Why Futures Are Better

[christmas10023 10]

Looking to get into trading futures

1. Much lower commissions

2. Stocks don't trade like futures and the way futures trade is much

better. Easier to see momentum and shifting trend(s).

[sbfx 10]

I trade currency futures and Forex and believe, in some instances, Forex is better than futures. here are my comments to relevant points as they pertain to currencies.

 

1, 3, 7, 9: These points deal with transaction costs, leverage and minimum funding requirements.

 

My vote for Forex over Futures here is directed at beginners. $12.50 or 1 contract is too much for beginners who open a small account. If you open a 4k account (9) and open a trade with a 10 point stop loss, you stand to lose 3.5% of your equity in 1 trade. I rounded it up to include commissions. So imagine the very real possibility of losing 4 trades in a row, I saw mentioned in one of the comments. Other comments I saw suggest risking 0.5% per trade, which is good advice. Therefore you would need a minimum of 28k with a maximum stop loss of 10 points per trade.

Introduce high leverage and you are asking to blow your account. 50:1 is plenty.

There are very decent Forex brokers who have virtually no entry requirements and position size can be kept really small until you become certain of purpose and confident in ability.

 

2. Very true that Forex brokers are not regulated by a central exchange, but the whole "trading against you argument" is the least of your worries. My background is software engineering. I have created software that has compared multiple Forex data feeds to specifically test how brokers might introduce spikes to chase stops or induce slippage. I didn't find any evidence. Even when I trade futures and Forex side by side the price movement is very correlated. I have never, not once, had an issue with slippage via 4 Forex brokers I have used. Your trading will lose you money, not dodgy Forex prices.

 

4, 19. In futures, trading the DOM, using Market profile and Volume analysis is powerful. These can be emulated on the Forex side, if you know how. If you are a futures trader who trades via charts, then you will not really be making good use of level II data. I developed my own market profile tool for use with Forex. This, in a nutshell, analyses time spent at price. Tick volume analysis on the Forex side measures activity and so you don't see the actual orders, but if you know what you are doing tick volume analysis can be powerful. ADX and/or moving averages can be used to define market state. So unless you are a die hard DOM trader, I don't see the huge advantage that many claim.

 

10. There is plenty of liquidity in Forex. Again compare the close correlations and it is clear. Actually, I often find Forex to be more liquid.

 

11. This one is UK specific. If you trade Forex through a spread betting firm then you don't pay capital gains tax full stop. In the UK, spread betting falls under the gambling act and so is not subject to tax. This combined with the London session being so active is what makes traders from other nations jealous of UK traders. If Forex trading was taxed that would mean that you would be able to offset your losses. So until the majority of traders start winning more than they lose, profitable traders will be fine.

 

12, 16. There is sufficient correlation and anti-correlation in Forex to supply you with plenty of opportunity. Understanding currency price and commodity price correlation enables you to be even more tuned into discovering opportunities. Could expand on this topic a lot more, but that would take me off topic...

 

13. Safety of funds is something you need to be aware of in Forex. Always go with an FSA regulated broker, preferably a public company with a long history. Forget segregated funds. It doesn't happen. If your broker is FSA regulated you are insured up to 50k. This should suit most retail traders. If you do want to trade a large account you can get your broker to open a proxy account where the funds are stored in your own account but the broker accesses funds required for trading. No risk at all.

 

14, 18. This is not true of Forex. There are always plenty of opportunities. The Market Makers Model applies to all Markets. Accumulation (the range), manipulation (the fake out) and release (the break out)

 

17. Volatility is good. I make money because of it.

 

Hopefully my comments are helpful and I wish you all happy trading

 

twitter: @shawnbarrett

[zdo 20]

sbfx, good post.

 

I am a futures trader... but

 

re:

 

 

4, 19. In futures, trading the DOM, using Market profile and Volume analysis is powerful. These can be emulated on the Forex side, if you know how. If you are a futures trader who trades via charts, then you will not really be making good use of level II data. I developed my own market profile tool for use with Forex. This, in a nutshell, analyses time spent at price. Tick volume analysis on the Forex side measures activity and so you don't see the actual orders, but if you know what you are doing tick volume analysis can be powerful. ADX and/or moving averages can be used to define market state. So unless you are a die hard DOM trader, I don't see the huge advantage that many claim.

 

 

yes.

another example - I happened across an 'indicator' that correlates + at 90% + with real volume ... and it has not a fkn thing to do with volume...

 

plus,as you mentioned in one of the other #s, since FX and futures directionally track so well at tick level, one can use futures feed and trade FX if needed

 

 

 

 

 

...

