Which Instrument?

[ReynaFan 10]

Hi All,

 

I'm currently trading options on equities, but I'm interested in learning more about futures. I like leverage, and I like price action being tied more directly to observable puzzle pieces. (It seems much clearer to trade oil as opposed to exxon).

 

What future do you prefer and why?

I'm considering volatility, number of variables/puzzle pieces, what else should I consider?

 

Thanks,

David

[Tams 20]

Hi All,

 

I'm currently trading options on equities, but I'm interested in learning more about futures. I like leverage, and I like price action being tied more directly to observable puzzle pieces. (It seems much clearer to trade oil as opposed to exxon).

 

What future do you prefer and why?

I'm considering volatility, number of variables/puzzle pieces, what else should I consider?

 

Thanks,

David

 

I would discourage you to proceed...

 

on a psychological/conceptual/mental/mechanical perspective,

options is at one end of the trading spectrum, and trading futures is at the extreme opposite end of the spectrum.

 

Why ruin a good life?

[steve46 12]

From my unconsciously competent point of view, it seems clear that the most significant advantages lie with the S&P futures contract....

The futures contract offers good liquidity, substantial volatility, and tax benefits above and beyond that for Equities or Bonds...

The downside for amateurs is that this is a very competitive market to trade, one that is dominated by professionals, so the odds of success are not good...and because a significant amount of activity is initiated by automated execution, amateurs usually don't fare very well.

If however, one takes a disciplined approach and is willing to take the time to learn, I would think you could develop a systematic approach that offers a good mathematical edge within say 12 months....At that point, if you are a person possessed of the appropriate education, talent, and have sufficient capital, you might be able to execute and maintain adequate risk management within say another 6 months. Over the next year (hypothetically speaking) random chance would influence your result for the first several months, and then IF you can maintain discipine (take all the trades and hold long enough for your edge to kick in) you would probably see a profit. To give an example, in my own studies (using multiple monte carlo tests) for the conditions put forth, I would forecast a 23% chance of ruin for a person running a $20,000 account in that fashion. On the profit side your return would vary proportionate to your tolerance for risk, your ability to be aggressive on entries and (of course) market conditions during your "live" trading period.

To me it is clear why Tams encourages others to go slowly....because the challenges are substantial and most amateurs fail, either because they are not prepared or are so poorly prepared that random chance takes them out of the game right away...

 

Edit

 

By the way Tams...a lot of the "quality of life" issues relative to trading have to do with stress tolerance....now that I am on the other side of the fence so to speak I can say that a person learning to trade Futures....may indeed experience trading and the trading environment as stressful, perhaps even very stressful...(it is after all stressful to lose money, and even more so if you don't know now to "stop the bleeding") however once you find a way to make this work it is another story entirely...frankly at this point in my life the primary stressor is whether I can hit my profit targets early enough to go to lunch and whether my Internet connection will be stable...I wish everyone the best of luck

Edited April 9, 2011 by steve46

[MightyMouse 12]

Hi All,

 

I'm currently trading options on equities, but I'm interested in learning more about futures. I like leverage, and I like price action being tied more directly to observable puzzle pieces. (It seems much clearer to trade oil as opposed to exxon).

 

What future do you prefer and why?

I'm considering volatility, number of variables/puzzle pieces, what else should I consider?

 

Thanks,

David

 

You could always stick to options and create synthetic futures contract if you are feeling frisky and want add risk to the mix and reduce the cost of time.

[MightyMouse 12]

From my unconsciously competent point of view, it seems clear that the most significant advantages lie with the S&P futures contract....

The futures contract offers good liquidity, substantial volatility, and tax benefits above and beyond that for Equities or Bonds...

The downside for amateurs is that this is a very competitive market to trade, one that is dominated by professionals, so the odds of success are not good...and because a significant amount of activity is initiated by automated execution, amateurs usually don't fare very well.

If however, one takes a disciplined approach and is willing to take the time to learn, I would think you could develop a systematic approach that offers a good mathematical edge within say 12 months....At that point, if you are a person possessed of the appropriate education, talent, and have sufficient capital, you might be able to execute and maintain adequate risk management within say another 6 months. Over the next year (hypothetically speaking) random chance would influence your result for the first several months, and then IF you can maintain discipine (take all the trades and hold long enough for your edge to kick in) you would probably see a profit. To give an example, in my own studies (using multiple monte carlo tests) for the conditions put forth, I would forecast a 23% chance of ruin for a person running a $20,000 account in that fashion. On the profit side your return would vary proportionate to your tolerance for risk, your ability to be aggressive on entries and (of course) market conditions during your "live" trading period.

To me it is clear why Tams encourages others to go slowly....because the challenges are substantial and most amateurs fail, either because they are not prepared or are so poorly prepared that random chance takes them out of the game right away...

 

Edit

 

By the way Tams...a lot of the "quality of life" issues relative to trading have to do with stress tolerance....now that I am on the other side of the fence so to speak I can say that a person learning to trade Futures....may indeed experience trading and the trading environment as stressful, perhaps even very stressful...(it is after all stressful to lose money, and even more so if you don't know now to "stop the bleeding") however once you find a way to make this work it is another story entirely...frankly at this point in my life the primary stressor is whether I can hit my profit targets early enough to go to lunch and whether my Internet connection will be stable...I wish everyone the best of luck

 

Steve,

 

You should ask your institutional employer to give you a better connection. Gee I hope he's not making you use wireless. That would be conscious incompetence, but it wouldn't be your fault. Ha ha ha.

 

I love the color you add to this site.

 

MM