trading futures instead of stocks or other instruments?

A: There are many very compelling reasons why most serious traders prefer to trade futures YM to stocks. Here are a few of those reasons. If you wish to know more information about a specific point, feel free to e-mail us.

 

 

Commissions are very reasonable $4/round turn trip on the YM at most brokers

 

Anyone can day trade without needing $25,000+ in the account! A lot of our users have modest accounts

 

Taxes are less complicated. Your not required list every sale on your tax return! (US)

Market liquidity Futures are always liquid enough. Market orders are instant. No strange fills do jumps

 

The spreads are never going to be huge like they can get on stocks, decreasing causing slippage

 

Focusing on one instrument day in and day out is less complicated and more productive Most everyone who is successful in the trading business started out by mastering one particular market. We'd rather be the master of one market then a jack of all trades. Each individual stock has it's own characteristics of price movement and it's character can change from day to day, making it either a good or bad choice to trade at any given time.

 

Freedom. You don't need to wake up 3 hours before the market opens to scan for stocks or opportunities to trade

Share size allocation is easier.

 

RISK: We've seen stocks that plunged 20 points due to random company event. While global economy reports move the futures from time to time, it's never as unpredictable as a single stock can be.

There are always shorts available and no up tick rule you must abide by

 

The $5/tick range of the YM e-mini futures contract makes for lower slippage

 

Bang for the buck. A futures trading making 1 - 3 trades a day and can make as much as multiple stock juggling traders.

Less stressful. Concentrating on one liquid market each day will improve your focus and allow you to work on your setups. Keeping track of 5 - 10 securities can be cumbersome.

 

Market direction. You don't have to follow systems that mirror the indices/ sectors, as eminis ARE the indices. Stock traders constantly have to follow the cues from the indices to track their positions. That means more eyes to follow all these charts.

Less investment in hardware and software cost. I used to have 3 PCs with 3 monitors, now only 1. Used for have 4 charting services, now 1, another as backup and it's free.

Very infrequent surprise gaps to deal with The futures markets are virtually always open. The e-minis trade 23 hours a day with a pause between 16:15 - 16:45 EDT. When terrorists attacked the London underground in the early hours of the morning, if you wanted to, you could get out in minutes and not have waited until the market opens to dump the stocks along with panicking crowd.

NO market makers playing games with the particular stock

NO routing decisions to make: " ECN? ARCA? REDBOOK????? Oh man, could have gotten a better fill with ARCA! "

Once I read this thread, I said to myself "I've heard these points before."

5th Q&A from the bottom. Almost verbatim.

FAQ: Puretick.com YM Emini Day trading Questions and Answers

PureTick.Com :: View topic - What are E-Mini Futures and Why are they better then stocks?

I think these are valid points but I get a little spooked when everybody starts to say the same thing, exactly.

[ezduzzit 10]

No need to feel spooked Robert. Most often this is just people parroting back the reasons they were fed by various institutions and brokers with a vested interest in promoting certain trading instruments.

 

Regardless of the so-called advantages of one class of trading instruments over another, you need to simply trade what you decide is comfortable for you and that point cannot be over-emphasized. I assure you that one man's meat is still another man's potatoes just as the old cliche says (not to be sexist, that goes for the women out there too heh, heh.)

 

Some who have traded stocks grew tired of all the scanning and research, etc. and found the e-mini futures, which require far less of that type of activity, to be a blessing. Others have traded e-mini futures and found them too highly correlated to one another (for instance, when one is not moving it is often the case the others are not moving very well either, though that correlation only holds true for about 80% of the time or thereabouts.)

 

They then decide they want the freedom to go "where the action is" by sorting for better opportunities in a vast sea of individual stocks, etc. It kind of follows along the lines of the hot dog vendor who always sets up shop at one area of the biggest park in the city (depending on paying customers to hopefully come by regularly), versus the hot dog vendor who is smart enough to position his cart wherever events may be taking place in the park on any particular day.

 

The time to get a little spooked is when almost everyone is persuaded about the direction the market is going to take. You wil find, if you are in this business long enough, that widespread direction bias is often a clue to consider taking the other side or at least be aware of the opportunity that lies in that opposing direction. The big money professionals know exactly where the retail investor sentiment and bias on direction lies, in fact they often are at least partly responsible for having brought those less sophisticated parties to those beliefs. They absolutely delight in starting out a day in the anticipated direction for a few minutes, drawing in all the hopefuls and convincing them of the accuracy of their views, only to quickly snatch it all away by forcing the tide quickly as possible in the opposite direction.

 

Anyway, you seem to be doing a good job of taking your own counsel and making up your own mind about things and I heartily encourage you to continue on in that very same manner.

 

Happy Trading

[walterw 10]

ezduzzit : at least myself, I wasnt promoted by any broker or other people to trade eminis.... its the daily wide range, margin, and money I make that keeps me trading that, I dont think there is any Hype to eminis as the real results you can experiment... now I dont think everybody is suited to trade this... so its ok if stocks or forex or other things fits other traders personality, and the day eminis dont give me this results, for shure I will be trading other thing... cheers Walter.

[GCB 10]

Regarding ease of usage and the functionality and practicality of trading, futures win on just about every checkpoint.