 

10. ... Actually, I often find Forex to be more liquid.

...

 

an additional point for some to consider... if you may potentially be holding a contract for months, FX is definitely superior cost wise to near month futures ...no rollover costs

...and is often even better than far out futures... bcse no 'far out' illiquidity slips if you do need to exit early.

 

another point - it is possible to more than cover all your FX sprd expenses with interest income.

example: I use cycles work to progressively build/scale up short positions in USD/INR ... size of each transaction geometrically larger than previous one...

Long TRY/JPY works almost as well... and also has low corre. with the USD/INR

 

...

 

13. ... safety of funds.

...

 

 

Forget about it...

ie your deposits are NOT safe period

ie your money is no safer at an FCM than it is with an FX house

 

 

Bottom line - Each trader should find and use the best instruments for his or her own needs - methods, sizing, holding periods, costs, etc

AND

each trader should study this area enough to be able to avail himself of any benefits of each type of instrument across all 'exchanges' if needed

 

all the best,

 

zdo

Edited February 26, 2013 by zdo

[Gekko78 10]

I trade currency futures and Forex and believe, in some instances, Forex is better than futures. here are my comments to relevant points as they pertain to currencies.

 

1, 3, 7, 9: These points deal with transaction costs, leverage and minimum funding requirements.

 

My vote for Forex over Futures here is directed at beginners. $12.50 or 1 contract is too much for beginners who open a small account. If you open a 4k account (9) and open a trade with a 10 point stop loss, you stand to lose 3.5% of your equity in 1 trade. I rounded it up to include commissions. So imagine the very real possibility of losing 4 trades in a row, I saw mentioned in one of the comments. Other comments I saw suggest risking 0.5% per trade, which is good advice. Therefore you would need a minimum of 28k with a maximum stop loss of 10 points per trade.

Introduce high leverage and you are asking to blow your account. 50:1 is plenty.

There are very decent Forex brokers who have virtually no entry requirements and position size can be kept really small until you become certain of purpose and confident in ability.

 

2. Very true that Forex brokers are not regulated by a central exchange, but the whole "trading against you argument" is the least of your worries. My background is software engineering. I have created software that has compared multiple Forex data feeds to specifically test how brokers might introduce spikes to chase stops or induce slippage. I didn't find any evidence. Even when I trade futures and Forex side by side the price movement is very correlated. I have never, not once, had an issue with slippage via 4 Forex brokers I have used. Your trading will lose you money, not dodgy Forex prices.

 

4, 19. In futures, trading the DOM, using Market profile and Volume analysis is powerful. These can be emulated on the Forex side, if you know how. If you are a futures trader who trades via charts, then you will not really be making good use of level II data. I developed my own market profile tool for use with Forex. This, in a nutshell, analyses time spent at price. Tick volume analysis on the Forex side measures activity and so you don't see the actual orders, but if you know what you are doing tick volume analysis can be powerful. ADX and/or moving averages can be used to define market state. So unless you are a die hard DOM trader, I don't see the huge advantage that many claim.

 

10. There is plenty of liquidity in Forex. Again compare the close correlations and it is clear. Actually, I often find Forex to be more liquid.

 

11. This one is UK specific. If you trade Forex through a spread betting firm then you don't pay capital gains tax full stop. In the UK, spread betting falls under the gambling act and so is not subject to tax. This combined with the London session being so active is what makes traders from other nations jealous of UK traders. If Forex trading was taxed that would mean that you would be able to offset your losses. So until the majority of traders start winning more than they lose, profitable traders will be fine.

 

12, 16. There is sufficient correlation and anti-correlation in Forex to supply you with plenty of opportunity. Understanding currency price and commodity price correlation enables you to be even more tuned into discovering opportunities. Could expand on this topic a lot more, but that would take me off topic...

 

13. Safety of funds is something you need to be aware of in Forex. Always go with an FSA regulated broker, preferably a public company with a long history. Forget segregated funds. It doesn't happen. If your broker is FSA regulated you are insured up to 50k. This should suit most retail traders. If you do want to trade a large account you can get your broker to open a proxy account where the funds are stored in your own account but the broker accesses funds required for trading. No risk at all.

 

14, 18. This is not true of Forex. There are always plenty of opportunities. The Market Makers Model applies to all Markets. Accumulation (the range), manipulation (the fake out) and release (the break out)

 

17. Volatility is good. I make money because of it.

 

Hopefully my comments are helpful and I wish you all happy trading

 

twitter: @shawnbarrett

 

I could go through these point by point but I will not. As I learned many years ago " a man convinced against his will is off the same opinion still"

 

One thing I will comment on is you mention $12.50 is to much for a new trader to handle. While I agrees with you this is more a mental roadblock which really has nothing to do with FX or futures. That is psychology.

