How to learn to trade futures ?

[osho67]

I trade spreadbetting at the moment in UK.I have realised at a very considerable cost that due to wide spreads and bias it is very difficult to profit in spreadbetting.

So what do I do next?. I think I should learn how to trade futures but I donot know how to do this. I am keen to learn and I have all the time.How do I go about this?

Please give your comments, critisisms and all sorts of ideas.

What percentage of people make money in futures?

Thanks so much . I hope members on this board will help me to train myself and become a successful trader.

 

[spoon102]

Set up an account with IB you can trade ES and NQ futures and you dont have to have the $25,000 minimum.

 

[Morris]

Well, my opinion (and I may be in the minority here) is that if one cannot trade the indices profitable with spread bets, then one should NOT start futures trading.

The reason is that, with a good trading strategy, it is perfectly possible to trade an index (I prefer the FTSE) profitably, even with the larger spreads.

Only once one has a consistently profitable trading history (say a few hundred trades) should one even consider moving to futures.

Jusy my opinion of course.. DYOR.

 

[spoon102]

Spreads on NQ spread bets are 4 points thats insane. Spreads on NQ futures are .5 and you can even take the other side of the trade and make the spread. Each ES contract is worth $50 per point and each NQ contract is $20 per point. With a 4 point spread you are effectively $80 down before you start if you spreadbet. Futures drive the stock markets and IMO if you cannot read the futures you may as well not bother trading.

 

[Morris]

.."and IMO if you cannot read the futures you may as well not bother trading..."

Hmm... a sweeping generalisation - there are plenty of good stock traders who cannot trade the futures profitably, no matter how narrow the spreads are. Horses for courses etc..

The point that I was trying to make in answer to Osho's initial query is this - it is a mistake to blame spreads for a lack of profitability when trading indices via spread bets. Instead, one should concentrate on improving the strategy employed BEFORE even thinking about trading futures.

I would suggest that a strategy which fails to produce consistent profits using spread bets is in need of re-examination.

But that's just my opinion of course.

 

[Helenqu]

Hi Osho,

I'd largely agree with Morris. If you can't do OK/breakeven with SB's on small stakes then you aren't ready for the additional pressure of futures where the money you can lose is so much greater. I always seem to be saying this to you don't I? Be careful

BTW if you check back on CTS/TBS you'll see my rationalisation for choosing to trade STOXX futures. That might help you with your quest.

All the best,

 

[MarketMaster]

It all depends on your level of trading activity, I am far more accurate in anticipating the direction of the market in the very short term and hence trade very actively, with tight stops. Such an approach would get crucified in the spread betting arena.

 

[ChartMan]

On SB's, don't forget you can bet $1 a point so the "fee spread" is 4$. Sure, anyone betting $50 a point on ES has a $50 fee and on dow it would be $300. You have to look at it in % terms really. Whereas IB for example charges $2.40 for ES, the minimum bet is 50$ per point but the fee is fixed at $2.4 whether you trade $50 a point or 500$ a point. On the DOW with SB 6 point spread that's 6 in 8500 about 0.07% The wide spreads on SB's are ok for small bets,but then that's all some people can afford.
I also concur that if you have a reasonable longer term strategy on SB, you should be able to win. If you are fortunate enough to move on to someone like IB, with the same strategy, theoretically you should increase your profits, % wise.
I don't see how you HAVE to trade futures..To me , trading DOW cash or ES futures on finspreads is the same thing.It's just a chart of an instrument. Pity there isn't an ES yesterdays you can trade. We'd all clean up
Maybe you're talking about trading things like Corn Futures ... well my corn comes aout of a packet called Frosties....... That's as close as I want to get to those sorts of futures.I'll leave those for the Gurus.
Market master, I think we all know the limitations of SB's.However, with great skill and a little luck, I have managed to scalp the dow across a 30 point range. This was at a 3 peak negative divergent top and I knew almost exactly what the dow would do nad watched the Fins movements like a hawk. NB there is no chance of doing that any more as you cant continuously refresh the price
As a generalism, there is NO WAY you can scalp on SBs because of the spread and more importantly, the bias.

 

[Morris]

Morning Malcolm, that's a valid point - I have a FTSE strategy which I trade via CFDs (4 point spread, bias - probably).
I've traded this 70 times so far, average gain is about 2.5 points per trade. Now I guess I could increase that gain with futures, but I am not happy with such a small gain per trade and would rather improve the strategy before trading it via futures.
Like Helen, I think one should be consistently profitable before scaling up position size.

 

[mooms]

I agree with Morris the Spread for DJI is 5 pts with CMC, therefore using 5/8511 x 100 =0.06% spread.

There you cannot blame the spread it has to be your trading method, the very nature of the stock markets is that the majority 90% lose their money.

Trading the futures is no different, your'e pitting your witts against millions of people.

Merry Xmas

Mooms

 

[ChartMan]

It's not clear exactly what futures Osho is talking about. I've asked him to clarify before half of us go off on the wrong tangent.

 

[MarketMaster]

Hi Morris,

2.5 points average profit is good or bad depending on the frequency of trading. I knew floor traders that traded 3-4000 contracts a day, for them a small fraction of a point average was good.

But even if you were trading just once a day and making an average £25, that is £125 a week, which is 2.5% of £5000 or lets be more modest it is 1.25% of £10,000. 1.25% week in week out sounds good to me.

A question about spread betting, if you were to chart the trades of a spread betting market (it is a different market to whatever market it is claiming to be), how similar would it be? It can't be exactly the same, so how different would it be? If I was trading a SB market I would want to chart and trade of that!