 

The only advantage that stocks have is that they sometimes trend in a nice smooth way that you just don't often see in futures. But the catch is you have to find that stock that is trending among hundreds of other stocks. Also, you have to put up with their sometimes very bizzare intra day volatility.

[Robert2617 10]

One question I have about e-mini's is about the contract quarters. I understand that on the second thursday of the fourth month is the switch over day or something like that but should I worry about that? And using TradeStation if I were to start trading say the YM do I need to use a certain symbol and switch symbols like YM-Z for one quarter contract and YM-H for the next or do I just enter @YM and TS will switch it for me?

 

And a question, does 1 contract equal to $2,200 or 1 tick is equal to $5 and how all that works? How the leverage works? In a nutshell.

[walterw 10]

Robert: depending on the broker you trade they will ask you a "margin" per contract... (real front money in your acct), some brokers go from 500 to 2000 on eminis per contract... once you long/short a contract you have the minimum fluctuation "tick" that on the case of ym is $5 on er is $10 and lets say on ES its $12.5 so per example if you put a margin of 500 and you got a 7 tick move on you favor on er, you got 70 bucks minus comision (let say 3.5 round trip) 66.5 profit against 500 that is 13.3% profit... now that can happen oposite if you got stopped -7 ticks... on eminis you have "ranges"... er is the most volatile " high range" and es is the most "low range" emini... wich means : how much potential move you can expect on the future... this is a High risk, high potencial bussiness... you have to be very good at it or in a week go broke... cheers Walter.

[Robert2617 10]

Do you know what the margin is for TS on one YM contract? I'm just trying to figure out how many in/out's I could potentially do in any three day period. I've looked (and am still looking) on the TS site but can't seem to find the answer.

[Soultrader 12]

Here you go Robert: http://www.tradestation.com/Futures_Margin/report.pdf

[Robert2617 10]

ST, So if I read that right, every trade I do would count against my acct $2,438 as far as funds used. It takes 3 days for funds to settle so if a person only had $5,000 in their account. They could buy and sell 2 contracts ($2,438 + $2,438 = $4,876) in one day and then they would have to wait three days before they would have cleared funds to trade with again. Not to mention any gain or loss. Is this correct?

[Soultrader 12]

Robert, the $2,438 simply means that is the amount you need in your account to trade 1 contract. So a $5000 account would be able to trade 2 contracts. (which I highly do not recommend) For intraday trades, you can simply trade 2 contracts all day long as long as your account never dips below $4876 ($2438 + $2438). The maintence margin is the amount you need in your account minimum before your broker will give you a call and say please deposit more funds.

[walterw 10]

Robert, no the 3 days settlement no... once you are flat you are ready to open a new position... I make about 4 to 5 trades on one session with the same money... some scalpers even do up to 20 trades on one session... thought they mostly overtrade...

[Robert2617 10]

The reason I mentioned this is because over at ScotTrade this policy is in effect.

Credit balances in a cash account may be used for purchases.

 

 

 

*

 

If the account has settled funds, there are no restrictions as to what may be purchased.

*

 

If the credit balance is a result of an unsettled sale of securities, certain restrictions may apply.

*

 

Unsettled proceeds from existing long positions can be used to purchase additional securities as long as the new purchase is not sold prior to the settlement date of the original sale that generated the proceeds used to finance the purchase.

*

 

If it is sold prior to the settlement date of the funding sale without additional funds being deposited, it will be considered a free ride under Federal Reserve Regulation T.

 

 

 

For example, if you sell a security on Monday the 1st, you can use the proceeds to make a purchase prior to the settlement date of Thursday the 4th.

 

 

 

*

 

However, if you make a purchase before Thursday the 4th then sell that new position before the settlement of Monday's sale, you will then be required to deposit funds to pay for the purchase.

*

 

If you purchase on Thursday the 4th, you may place a sell at anytime you wish, since the purchase was made with settled funds.

 

 

 

Mutual Funds and Fixed Income Securities can only be purchased with existing or settled funds.

At Scot I had a what they call a "Cash Account" and that rule applied. At TS I have a margin acct so I'm just not sure that it applies. Now if you have mega bucks in your acct it is not an issue but if you have just enough to get by, it would apply. That is what I have to figure out. Does that rule apply to me at TS?

 

I own my own business and am not going to give that up so I only want to make a few trades in the morning every other day or so but I would like to be able to make more than the 3.5 trades allowed or be classified as a pattern day trader. I don't have another $25,000 to drop in my trading account right now. I know number of trades does not apply with e-mini's but the unsettled funds rule might. That's the nut.

[Soultrader 12]

There is no pattern day trading rule for eminis. You can open a TS futures account with the account minimum at $5,000 and day trade all you want. Also do you plan to day trade or hold overnight positions?

[Robert2617 10]

I want to be in and out. No overnight if I can help it. I know about the "no pattern day trader rules apply" for e-mini's but does that mean that the "Securities Rule T" not apply as well. No three days to have settled funds? With stocks, that Securities rule does apply for sure.

[Soultrader 12]

Nope... doesnt apply to futures. Everything gets calculated at the end of the day. So lets say your account goes below $2438. However, by the close you have profited enough to raise it above $2500. Since futures are calculated at the end of day... you are still good to go.