Why Futures Are Better

[Gekko78 10]

Well I've sure been known to miss the point from time to time. I probably did again upon reading your take on charts producing data that is older than that on a DOM. Really? I've watched them side by side for years and never noticed any difference whatsoever.

 

What causes the chart data to be "in the past" versus DOM data? This is not to argue the point, but to understand it. Much of what I learned about trading was from asking questions.

 

Thanks

 

Maybe this will help you :

 

The DOM can show you something that no chart on earth will show you. See, with the DOM, you can actually view what just didn't happen. With the tape running unfiltered tick data, you see raw executions, or in other words, you see what just happened a millisecond ago. When you know how to use the DOM, you also see the large scalpers at work as they go about their job of suckering you and everyone else into taking the other side of their position. They want to short 20k lots, they need to find some buyers. And they're going to rely on those buyers placing stop orders - that's how they're going to profitably close their positions.

 

But here's the rub: you want to build a 20k lot position, you don't just kick a market order in there. You have to manipulate and finesse your way into the position. That manipulation is not visible on the chart - all you see on the chart are the normal fluctuations in the market. However, the manipulation is clearly visible on the DOM - if you know what to look for.

[Roger Felton 10]

I thought you were some kind of teacher? If you really have to ask this question I suggest you Google it.

 

Here :......A tick is a single trade irrespective of size. A tick chart builds each bar based on a certain number of ticks per bar. A 233 tick chart will create a new bar after every 233 trades have gone through. BOTTOM LINE IS NOTHING PRINTS ON A CHART UNTIL AFTER IT HAPPENS......Do you know of a chart the shows orders being placed 10 deep?? I thought not. Do you know of a chart the tells you how many contracts went through on that 1 trade? Not the tick , the trade. Dont you think it might be just a little bit helpful to know whether price ticked up because of a 20 lot order or a 200 lot order?? I sure would like to know....... Don't you think it would be just a little bit helpful to know how many contracts traded at the price 10 ticks above you entry if you have a 15 tick target?? I sure would like to know.........

 

Allow your mind to accept this ...... it is not rocket science. It is hard to learn but once you learn it you will never trade the same again.

 

Thanks Gekko but that didn't help any. I don't trade tick or time based charts but even if I did, I could still tell exactly where any markets current price was at any moment in time...and where it was in the past, as well. How do you backtest on a DOM? How do you see how volatile a market has been for the last two hours or last two years for that matter on a DOM?

 

How many contracts have traded from any point in my trade doesn't help me one bit. I might be 8 ticks into profit and 150 contracts are traded and I go to 10 ticks above BE. Another 150 contracts are traded and price goes to 3 ticks below BE. To me, monitoring that is just a silly exercise that does nothing to help me stay in a trade or know to get out.

 

Yes, I am a teacher but I wanted to give you the benefit of a doubt as to whether a DOM would help me. Maybe I missed something. I have studied them in great depth and, to me, they are just a distraction. But, for you they help you make the big bucks and reach your goals ( I assume). That's great. Volume, T&S, DOM's, etc. just do nothing for me but I appreciate the info.

[Gekko78 10]

Thanks Gekko but that didn't help any. I don't trade tick or time based charts but even if I did, I could still tell exactly where any markets current price was at any moment in time...and where it was in the past, as well. How do you backtest on a DOM? How do you see how volatile a market has been for the last two hours or last two years for that matter on a DOM?

 

How many contracts have traded from any point in my trade doesn't help me one bit. I might be 8 ticks into profit and 150 contracts are traded and I go to 10 ticks above BE. Another 150 contracts are traded and price goes to 3 ticks below BE. To me, monitoring that is just a silly exercise that does nothing to help me stay in a trade or know to get out.

 

Yes, I am a teacher but I wanted to give you the benefit of a doubt as to whether a DOM would help me. Maybe I missed something. I have studied them in great depth and, to me, they are just a distraction. But, for you they help you make the big bucks and reach your goals ( I assume). That's great. Volume, T&S, DOM's, etc. just do nothing for me but I appreciate the info.

 

I am a scalper , why would I care about 2 years ago???? 2 hrs ...thats easy I see where the market was ALL DAY . My platform calculates contracts all day at every price.

 

Its fine ....you obviously do not get it. Your argument is flawed but I am done talking about it. If you actually take the time to learn it ....you would understand.

 

Good day to you sir.

[Roger Felton 10]

Maybe this will help you :

 

The DOM can show you something that no chart on earth will show you. See, with the DOM, you can actually view what just didn't happen. With the tape running unfiltered tick data, you see raw executions, or in other words, you see what just happened a millisecond ago. When you know how to use the DOM, you also see the large scalpers at work as they go about their job of suckering you and everyone else into taking the other side of their position. They want to short 20k lots, they need to find some buyers. And they're going to rely on those buyers placing stop orders - that's how they're going to profitably close their positions.

 

But here's the rub: you want to build a 20k lot position, you don't just kick a market order in there. You have to manipulate and finesse your way into the position. That manipulation is not visible on the chart - all you see on the chart are the normal fluctuations in the market. However, the manipulation is clearly visible on the DOM - if you know what to look for.