 

If $12.50 is to much to handle then trade 6b which is only $6.25 per tick.

 

If futures and FX correlate so well then why not go with the safer bet and trade futures. By safer I am simply referring to $$ safety. Not trading.

 

Having traded FX for about 5 years and then coming over to futures I wish I would have went with futures to start.

 

I did not lose in FX I just started researching more about futures and liked what they offered better than FX. I like reading the tape , I like seeing orders and order flow , I like time and sales. None of these things were available to me in FX . Candlesticks cannot tell you if the order that moved price was 50 lots or 2000 lots.....big difference there.

 

Hey if you are making $$ in FX then awesome !

[Gekko78 10]

Use what works for you. I formerly traded the Beige Book but stopped when it became the Rainbow Book. Now I just listen to Obama. When he says everything is peachy, I short everything. When Warren Buffet says he pays a lower tax rate than his secretary, I buy Puts in prisons. Elementary dear Watson...

 

Nice.... LOL:thumbs up:

[DbPhoenix 42]

One thing I will comment on is you mention $12.50 is to much for a new trader to handle. While I agrees with you this is more a mental roadblock which really has nothing to do with FX or futures. That is psychology.

 

If $12.50 is to much to handle then trade 6b which is only $6.25 per tick.

 

Or the NQ. 5 bucks. And it moves much better than the ES.

[Roger Felton 10]

Or the NQ. 5 bucks. And it moves much better than the ES.

 

Gekko is right...it is all about what's happening between the ears. If you can't win at $12.50 per tick, you can't win at $10, $5, $2 or a nickel for that matter. You just die slower.

 

With Futures, my commission and Exc. fees are paid and I can be making money from the very first tick. All things considered, Futures offer the most level playing field...certainly for the small trader.

 

You know your ES, DbP. It's the only market I know of that you have to pack a lunch and a sleeping bag to trade... all while holding your nose.

[zdo 20]

... All things considered, Futures offer the most level playing field

...

 

I agree.... but

 

Neither field is level...

and the issue I'm having is that some of us are trying to portray the 'slopes' of the FX field to be MUCH steeper than the fairer 'slopes' of the Futures field. That's really not the case.

The FX field is generally slightly steeper for the whole population. But, for individual traders (because of ALL the differences in stuff between and below the ears, etc etc. etc.) FX may actually present less "unfairness" [snic].

Also, any very small beginning trader (who is not specializing on volume and order flow 'stuff') who commits to trying out for this game would be much better off starting with an OAND@ account instead of a barely one day margin futures account - which is way too small...

ie how much capital you can allocate (and risk, etc). and then what you do with it are MUCH BIGGER field levelers than which exchange or instrument or whatever one is using.

Edited February 27, 2013 by zdo

[SIUYA 11]

a lot of the complaints about the FX market should in fact be leveled at the type of bucket shop broker who plies their customer with promises of riches, excess leverage, low or zero commissions and or spreads - and then trades against them with unfair rules.

Often retail customers cant make the minimum account holdings for a good broker.

Additionally, it has taken longer than is required for many FX spreads to collapse, brokers to become more transparent and electronic.....those who dont usually get left behind or prey on the low hanging fruit.

 

A good FX broker generally does not trade against you, the spreads are smaller, the margins better and the liquidity deeper than in the futures.......either market is fine - the broker is probably the major determining factor.

 

eg: I use Interactive brokers - today i saw (yes with my own two eyes) at least three times in the EURUSD a similar spread in the futures of 1.3107 - 09 in the FX 1.3055-06 --- with more size in the FX

 

I direct attention to this FWIW......http://www.interactivebrokers.com/en/?f=%2Fen%2Ftrading%2Fpdfhighlights%2FPDF-Forex.php

 

I have no affiliation with them but would recommend them as a broker.

[Roger Felton 10]

a lot of the complaints about the FX market should in fact be leveled at the type of bucket shop broker who plies their customer with promises of riches, excess leverage, low or zero commissions and or spreads - and then trades against them with unfair rules.

Often retail customers cant make the minimum account holdings for a good broker.

Additionally, it has taken longer than is required for many FX spreads to collapse, brokers to become more transparent and electronic.....those who dont usually get left behind or prey on the low hanging fruit.

 

A good FX broker generally does not trade against you, the spreads are smaller, the margins better and the liquidity deeper than in the futures.......either market is fine - the broker is probably the major determining factor.