 

[Helenqu]

A question about spread betting, if you were to chart the trades of a spread betting market (it is a different market to whatever market it is claiming to be), how similar would it be? It can't be exactly the same, so how different would it be? If I was trading a SB market I would want to chart and trade of that!

One big joy for me in moving to futures was to suddenly be able to trade what I saw in the charts, not trying to anticipate and play the bias all the time as I had had to do with SBs.

I also think your point re style of trading is very important. I was trying to very short term trade SBs as I now do futures. The two don't go together at all, with SBs you need a longer term strategy (well longer than the few mins that I am instinctively comfortable with anyway


Horses for courses.

 

[ChartMan]

Yes. Trading off their chart helps, but not a lot. I does give you a clue as to how they organise their bias and perception of the underlying instrument. There was a time when company A had got their price algorithm screwed up, by just a tad...... Company B had a slightly better algorithm..... By using the price and chart from company B, and trading company A, I was able to clean up. Best I scored was something like 22 wins out of 23 scalping the DOW. I just had to have the balls to hit the button, irespective of the price. It was FUN while it lasted. Pity company A got their act togther.

 

[Morris]

Thanks for that Malcolm.

My target is modest, 10 points per day on the FTSE - maybe 4 round trips per day.

I can 'optimise' my results by employing tighter stops, but as we all know, this can get you whip-sawed out more often.

Oh well.. guess I'll persist with it as long as it's making profits overall.

 

[Splitlink]

Since I have been trading with IB I have gone back to Financial Spreads for a couple of trades. Because I do not have the time to monitor both sites I took two overnight futures and kept them for about three days. Since I wanted deep stops on them I only traded at 5p per point so that I did not have to worry about any loss too much. Both trades made excellent profits percentage wise which illustrates what Helen says- spreadbets are more attractive on a longer term basis. I tried to use, as best as possible, the bias as a weapon against them. It can be done but it took my mind too much off the real game- making money at IB.

On the short term trades the SBs can move their biases about at their convenience but they cannot be so certain on long term strategies as to which way the market is going to go. 100 points from one day to another is nothing and that is where, in my opinion, the trader can beat them.

Regards Split

 

[Mr. Charts]

Chartman,
"Sure, anyone betting $50 a point on ES has a $50 fee"

Emini S&P futures have a spread of .25 ie $12.50
Emini Nasdaq futures spread is .5 ie $10

My broker charges $5.80/round trip which is higher than IB but has excellent back-up service for outages and you are, of course, trading directly into Globex with fills within one second.
In addition you have depth of market which sometimes, not always, gives an indication of support/resistance.

There is no-one trying to screw you, not that I am suggesting for a moment that bookmaking companies would do such a thing.......

If you can profitably "bet" indices with spreadbetting over a period of time, you will make a lot more money trading the real market.

This is my experience and I trade US futures and US shares for a living.

 

[spoon102]

Fact, futures drive the stock markets and not the other way round. If there is a sell off in the futures stock prices will follow. I did not say that everybody should trade futures, what I said (and this obviously applies more to day traders) was that you must be able to read the futures.

I do not agree that you should start to spreadbet before trading futures. As a personal example I traded ES/NQ for three days last week. I made profits of $1,100, $935 and $662.50. I cannot remember the exact trades but I would estimate that 80%-90% of my profits came from moves of less than 4-5 points. Now if I had traded using spreadbets I would have only broke even or perhaps have made a loss. Now where is the benefit/education in that? You could abandon a perfectly good trading strategy simply because you fail to make any money with a spreadbetter. Remember that these Spreadbet Companies are glorified betting shops. Put in very simple trems they want you to loose money. They will do everything possible to make sure you loose money. They are normally quite happy to take the other side of your trade or to make money on the spread.

My advice would be to start as you mean to go on. Futures trading is very risky and can be highly leveraged. If people want to learn before taking the plunge into real trading why dont they paper trade the real markets instead of betting with SB companies?

Only trying to help as Ive personally been down all the other routes before.

 

[Skimbleshanks]

I believe it is a good idea for anyone starting out to use SB companies before trying to play in the big boys' playground.

My reason is this: over a 12 month period 85% are reckoned to lose, 10% break even, and a mere 5% win. So we need to assume that unless you have the key to the door of the 5% club then you are statistically likely to lose.

Here's the two options available.

Option A:
Open a futures account with a broker (the average opening account is $10,000 - some are $25,000 and the cheapest I know of is $2,500). With a futures account you are heavily margined and at $50 per point on ES and will be unable to trade after losing just 8 points. (You need to have an initial margin in your account before you can enter a trade.)

Option B
Open an account with a SB company, for example £250 will open you an account with Fins. Trade at, say, 50p a point and you will have to lose 400 points before you are unable to trade (again, you need a minimum margin in the account to be able to place 50p bets).

I know which one I would go for if I was starting out trading index futures. And a SB company's trading platform will also provide you with the emotion (elation and despair) which you just cannot get paper trading.

Every $50 I make on futures is from someone who has lost. Remember, the big boys don't lose, it's the little guys who lose. I'd hate to think that this was coming from any T2W member, so PLEASE PLEASE don't play with fire on the futures market until you really know what you are doing. And when you do know what you are doing, may the best girl win.

 

[Henry]

I know which one I would go for if I was starting out trading index futures. And a SB company's trading platform will also provide you with the emotion (elation and despair) which you just cannot get paper trading.

I'd go slightly further than that and suggest that anyone should start by papertrading before going on to SB or futures; if you can't make money on paper when there isn't even the emotional aspect to deal with (at least not to the same extent), then you've got little chance with real cash, even 50p's. But I know paper trading is an emotive subject!

H.