 

That sounds great but just too complicated for me. This is assuming that there are a bunch of ignorant traders trying to make a buck and there is this one nasty demon dude out to snooker them. It just doesn't happen that way...at least not in the markets I trade. I can trade 5 to 10 contracts and take 10 to 30 ticks (avg) per trade and, even with the occasional loser, I can make all the profit I want and my exposure in the market is minimal. I'm done trading usually before breakfast.

 

You have a terrific system for you just as I do for me. Keep up the great trading my friend.

[Gekko78 10]

That sounds great but just too complicated for me. This is assuming that there are a bunch of ignorant traders trying to make a buck and there is this one nasty demon dude out to snooker them. It just doesn't happen that way...at least not in the markets I trade. I can trade 5 to 10 contracts and take 10 to 30 ticks (avg) per trade and, even with the occasional loser, I can make all the profit I want and my exposure in the market is minimal. I'm done trading usually before breakfast.

 

You have a terrific system for you just as I do for me. Keep up the great trading my friend.

 

This is assuming that there are a bunch of ignorant traders trying to make a buck and there is this one nasty demon dude out to snooker them. It just doesn't happen that way...at least not in the markets I trade.

 

Sorry but this IS how the markets work. If you watched the DOM you would see that. Except its not just one demon trader its many.

[Roger Felton 10]

I am a scalper , why would I care about 2 years ago???? 2 hrs ...thats easy I see where the market was ALL DAY . My platform calculates contracts all day at every price.

 

Its fine ....you obviously do not get it. Your argument is flawed but I am done talking about it. If you actually take the time to learn it ....you would understand.

 

Good day to you sir.

 

You should not get upset just because what you do doesn't appeal to someone else. How I trade works better for me than I ever thought possible when I first began trading. I don't have to watch a bunch of constantly changing numbers on the ladder and try to figure out what the big boys are up to...all that subjective analysis stuff. I just find strong market entry points, get in, take my profit and go on to to the next trade. Why would I want to change that?

 

What you do works terrific for you and you'd be nuts to go do something else. So let's just congratulate each other, keep making money and stay friends, ok.

Edited March 2, 2013 by Roger Felton

[Gekko78 10]

You should not get upset just because what you do doesn't appeal to someone else. How I trade works better for me than I ever thought possible when I first began trading. Why would I want to change that? What you do works terrific for you and you'd be nuts to go do something else. So let's just congratulate each other, keep making money and stay friends, ok.

 

Not upset...just tired of trying explain. Do not want you to change. Wanted you to understand.

 

Watch a real DOM , not Ninja Trader crap . A real one and you will see what I am talking about.

[Roger Felton 10]

Not upset...just tired of trying explain. Do not want you to change. Wanted you to understand.

 

Watch a real DOM , not Ninja Trader crap . A real one and you will see what I am talking about.

 

Thanks Gekko. You're a good knowledgable trader and friend and I appreciate you taking the time to explain the DOM and how it works for you. Every trader has to find their own path to success and I am very pleased at your accomplishment.

 

No trader should ever change what's working well for them.

[kuokam 10]

I totally agree that the Dom might be of great help when scalping. Just need some couple of basic rules but all I hear is spend time watching. What do I look for? How long does it take to know if the thong is for me?

[BlueHorseshoe 10]

I thought you were some kind of teacher? If you really have to ask this question I suggest you Google it.

 

Here :......A tick is a single trade irrespective of size. A tick chart builds each bar based on a certain number of ticks per bar. A 233 tick chart will create a new bar after every 233 trades have gone through. BOTTOM LINE IS NOTHING PRINTS ON A CHART UNTIL AFTER IT HAPPENS......

 

Hi Gekko,

 

I'm afraid that maybe you need to google this also, as your description is incorrect.

 

A tick is not a single trade irrespective of size. A tick is the minimum possible fluctuation in an instrument's price. So, 233 (or indeed 233000) trades can be executed, but if they don't cause price to move (to "tick") at all then your chart won't change.

 

This can easily be seen by viewing volume alongside your tick chart. You'll see that underneath each of your 233 tick bars the number of contracts traded varies wildly and is not 233.

 

233 is actually the minimum volume per 233 tick bar because the minimum scenarios are:

 

a) the bid is one contract deep through 233 price tiers and is hit 233 times by market orders crossing the spread (or the ask is lifted 233 times in a similar fashion).

 

b) price "flutters" with perfect single contract alternation between bid and ask 233 times.

 

Of course, in the real world neither of these scenarios is actually likely to occur, and hence the number of trades associated with a 233 tick bar is typically greater than 233.

 

The type of bar that you describe is a "volume bar" or a "share bar".

 

Hope that all makes sense.

 

BlueHorseshoe.

[SIUYA 11]

I am not going to continue to debate this as I know what happens here when people disagree.

 

Many will see the value in what I am saying , many will not. Does not really matter to me. You are making my point about the hedge fund guy ...... I would follow him and do what he is doing but a CHART will not show you what he is doing. You cannot see his Offers @ 13 so how would I know that unless using a DOM?>

 

I have not fallen into any trap. I learned a long time ago that if you want to be successful then find someone who is successful in what you want and do what they did.