 

eg: I use Interactive brokers - today i saw (yes with my own two eyes) at least three times in the EURUSD a similar spread in the futures of 1.3107 - 09 in the FX 1.3055-06 --- with more size in the FX

 

I direct attention to this FWIW......http://www.interactivebrokers.com/en/?f=%2Fen%2Ftrading%2Fpdfhighlights%2FPDF-Forex.php

 

I have no affiliation with them but would recommend them as a broker.

 

As long as there can be bucket shops in the Forex, there WILL be bucket shops in the Forex. Not every broker will trade against you, but good luck taking a broker's word for it.

 

Every trader has their favorite broker and I'm not going to promote mine here, but I used Interactive Broker for a while back when they were promoting $4.80 RT commissions. Every time I needed to speak to them, I got a recording. They never called me back until the next day...and then billed me $30 for the phone call!!! No thanks.

 

Tick charts are an important fundamental chart type that millions of traders use. IB does not provide tick data, period. I would never consider any broker that is stuck in the 1990's. Good accurate unfiltered tick data is essential to me and many others. So, IB will ne technology They'll never see my business again....but that's just my opinion, of course.

[kuokam 10]

Roger, what is the optimal nomber of ticks for intraday charts? or does it depend on what object you are trading ?

 

As long as there can be bucket shops in the Forex, there WILL be bucket shops in the Forex. Not every broker will trade against you, but good luck taking a broker's word for it.

 

Every trader has their favorite broker and I'm not going to promote mine here, but I used Interactive Broker for a while back when they were promoting $4.80 RT commissions. Every time I needed to speak to them, I got a recording. They never called me back until the next day...and then billed me $30 for the phone call!!! No thanks.

 

Tick charts are an important fundamental chart type that millions of traders use. IB does not provide tick data, period. I would never consider any broker that is stuck in the 1990's. Good accurate unfiltered tick data is essential to me and many others. So, IB will ne technology They'll never see my business again....but that's just my opinion, of course.

[Predictor 11]

I've always focused on the futures to the exclusion of other markets. There is a lot going for them as discussed here.

 

There are some downsides to futures though. The first is the large contract size which is too large for many traders. This large contract size also suffers from not being very "granular", ie if you wanted you can't just go long equivalent to 100k notional but have to choose 75k or 150K for ES. Some futures like CL are due to the size swing too risky for smaller traders. The large tick size makes tape reading more valuable but it also means it costs more to cross the spread. I wouldn't want to see that changed.

Stop losses can be used to manage risk but have the effect of introducing an element of unpredictability.

 

Unless one trades futures spreads (which most retail traders aren't aware of), its also hard to formulate relative value statements. For example, if one wanted to express sentiment that A outperforms B. There are exchange listed index spreads but they aren't discussed. Another problem with futures traders is they tend to be directional only traders. This again isn't required but unless one has multiple accounts then one can't be long/short same instrument (though the upcoming NinjaTrader webinar plans to speak to that).

 

Alternatives:

NADEX spreads -- One could use our tape reading program but trade the risk limited spreads. I'm watching the spreads with AlphaReveal in real-time today and they seem pretty tight. Another option would be to scalp in the futures and then hedge off using NADEX. I think this could work quite well for some of my "bigger" trades.

 

Forex -- Again, the benefit smaller contract size. An option would be to read the tape off the 6E. I haven't tried this but its something I'd like to try.

 

Weekly futures options & options -- bull/bear spreads could set up multi week trades without stop out risk

 

Stocks: Ability to pair off anything with anything.

Edited February 27, 2013 by Predictor

[Roger Felton 10]

Roger, what is the optimal nomber of ticks for intraday charts? or does it depend on what object you are trading ?

 

Yes, it would depend on the instrument you trade. Intraday, the ES might move in a range of 80 ticks and, if you looked at Crude Oil or Gold futures (CL or GC), you could very well see a daily range of 300 ticks. While the ES tick value is $12.50, there are only 4 ticks to the point. CL and GC have a tick value of $10 but there are 10 ticks to the point.

 

If we agree that a market that doesn't move cannot make money for anyone then isn't it logical that the more a market moves intraday the more opportunity there is for taking profit? There are lots of futures markets that offer this...good consistent smooth up and down volatility every day...but the ES isn't one of them.

 

Hope this helps....

[Predictor 11]

Just as an aside, I think the ES moves quite nicely. I think the key is to understand your market and how it moves. I don't trade CL but obviously those trading it will try to catch a larger run.. With the ES there is plenty to be made in little chops and also runs. I've never had a need to trade another market and I know many traders who trade equity indexes and won't go near something like CL. One of the nice things about the ES historically is that the market will chop around long enough for a trader to recognize they're wrong and get out without taking a stop loss. The market tends to be moving faster these days and trading more like actually the CL which is a downside for me.

