How to Make Money Trading Futures

[MarketMaster]

How to Make Money Trading Financial Futures
A Free Evening Presentation on January 24th 2002

In the presentation I am going to outline the steps to take to develop from a novice to a consistently profitable trader. I will start by discussing the three most common errors that novice traders make. I will outline an approach that will avoid these mistakes and that leads you down the path from beginner to seasoned professional. During this discussion I will show you a trading strategy that anyone can follow using the simplest of charting packages that has the potential to compound your trading capital at a rate of 1% a day. A 1% return will enable you to double your money every 20 weeks!

When I started trading, almost 10 years ago, as an independent trader on the London Futures Exchange, (LIFFE), you had to be a floor trader to take advantage of the ideas that I am going to share with you. Now that the futures exchange is electronic, everyone can benefit from the unique advantages that used to be the sole domain of the professionals. To register go here:

http://www.themasteryoftrading.com/FP/Presentation.htm

 

[TraderPattern]

Hi,

Are your ideas based on the material in Larry Williams book "Day Trade Futures Online" ? As I recall he took $10,000 to $1million in a year trading futures...

If you haven't seen his book, I highly recommend it for those interested in chart trading:
http://www.amazon.com/exec/obidos/A...7675/sr=8-2/ref=sr_8_71_2/102-5592774-6716104

I don't trade futures but I have traded QQQ (which replicate the action of the Nasdaq Futures)... Another person on this board, Naz, also trades QQQ I think... we focus on Level2 trading.... I suspect that you will be using a chart-based approach, since futures don't have Level2.

Anyway best of luck with your training business,
TraderPattern

 

[MarketMaster]

Hi TraderPattern,

My strategy is not based on Larry Williams, it is though a chart based approach.

Futures have depth of market, which is similar to Level2. Although the strategy that I outline in my presentation is a chart based one, I would not call myself a chart based trader. I developed my trading skills as a floor trader on LIFFE, when it was open outcry (i.e. traders shouting at eachother), so I did not trade from charts, I traded off the information available in the pit. As a screen based trader I focus 80% of my attention on watching the bid/offer action, as if I was still in the pit.

Thanks for your comments.

Malcolm

 

[TraderPattern]

Hi TraderPattern,

My strategy is not based on Larry Williams, it is though a chart based approach.

Futures have depth of market, which is similar to Level2. Although the strategy that I outline in my presentation is a chart based one, I would not call myself a chart based trader. I developed my trading skills as a floor trader on LIFFE, when it was open outcry (i.e. traders shouting at eachother), so I did not trade from charts, I traded off the information available in the pit. As a screen based trader I focus 80% of my attention on watching the bid/offer action, as if I was still in the pit.

Thanks for your comments.

Malcolm

Hi Malcolm,

You say your approach is chart based but then you say you spend 80% of your time watching the bid/offer action

Please clarify!!

TraderPattern

 

[MarketMaster]

TraderPattern

I said:"Although the strategy that I outline in my presentation is a chart based one, I would not call myself a chart based trader". I did not say that I trade this strategy, though it is based on elements of my trading approach. My trading is too instinctive to be put in a rigid system; my ability to read the market has evolved over the years of my trading career. I developed this system that I outline in my talk as an example of how a novice trader can evolve. My proposition is that to develop a trader should start with a simple system that he/she implements. This system needs to give an edge, but it does not have to be a big one. As the trader implements this system so they will start to develop their trading skills and their ability to read the market. As their skills improve so they will be able to refine their approach and improve their results.

My system has been producing an average profit of a little over 3 points a trade, trading FTSE futures intra day. Not that much you might say, but it works out at a profit of £17 per contract per trade including slippage and commission. There are on average 5 trades per morning, 8-11. This is just a starting point, I have a client who has been implementing this strategy and by adding a conservative exit strategy he has improved the results by a factor of more than 2.

I believe that trading is a game of skill and like all games of skill we develop through practice and persistence. I want to encourage would be traders to realise that they will have to go through a process of learning, rather than assuming that they should be able to walk into the market and start making lots of money. I also do not believe in the holy grail approach.

Reagrds
Malcolm

 

[options]

Hi Malcom,
Just reserved a spot for next week. Look forward to hearing you speak. (If you have done this for ten + years, then I want to listen to what you have to say.)
I already trade through Easy2, and consistantly take small points per day. Quite happy with 3-4 points per trade, even more so with 30-50 point runs, but am happy to let the market give me what it wants to. Though having said that, I have found that with futures, you can be right one second; not take the profit and be down by £180 quid or whatever before you realise it. (Do that 3-4 times a day...?)
It's alright having the entry points, quite another to actually take them, then get out at the right time?
The ones you don't take go right, and the one that you do after that goes wrong
I have found that in paper or light trading; £1 per point say, I can place a stop outside the market action and take profits on a regular basis. Yet in proper trades, these get cut at a loss as the minus points rack up.
So much so, that I find myself being drawn to scalping 3-4 points per trade and being happy with that. ( The feeling is being developed when I 'know' a trade was wrong or about to be wrong.)
I mean, I can make a profit on a 1 point gain!
Perhaps though you can explain the market depth so that I understand it more. I have used it to get a few points, then just when I thimk I understand it, it goes off the other way.
Am I right in thinking that it isn't a true representation of all the market action, in the respect that if say, more buys were coming in then sells, the market should rise?
Straight forward; but I believe some orders are held back, some are on the iceberg, ie dripped into the market; and some have been on the books for weeks.
Not a clear indicator then, as far as I see it. I hope that you can show me I'm wrong on this and show me how to read it properly.
See you this week.

All the best.

John. (options)

 

[MarketMaster]

Options,

I look forward to meeting you on Thursday. The depth of market is not a very useful indicator of strength or weakness as the orders above and below the market are intentions, rather than actual trades. Any of these oders could disappear before the market reaches them and many traders will wait for the market to reach their price before they enter their order and make it visible. The closer an order is to the current market prize the more dependable it is. I think the depth of market is useful for deciding where to place stops, if there is a large order near your desired stop point, stick your stop order behind it.

Malcolm