 

Thats what I am doing. That is what works for me .

 

Again I am only speaking from a day trading standpoint.....if you trade off daily's then my information is useless. I am speaking to the people who want the higher probability intraday set ups.

 

Let me ask you a question: do you think that traders on the floors of the exchanges who are trading right there care about chart patterns? What do you think they are watching? Some arbitrary trend line or what the buyers and sellers are actually doing?

 

Gekko out -

 

Gekko, I am not arguing with you that your system does not work, or that your system and method does not work well for you.....I am merely pointing out that its wrong to assume its the only way, the best way or that you know what everyone else is doing and thinking in the markets. That using a chart requires using an indicator etc; etc;

(Its a trap to think there is only one way of doing something in trading)

 

I might have missread your post/intention initially when you started saying you know what professionals are doing, that it you dont use volume you are behind the eight ball.

 

I am glad you have found someone doing something successful and it works for you. That is not a trap, that is an achievement. The trap is thinking its the only way, the right way, the truth, and that everyone else is wrong. If you dont understand this then you never will.

 

As for posts - Everyone will disagree, so long as its civil, otherwise imagine how simple a forum would be. One post and 50,000 thanks. .....

I like it when I can be shown to be wrong, or am convinced to change my mind.

..............................

 

Some of us dont use volume and can also be successful and trade differently, and we dont try and second guess individual orders flashing in and out, we watch collective market movements, waves, cycles, context, support and resistance, watching for the false breaks you talk about and using what if scenarios (whatever works --- If you are using MAs to scalp then you probably are going to be struggling).

..........much the same as you except without second guessing if volume is real or fake

 

.....my opinion on this is simple.

 

To me there is nothing conclusive about flashes of volume that tells me anything. To me it adds to confusion, adding another subjective measure as opposed to simplifying things. But that is just my way of seeing it.

 

 

 

(I used to be an option market maker, and if you think watching a DOM is hard, try watching 4 screens of numbers with 50 different strikes, series and constantly changing numbers over multiple instruments, or being on a floor with 50 a4 sheets of theoretical prices searching for the right one - Let me tell you, your memory and ability to guess improves immensely and you learn to eliminate superfluous info - thank god for computers )

 

 

..........

as to your question about floor traders.....some of us used to work on floors.....and then as much as now many people trade differently.

Some of us used to fill in charts throughout the day when we could. Some remembered levels, some front ran incoming orders, others just listened (a lost sense unfortunately) and felt the vibe of the market.

This is where i learnt to ignore volume as I saw too much spoofing, too much irrelevant information. I can relate plenty of stories of this were people got sucked in, scared, or greedy due to volume. While I still know other good traders who like to use volume....each to their own.

 

Plus, dont think that floor traders all made money - the edge of the floor kept many in business but that did not mean they could trade, nor did it ensure you made money. Plenty came, lost and disappeared. They still do in many of the big rooms you see today.

 

...................

Using a tick chart - a 1 tick chart that registers every move in a tick (not just registering each tick, but the move) is satisfactory IMHO......why --- because you then integrate it in your overall context you might have, and scenario analysis......exactly the same as what you are doing except without worrying about volume.

 

As for the demon --- well if you look around the room and you dont know who the sucker is.....LOL

Personally IMHO - there is no Demon, there is just the market and sometimes people wanting to feel like they are competing against someone, as opposed to themselves. If that helps them so be it.....though I think it hinders more than it helps many

 

.............

now as to how or why futures are better, then its simple if you require volume, futures are probably better.

If you dont then there are other pros and cons that might sway you in an other direction assuming you are talking mainly about FX.

[DbPhoenix 42]

Gekko, I am not arguing with you that your system does not work, or that your system and method does not work well for you.....I am merely pointing out that its wrong to assume its the only way, the best way or that you know what everyone else is doing and thinking in the markets. That using a chart requires using an indicator etc; etc;

(Its a trap to think there is only one way of doing something in trading)

 

I might have missread your post/intention initially when you started saying you know what professionals are doing, that it you dont use volume you are behind the eight ball.

 

I am glad you have found someone doing something successful and it works for you. That is not a trap, that is an achievement. The trap is thinking its the only way, the right way, the truth, and that everyone else is wrong. If you dont understand this then you never will.

 

As for posts - Everyone will disagree, so long as its civil, otherwise imagine how simple a forum would be. One post and 50,000 thanks. .....

I like it when I can be shown to be wrong, or am convinced to change my mind.

..............................

 

Some of us dont use volume and can also be successful and trade differently, and we dont try and second guess individual orders flashing in and out, we watch collective market movements, waves, cycles, context, support and resistance, watching for the false breaks you talk about and using what if scenarios (whatever works --- If you are using MAs to scalp then you probably are going to be struggling).

..........much the same as you except without second guessing if volume is real or fake

 

.....my opinion on this is simple.

 

To me there is nothing conclusive about flashes of volume that tells me anything. To me it adds to confusion, adding another subjective measure as opposed to simplifying things. But that is just my way of seeing it.