 

One thing to be aware of is that if one wants to use a tight stop then they'll do better trading a market that makes larger moves. The reason for this is that such methods need big winners to overcome lower win percentage. These traders lose a lot of money in "chop" zones as they constantly get stopped out for losses when they wouldn't have needed too if they used a larger stop.

 

Likewise traders who look to trade chops/reversals can take large losses when volatility increases. Because a larger stop is basically a bet on a lower volatility environment.

[kuokam 10]

Thanks Roger.

Now, what is the main advantage you find in tick charts over time charts?

 

Yes, it would depend on the instrument you trade. Intraday, the ES might move in a range of 80 ticks and, if you looked at Crude Oil or Gold futures (CL or GC), you could very well see a daily range of 300 ticks. While the ES tick value is $12.50, there are only 4 ticks to the point. CL and GC have a tick value of $10 but there are 10 ticks to the point.

 

If we agree that a market that doesn't move cannot make money for anyone then isn't it logical that the more a market moves intraday the more opportunity there is for taking profit? There are lots of futures markets that offer this...good consistent smooth up and down volatility every day...but the ES isn't one of them.

 

Hope this helps....

[Roger Felton 10]

Thanks Roger.

Now, what is the main advantage you find in tick charts over time charts?

 

I haven't traded straight generic tick charts in years but, when I did, I found them to help eliminate some of the noise that time based charts are famous for. They're far from perfect but seem to be more in tune with the market by measuring transactions rather than some arbitrary length of time.

 

But the difference isn't all that dramatic. I ended up having to create my own bar type. The goal was to have the bars themselves filter the vast majority of market noise before a single indicator is ever applied. I'm very pleased with how it turned out.

Edited February 28, 2013 by Roger Felton

[SIUYA 11]

Every trader has their favorite broker and I'm not going to promote mine here, but I used Interactive Broker for a while back when they were promoting $4.80 RT commissions. Every time I needed to speak to them, I got a recording. They never called me back until the next day...and then billed me $30 for the phone call!!! No thanks.

 

Tick charts are an important fundamental chart type that millions of traders use. IB does not provide tick data, period. I would never consider any broker that is stuck in the 1990's. Good accurate unfiltered tick data is essential to me and many others. So, IB will ne technology They'll never see my business again....but that's just my opinion, of course.

 

Which is why I underlined in my post - "Often retail customers cant make the minimum account holdings for a good broker" - when I ring them up - very rarely required - I get straight through on a line to someone either in the US, Switzerland or Hong Kong.....

 

Yes - their data is not the best, and it maybe inadequate for some - but there are options around whereby you can use a separate data provider.

 

Personally I am happy to promote a broker that i think does a good job in many respects and I have no affiliation with them. Each person can try out what suits them, and we can all hope the bucket shops dont do too much damage (wishful thinking I know)

Edited February 28, 2013 by SIUYA

[sbfx 10]

Time to unsubscribe to this thread. Hope that this isn't the typical nonsense that goes on in most threads at TL.

[kuokam 10]

All this flow of compliments don't tell me how to better trade futures.

May we re read the title of the thread.

Edited February 28, 2013 by kuokam

[DbPhoenix 42]

All this flow of compliments don't tell me how to better trade futures.

 

May we re read the title of the thread.

 

Actually the thread is about why futures are better than forex, not about how better to trade futures.

 

But then threads often lose their way after about the tenth post.

[kuokam 10]

Problem aggravated, imho. Why hide? If he is doing some thing wrong, then the mods should intervene and sanction him accordingly. Otherwise he deserves the treatment of all accepted TL members who abide the the forum rules.

 

If you are not here to sell or promote then create a new TL user and post freely without the hassle.

 

Problem solved?

[TradeRunner 10]

Why hide?

 

Because "All I want here is for these attacks to cease and just let my post contributions stand on their own merit". Change TL user and stop promoting and the attacks stop and his post stand on their own merit - simple right.

 

TL owners are weak in this regard and have in the past tended to sided with the vendors.

Edited February 28, 2013 by TradeRunner

[zdo 20]

omg... futures are better

[DbPhoenix 42]

omg... futures are better

 

There you go, changing the subject again.

[kuokam 10]

I was the first to call for a cease fire here.

Now, I don't see what was promoted on this very thread.

 

Because "All I want here is for these attacks to cease and just let my post contributions stand on their own merit". Change TL user and stop promoting and the attacks stop and his post stand on their own merit - simple right.

 

TL owners are weak in this regard and have in the past tended to side with the vendors.