 

 

 

(I used to be an option market maker, and if you think watching a DOM is hard, try watching 4 screens of numbers with 50 different strikes, series and constantly changing numbers over multiple instruments, or being on a floor with 50 a4 sheets of theoretical prices searching for the right one - Let me tell you, your memory and ability to guess improves immensely and you learn to eliminate superfluous info - thank god for computers )

 

 

..........

as to your question about floor traders.....some of us used to work on floors.....and then as much as now many people trade differently.

Some of us used to fill in charts throughout the day when we could. Some remembered levels, some front ran incoming orders, others just listened (a lost sense unfortunately) and felt the vibe of the market.

This is where i learnt to ignore volume as I saw too much spoofing, too much irrelevant information. I can relate plenty of stories of this were people got sucked in, scared, or greedy due to volume. While I still know other good traders who like to use volume....each to their own.

 

Plus, dont think that floor traders all made money - the edge of the floor kept many in business but that did not mean they could trade, nor did it ensure you made money. Plenty came, lost and disappeared. They still do in many of the big rooms you see today.

 

...................

Using a tick chart - a 1 tick chart that registers every move in a tick (not just registering each tick, but the move) is satisfactory IMHO......why --- because you then integrate it in your overall context you might have, and scenario analysis......exactly the same as what you are doing except without worrying about volume.

 

As for the demon --- well if you look around the room and you dont know who the sucker is.....LOL

Personally IMHO - there is no Demon, there is just the market and sometimes people wanting to feel like they are competing against someone, as opposed to themselves. If that helps them so be it.....though I think it hinders more than it helps many

 

.............

now as to how or why futures are better, then its simple if you require volume, futures are probably better.

If you dont then there are other pros and cons that might sway you in an other direction assuming you are talking mainly about FX.

 

Too bad we don't have Post of the Month anymore.

[Perrin 10]

It will be interesting to see if vendors can adapt to the new environment and if they can avoid self-promotion (since MMS has stated that products are not to be promoted in discussions).

 

Can vendors adapt and become civilised valuable members of TL who offer help and trading wisdom, in the knowledge that in working hard, being honest & helping others they help themselves, and they need no other reward. Just imagine how amazing that would be. Did anyone see the film Daybreakers? The world was populated by vampires milking humans for their blood, and somehow the hero found a way to turn vampires back into humans. There is always hope

[Gekko78 10]

DB: Sure it is.. Koukam asked for specific information about how to read the DOM. I've posted specific information on that and one of the few folks who have. If he asked how to spread crude oil vs gold then you'd be right. It'd be off-topic. But, he didn't. He asked for specific information on the types of patterns you can find in the DOM. Something I've written and posted on.

 

It is also very valuable advice that I told him that if he's not going to use the proper tools that he shouldn't waste his time. Very valuable info there.

 

Predictor

 

I agree with you that you need specialized software to trade the tape in the trading world today. I mentioned in many of my posts that I use said software,not yours , but, I have never mentioned the name of it. I am not a vendor or anything like I just try to follow the rules even though I am not selling anything anyway .

 

If you really want people to learn about your product or service why don't you just pm them?

 

I would assume that's it allowed since you are not posting on the board.

 

In my regular day job I am in sales . I have been in sales for 8 years now and what you are doing is selling plain and simple. Which is fine but you just have to do it the right way.

[Gekko78 10]

This will be my last post regarding Dom vs charts as I feel like I do when debating why free markets are the solution and not the disease.

 

 

Here's what I believe ( yes I believe , that does not mean you have to believe )

 

Prices moves happen because of 2 things

Cause and effect

 

Charts only show effect

 

Dom shows cause And effect

 

Indicators only show effect , volume bars only show effect . Ticks counts only show effect

 

 

I guess I should have started a new thread right when this discussion started , my bad

 

Dom trading is not the only way so please hear and listen when I say that . I get it . There are many other ways to trade , invest , scalp. Whatever you want to call it.

 

What I know is at MOST ( most does not mean all ) pros who day trade looking to scalp use this type of trading. It works . So I am just going to do wht MOST (again most does mean all) prop traders do.

 

 

Dom trading is like poker . It allows you to see everyone's hand before they throw it down. Sometimes they are bluffing , sometimes they are not . Once you learn how to read what is happening everything becomes more clear . It does not work 100% of the time , nothing does but it works more than it does not.

 

If I were going to compare charts to poker then it would be like saying AFTER the hand is over , " oh dang that guy had a full house!" how does that help me now? The hand is over

 

What are the chances of him getting it again? Sure the volume bars might tell me that he had a full house a few hands ago but again how does that help me right now at this moment in time? it does not.

 

Just because there was a huge price spike at xxxx price does not mean that it will happen again when it gets there. A chart does not tell you why. Maybe it was some big hedge fund guy unloading a bunch of contacts and decided that was a good place to get out. Volume will tell me that something big actually happened there but it will not tell me why . Had I been watching a Dom I would have seen large orders being placed and coming through and said " hmmm those orders that are being placed look pretty big I better pay attention" now if he pulls them i would have seen that to and i might have said " ok herre is a guy who might want me to "THINK" he has a full house .now when price gets back to that level again I would be watching for those big orders , if I don't see them now I have to play it differently. A chart will not show any of that .

 

How can an oscillator, trend line , indicator , candlestick , bar or line tell me what joe at abc hedge fund is trying to do? It can't . A Dom Can show you what he is trying to do better than any chart. Adom will also show you what he wants you to think,It's not perfect but it is an edge.

 

This is what I have chosen to do . Does that mean it is for everyone? Nope

 

It's like that old progressive car insurance commercial that used to run a few years ago when the lady would say " progressive is usually the best but, sometimes we're not "

 

Same things applies here. If it is not for you that's ok.

Edited March 2, 2013 by Gekko78

[kuokam 10]

Okay, will search your material.

Thanks

 

Kuokam, I don't think you will be able to make any sense of the DOM without specialized software like the kind I've developed. In fact, I never was. I've been on the record here stating that.

 

First, I don't think you'll be competitive against the traders you'll be going up against who have better tools (and then the robots too). Second, I don't know anyone who could process that information.

 

I believe that if you don't have specialized tools for this that you're better off ignoring this stuff and focusing on something else.

 

On the other hand, if you have valid tools then it can be quite useful. Koukam, you can search my posts or read my blog for things to watch for. Important to keep in mind, you can't see these patterns with naked eye. Just staring at DOM would be a huge waste of time..

[Gekko78 10]

That's against the rules as well

 

Oops! Guess I was wrong.

[Roger Felton 10]

I totally agree that the Dom might be of great help when scalping. Just need some couple of basic rules but all I hear is spend time watching. What do I look for? How long does it take to know if the thong is for me?

 

I think the thong might be for you if it doesn't bind or chafe. I usually wear jeans this chilly time of the year...:haha:

 

As for the DOM, piece of cake. If you can pull the lever on a slot machine and count the cherries, oranges, 7's and JACKPOT symbols and the number of times each spins around before finally stopping, you'll do well with the DOM...except it never stops.

 

Seeing the figures change takes about a second. Learning what they mean might take you a couple of years, maybe. Applying that to trying to figure out what's going on in the brains of several "professionals" simultaneously will take longer...a lot longer.

 

Some people like to make trading into a complicated psychological "chess game" while others just look for strong and weak times to enter the market.

 

There are hundreds of ways to trade...and a thousand ways to lose.

[Roger Felton 10]

Gekko, I am not arguing with you that your system does not work, or that your system and method does not work well for you.....I am merely pointing out that its wrong to assume its the only way, the best way or that you know what everyone else is doing and thinking in the markets. That using a chart requires using an indicator etc; etc;

(Its a trap to think there is only one way of doing something in trading)

 

I might have missread your post/intention initially when you started saying you know what professionals are doing, that it you dont use volume you are behind the eight ball.

 

I am glad you have found someone doing something successful and it works for you. That is not a trap, that is an achievement. The trap is thinking its the only way, the right way, the truth, and that everyone else is wrong. If you dont understand this then you never will.

 

As for posts - Everyone will disagree, so long as its civil, otherwise imagine how simple a forum would be. One post and 50,000 thanks. .....

I like it when I can be shown to be wrong, or am convinced to change my mind.

..............................

 

Some of us dont use volume and can also be successful and trade differently, and we dont try and second guess individual orders flashing in and out, we watch collective market movements, waves, cycles, context, support and resistance, watching for the false breaks you talk about and using what if scenarios (whatever works --- If you are using MAs to scalp then you probably are going to be struggling).

..........much the same as you except without second guessing if volume is real or fake

 

.....my opinion on this is simple.

 

To me there is nothing conclusive about flashes of volume that tells me anything. To me it adds to confusion, adding another subjective measure as opposed to simplifying things. But that is just my way of seeing it.

 

 

 

(I used to be an option market maker, and if you think watching a DOM is hard, try watching 4 screens of numbers with 50 different strikes, series and constantly changing numbers over multiple instruments, or being on a floor with 50 a4 sheets of theoretical prices searching for the right one - Let me tell you, your memory and ability to guess improves immensely and you learn to eliminate superfluous info - thank god for computers )

 

 

..........

as to your question about floor traders.....some of us used to work on floors.....and then as much as now many people trade differently.

Some of us used to fill in charts throughout the day when we could. Some remembered levels, some front ran incoming orders, others just listened (a lost sense unfortunately) and felt the vibe of the market.

This is where i learnt to ignore volume as I saw too much spoofing, too much irrelevant information. I can relate plenty of stories of this were people got sucked in, scared, or greedy due to volume. While I still know other good traders who like to use volume....each to their own.

 

Plus, dont think that floor traders all made money - the edge of the floor kept many in business but that did not mean they could trade, nor did it ensure you made money. Plenty came, lost and disappeared. They still do in many of the big rooms you see today.

 

...................

Using a tick chart - a 1 tick chart that registers every move in a tick (not just registering each tick, but the move) is satisfactory IMHO......why --- because you then integrate it in your overall context you might have, and scenario analysis......exactly the same as what you are doing except without worrying about volume.

 

As for the demon --- well if you look around the room and you dont know who the sucker is.....LOL

Personally IMHO - there is no Demon, there is just the market and sometimes people wanting to feel like they are competing against someone, as opposed to themselves. If that helps them so be it.....though I think it hinders more than it helps many

 

.............

now as to how or why futures are better, then its simple if you require volume, futures are probably better.

If you dont then there are other pros and cons that might sway you in an other direction assuming you are talking mainly about FX.

 

That, my friends, is one of the best, clearest, most well thought out responses I've seen in a while. Learned some things about SIUYA I didn't know as well. Very good job and spot on.

[MadMarketScientist 11]

Thread cleaned, all promotions removed, all name calling removing let's please keep the discussions to the topics

 

Thanks everyone for using the Report Post buttons.

 

And let's please try to keep it civil.

 

thanks,

MMS

[Gekko78 10]

That's a shame . There was a lot of good information in those removed posts. The advertising ones I agree with but all the other ones, even thoug some of them were a bit sketchy , contained some valuable info.

[DbPhoenix 42]

That's a shame . There was a lot of good information in those removed posts. The advertising ones I agree with but all the other ones, even thoug some of them were a bit sketchy , contained some valuable info.

 

Since these dustups will likely continue until there is a fundamental change, you ought to consider saving what you think you may want at some point, perhaps to repost it.

 

Just click Thread Tools, then Show Printable Version, and save it somewhere, like Word.

[kuokam 10]

Wow! what a man- thread !

[Larry1234 10]

When I started trading it was FX , then I moved to stocks , then back to FX......finally I landed at my home in futures.......can across an article and wanted to share as I agree with most of this stuff ESPECIALLY the FX part.

 

 

Enjoy

 

The Powerful Advantages of Trading the E-Mini S&P 500 Futures over Stocks, ETFs and Forex

 

Have you ever wondered why many traders prefer futures over equities and/or Forex? If your answer is "yes" and you are interested in daytrading this is definitely an article you should take a minute to read. Make no mistake, there are substantial risks involved with futures daytrading and it is not suitable for all investors, but I feel the following 20 points demonstrate the particular advantages of daytrading the E-mini S&P 500 over trading stocks, Forex and ETFs like the SPDRs and QQQs.

1. Efficient Market

 

During normal market hours the Emini S&P 500 (ES) futures have a tight bid-ask spread of typically 1 tick or $12.50 per contract. With a current approximate contract value of about $50,000, that comes out to .025% of the contract value, which is one of the best spreads in the trading world. This spread should be considered your cost of entry (not unlike commissions) to enter and exit the market. The wider the spread, the more the trade has to move in your favor just for you to get to break-even.

 

Depending on the stock or currency pair you are trading the bid-ask spread may be much wider. Also, since Forex firms "create" the market and therefore, the bid-ask spread, they can widen it to whatever they see fit. Even when Forex firms advertise a fixed spread, they typically reserve the right to widen when they see fit. Typically, this spread is anywhere from $15 to $50+ depending on the currency pair and market conditions.

2. Central Regulated Exchange

 

All ES trades are done through the Chicago Mercantile Exchange and its member firms where all trades are recorded in an official time and sales. All trades are made available to the public on a first come, first served basis and trades must follow the CME Clearing rules, along with the strict CFTC and NFA rules.

 

Forex trades occur "over the counter," (off any exchange floor or computer) where there is no centralized exchange with a time and sales report to compare your fill. Traders with different firms can experience different fills even when trades are executed simultaneously. Even more alarming is that in some cases the Forex brokerage firm you have an account with takes the other side of your trade and is therefore "betting" against you. Even for equity trades many stock brokerage firms direct your trades to brokers that give them a "haircut," rebate or kickback for your order or they go to dark pools or are shown to flash traders before made available to the public. Again, this can become a conflict of interest since your order may not be getting the best possible execution.

3. Low Commissions

 

ES commissions are only about $2.00-$3.00 per side and larger traders can even lease a membership to further reduce their fees. This low transaction cost allows daytraders to get in and out of the market without commissions significantly cutting into their profits, but of course the more trading you do the more this will impact your bottom line.

 

While most Forex firms do not charge a "disclosed" commission, they make their money by creating their own bid/ask spread and taking the other side of your trade, typically costing much more than the transaction costs of the ES. The average discount stock brokerage firm charges $5-10 per trade, which can really eat into your potential daytrading profits.

4. Level II Trading

 

You can see the 10 best bids and 10 best asks along with the associated volume in real time and you are allow the placement of your order at any price you wish when trading the ES. This transparency of the market’s orders allows ES traders to see where and how many orders have been placed ahead of them. For short term daytraders this information may be very valuable and may be used as an indication of future market movements.

 

Most Forex platforms do not offer Level II type pricing and for the few that do, since there is no centralized market, it is only the orders that that firm has access to and not the entire market. Also, most Forex firms do not allow you to place an order within a few ticks of the last price or between their posted bid/ask spreads, further limiting your trading abilities.

5. Virtually 24 Hour Trading

 

The ES futures market is open from Sunday night at 5p CST until Friday afternoon at 3:15p (it closes from 3:15p-3:30p and also closes daily from 4:30-5p for maintenance). This allows you to enter, exit or have orders working to protect your positions almost 24 hours a day, even while you sleep.

 

Even with pre and post market trading, the stock market is open less than 12 hours per day, and the liquidity during these sessions are not always good.

6. All Electronic Trading

 

There is no trading pit for the ES which means there are no market makers, no locals and no floor brokers and all orders are matched by a computer on a first come-first served basis no matter how large or small they are. This means that all traders see the same level II market and bid/ask spreads with an equal chance to hit them.

 

While most Forex firms offer electronic trading, some manually approve each order at a trading desk because they are market makers against your orders. Many times larger traders are given preferential treatment and better bid/ask spreads.

7. Leverage

 

Of course more leverage is a double edged sword since higher leverage equates to higher risk, but one Emini S&P contract currently has an approximate value of $65,000 and can be daytraded for as little as $500 which is 1% of its total value (about 100:1 leverage). Even if you hold a position overnight, the current overnight margin is only $5,625 which is still less than 10%.

 

Not all stocks and ETFs are available to be traded on margin, and the ones that can, require at least 50% margin to do so. US regulated Forex firms are not allowed to offer more than 50:1 leverage on the major currency pairs and 20:1 on the other currencies. This high margin requirement may be very limiting to daytraders who are only looking for small market movements.

8. No Interest Charges

 

For futures trading the daytrade and position margins do not require you to pay any interest on the remainder of the funds. The $500 posted for daytraders is a performance bond and traders do not pay interest on the remaining value of the ES futures contract. No special type of futures trading account is required to be able to take advantage of the daytrade margins.

 

Stock traders typically must apply for a special account in order to be able to daytrade and/or trade on margin and for those who can use the 50% margin, they need to pay interest on the other 50% they are borrowing. Forex has a cost of carry associated with its trading which means interest may be charged or paid on positions taken, but in the end this interest is seen as a revenue stream for Forex brokers and works to their advantage.

9. No Pattern Day Trader Rule

 

Futures daytrade accounts can be opened with as little as $4,000 and do not have any Pattern Daytrader Rules associated with them. Of course only risk capital should be used no matter what the amount is that you choose to start with.

 

The SEC describes a stock trader who executes 4 or more daytrades in 5 business days, provided the number of daytrades are more than six percent of the customer's total trading activity for that same five-day period, as a Pattern Daytrader. As a Pattern Daytrader you are required to have a minimum of $25,000 starting capital and cannot fall below this amount.

10. Liquidity

 

The Emini S&P futures trade about an average of 2 million times a day which allows for great price action, volatility and speedy execution. At a current approximate value of $50,000, that is over $100 billion changing hands every trading day.

 

Not all stocks and Forex markets are as liquid which means movements can be shaky and erratic, making daytrading more difficult. Forex firms like to make the claim that the over the counter foreign exchange market trades more than one trillion Dollars in volume per day, but most people don't realize is that in most cases you just traded against your broker's dealing desk rather than the true interbank market.

11. Tax Advantages

 

US Futures traders have favorable tax consequences for short term traders since futures profits are taxed 60/40, which means that 60% of the gain is taxed at the maximum rate of 15% (similar to long-term gains) and the other 40% is taxed at a maximum rate of 35% as ordinary income.

 

Securities positions held for less than 12 months are considered short term gains and taxed at 35%. Of course everyone’s tax situation is different and should consult a licensed accountant for their specific situation.

12. Diversification

 

When trading a stock index like the Emini S&P futures your "news risk" is spread out over the entire market. Should a report or rumor come out on an individual stock it should have very little impact on the whole index you are trading.

 

When you take a position in an individual stock you are susceptible to stock specific risk which can occur without warning and with violent consequences.

13. Safety of Funds

 

When you trade the ES you are trading with a Commodity Futures Trading Commission (CFTC) regulated and National Futures Association (NFA) member firm which is subject to the customer segregated funds rules laid out by the US government. In the over 100 years of futures trading the CME has only once had a loss of customer funds due to the failure of a clearing member because of these rules that are in place. While there are never any guarantees that you can't lose money, this track record is unprecedented.

 

Even with regulated US Forex firms, funds are not considered segregated, so if a regulated firm goes bankrupt clients funds are not offered the same protections as they are in the futures market.

14. Focus

 

Many ES futures traders only track the ES market and find it is the only chart they need to follow. There are always opportunities and great volume throughout the trading day. When large institutions or traders want to take a position in the market or hedge a portfolio they usually turn to the futures markets to get this done quickly and efficiently. Therefore, why not trade the market the "Big Boys" trade?

 

Most traders agree that individual stocks and therefore, the market as a whole follow the futures indices, and not the opposite. In fact, many stock traders will have an Emini futures chart up next to the stock they are following. As a stock or Forex trader you may need to scan dozens of stocks or currency pairs for opportunities. Many times specific stocks fall out of favor so volume and, therefore opportunities dry up and traders are forced to find a new stock to trade.

15. Go Short

 

There are no rules against going short the ES, traders simply sell short the ES contract in hopes of buying it back later at a lower price. There are no special requirements or privileges you need to ask your futures broker for.

 

Most stockbrokers require a special account with higher requirements for you to be able to go short. Some stocks are not shortable, or have limited shares that can be shorted. Also, up-tick rules could be re-enforced and in the past the government has put temporary bans on stocks that can be shorted.

16. Direct Correlation

 

On average the ES futures are directly correlated to the underlying S&P 500 index in the short and long term. If you pull up an Emini S&P 500 futures chart and compare it to the S&P 500 index chart they should almost look identical.

 

Double or triple weighted ETFs do not track the S&P accurately over longer periods, and some currency ETFs have credit risks associated with them which could hinder their ability to correlate.

17. Deep Market

 

The S&P 500 index is comprised of very actively traded stocks with some of the largest market capitalizations and with hundreds of billions of dollars invested in some fashion in them. With such large dollar values and high trading volume it would be very hard to manipulate its movements.

 

On the other hand sometimes it is easy to move or even manipulate a particular stock and even a foreign currency market. George Soros has been accused of intentional driving down the price of the British Pound and the currencies of Thailand and Malaysia and many stock "promoters," insiders and markets makers have been convicted of manipulating stocks.

18. Big Players

 

The old adages follow the "big boys" and "smart money" are usually true when it comes to trading, and large money managers, pension funds, institutional traders, etc. tend to be very active traders in the futures markets. The S&P 500 futures contract is generally recognized as the leading benchmark for the underlying stock market movements.

 

Most active equity traders admit they first look to the index futures for an indication of what the stock they are trading might be doing, so why not just trade the leader of the market, the Emini futures?

19. Volume Analysis

 

Volume can be one of the most useful indicators a trader can use, those little lines at the bottom of the chart are not just there to look pretty they should be used as another indication of the validity or lack thereof, of a particular move. In other words combined with other indicators and/or chart patterns volume can be used to confirm a move in the market. Most market technicians would agree that a move made on relatively light volume is not as significant as a move made on heavy volume and should be treated accordingly.

 

Since the Forex market is over the counter (OTC), there is no centralized exchange, no one place where trades take place therefore, there is no accurate record of volume and most, if not all, Forex charts will not show any indication of volume. So what might appear to be a significant move on a Forex chart, may just be a false move on low volume and could not be filtered out if you were looking at a Forex chart.

20. Clearing Reliability

 

During the May 6, 2010 "Flash Crash" the Emini S&P futures continued to trade within a reasonable price range reflecting what the cash S&P 500 index was indicating. No trades on the Emini S&P futures were cancelled and all trades cleared.

 

According to the joint study by the SEC and CFTC, ETFs made up 70% of the securities with trades that were later canceled. Furthermore, there were about 160 ETFs that temporarily lost almost all of their value and 27% of fund companies had securities with trades broken. Had you bought or sold during this event you may had been notified after the market closed that your trade was no longer good and left with potentially dangerous consequences.

 

As you probably already know trading is hard enough, so why choose a market where the odds are stacked more against you before you even place your first order. The above mentioned 20 points clearly make the E-Mini S&P 500 futures the best choice for daytraders and will give you the most bang for your buck. Before you trade futures, though, please make sure they are appropriate for you and that you only use risk capital.

 

There is no doubt about Futures that they are better than forwards but most of the time Futures prices are also higher than forward prices. Don't you think that there is a trade off between price (high in futures) and risk (high in forwards) ?

[Roger Felton 10]

There is no doubt about Futures that they are better than forwards but most of the time Futures prices are also higher than forward prices. Don't you think that there is a trade off between price (high in futures) and risk (high in forwards) ?

 

I think it all depends on what you were raised on. Personally, I think the trader that begins their career on Futures will ultimately do better quicker but that's dependent on a number of factors. In other words, if they are trading by the phases of the moon and when Voyager 1 aligns with Pluto, they might find success a bit more elusive. Let's consider some other "vehicles":

 

Options - Learning how to trade is always more difficult when you have to learn a new language first. Puts and Calls and Naked Leaps and Covered Dishes and Vertical Spreads and Iron Condors and Cardboard Butterflies...geez. It goes on and on. Plus you have this ticking bomb in your hand the whole time. No thanks, too complicated and the deck is stacked against me.

 

Forex - If you had your choice of trading a regulated market where you could enter within one tick of where you wanted (on avg.) and be making money from the very first tick towards profit and you could move your stop and target(s) at will anywhere anytime OR start out deep in the hole (best I ever got in Forex was -8 pips to BE) and when you tried to move a stop or target you usually got an error message plus your broker could legally run a bucket shop on your trades if he chose to do so, which market would you choose?

 

Equities - Hey, is anybody making any money in stocks these days? This is a market that ties up a lot of capital (1 to 1 leverage), is basically one directional and so slow a snail could beat it to goal line and still have time to catch a movie. Companies cook their books and the big boys get the reports long before you do. Terrific game if you've got about 20+ years of experience, are already rich and have access to insider trading info (which is illegal, you know), but that's how they got rich. You might also appreciate the excitement of waiting years to get ahead on your portfolio and then have everything come crashing down on your head taking you under water for the next decade. What a rush.

 

Futures - You Buy and You Sell. That's about it. Small account required, no extensive special lingo to learn, great leverage, liquidity and smooth volatility in many markets to choose from. Is trading Futures easy? Heck no...but it's simple and that really helps. It's also offers the fairest, most level playing field. Learn a good system, stick to your rules, practice like a madman and never never give up.

Edited March 4, 2013 by Roger Felton