US Futures and Commodities

[Burney]

Hi,
Have noticed a couple of posts re Futures Trading ,after a number of years trading Stocks,SB,etc have started to Trade US Commodities Options and Futures. So far it is going fairly well and I am hoping to eventually do well enough to make a living from it(Christmas Holidays always increase my desire to chuck in the day job ) .Anyway was wondering if there are any others out there who trade mainly US Futures and Commodities and if there was any interest in starting some threads or a Forum dedicated to them-Happy to do my bit if there is.


Cheers


Alan

 

[FTSE Beater]

Hi Burney

I like you are making the switch to futures trading. In the new year I'll be trading the Stoxx, so anything you want to post on futures trading would be great.

 

[Burney]

Hi FTSE Beater,
Was beginning to think I had offended people-doesn't seem to have been a great deal of interest-thus far-maybe it is the holidays !!-anyway happy to swap thoughts and ideas with you if no one else and maybe things will pick up.I have been actively trading US commodities since May 2002 .Trade mainly Yen,Sugar,T-Bills,Eurodollar-all on a Stop and reversde basis.Will also take trades in most of the others US Bonds,Euro,Cocoa,Coffee,Gold ,Silver etc.Have also started to trade E_Mini S&P-tried it daytrading but found that pretty tough-so Position/Swing trade it like the others.

As I said, I traded stocks for years but was getting fed up with limited returns and lack of leverage as well as the inability in the UK to go short without resorting ot CFD's and Spread Betting.

The main thing I have found is that Money management and Risk Management are the biggest things to get right compared to stocks.
Also, I am starting, due to increasing accoutn size, to look into Position Sizing(have been trading one lots only up till now).

Anyway interested in your thoughts on what you are doing and why picked solely the Stoxx futures.Lets try to keep this going and generate some interest.

Cheers

Alan

 

[Skimbleshanks]

There are quite a few on these boards who trade futures, although I notice there is interest being generated in commodities and FX.

I wholeheartedly agree with your statement about money management and risk management - these are THE two things to concern yourself with when trading, but the vast majority disregard the importance of these disciplines.

My trading strategy is based primarily on entering at a point which gives me the smallest risk, and I have just started incorporate ROR (Return on Risk) into my performance analysis.

 

[delboy trotter]

Skimbleshanks,

Can I ask you how you determine your entry point to get the smallest risk and how you calculate your ROR?

thanks,

dt

 

[Skimbleshanks]

Sure, Del.

My risk is 2 points or less ($50 x 2).

(points made x $50) x 100 = ROR% (return on risk)
-----------------------
risk


So, for example, if I made 15 points, my ROR would be 750%.

(15 x $50) x 100
-------------
(2 x $50)

To get the smallest risk entry point you need to work out where previous support and resistance is, and jump in. If you are wrong you should know within 2 points, so exit and reverse to ensure you are always flowing with the price action. It takes a bit of practice, and b*lls!

 

[delboy trotter]

Thanks Skimbleshanks,

Do you only trade market hours and ignore the pre and post market action on ES H3?

dt

 

[Skimbleshanks]

I trade market hours only. I do have a peep at the overnight as you can quite often deduce what the opening bias will be.

 

[Burney]

Just to build on the comments re risk etc, as I mentioned I very rarely daytrade as I found it didnt suit my style and personality(something which is I believe is very important for success).On a Position/Swing Trade basis -I use the following : I never risk more than 3% of my Account equity on any trade and preferably 2%.I will trade the maximum number of contracts that with my risk or stop will allow me to utilise that 2/3%.I find that usually the more volatile contracts like E-Mini,Yen etc I am still limited to one contract.For things such as the soft commodities,Sugar ,coffee,cocoa and things like T-Bills and Eurodollars I can trade two or three safely and still remain within my rules.The one area that I am finding challenging is trying to find the best way to predetermine balancing an appropriate stop to minimise whipsaws but also trade as many contracts as possible. I would be interested in how some poeple are determining where to put their stop.Are you using things such as Average True Range,Historical volatility or Support and resistance.Also anyone know of any software or Excel models that will help with this I would be interested to hear about them.

Alan

 

[FTSE Beater]

Hi Burney

Anyway interested in your thoughts on what you are doing and why picked solely the Stoxx futures

I've made the switch to futures, mainly because I had a terrible December, and I was finding the swing trading a lot harder to do. Little things like stops getting hit and support and resistance lines not working fully on the US stocks (too many heavy weights pushing prices about).

I've been focusing on the Stoxx after a conversation with Helenqu. She pointed out to me how much easier Stoxx trading is. The usual futures stuff of 1 point spread (as apposed to the 5c spread I was getting on spreadbetting the US shares), small contract size and some very nice trending moves.

I like the sound of Yen futures and soft commodities - but I'm going to see how the Stoxx goes first (once I get the go ahead from IB, which seems to take an eternity especially as its Christmas).


Skim is right (yet again) with managing risk. After the terrible December, the only thing thats kept me in the "game" was the control of the losses. Any tips Skim on making the move from spreadbetting to futures? (apart from controlling risk).

 

[Skimbleshanks]

I only use stops when entering a trade, and just reverse my position if I get the direction wrong. I then let the trade run until I see an appropriate exit at which point I will reverse my position. If I'm honest I don't usually place stops during the trade because I am sitting in front of the screen the whole time and I know my risk (Emini S&P can easily move 9 points in 5 minutes on news).

Correct positioning of stops is an art, not a science.

 

[Skimbleshanks]

FB - it's all about risk. Nothing else. Remember when Alan Farley said that you need to know within a 5 minute bar if you are wrong? Just stick rigidly to that principle and you'll be OK.

If you are wrong, just flip the trade so you are going the right way. You will find it very difficult to get wiped if you are using a small risk. If you miss the correct low-risk entry point, just sit on the sidelines, never ever chase the trade because your exposure to risk is just too great. Once you chase a trade and get in, even if it goes your way your subconscious will tell you that it's OK to have a large risk exposure. As you know, once you get into bad habits you're finished.

Oh, and just check you know when the economic figures are being announced - don't even think about being in the market at the time as you'll get slaughtered. You can see the US announcement timetable at: http://finance.lycos.com/home/research/econ_calendar.asp

 

[ChartMan]

I'm always dismayed at the number of people that don't/can't run their winners.Calculating you R/R before entry and stop loss placement is a waste of time if you don't know how to run you winners. Calculate, theoretically, the move from basic TA principles- The triangle breakout, the size of the move up from a pullback, the target for a Head and shoulders (+ inverse) move, the move of a down trend pullback etc. Be guided by indicators in assisting your judgement as to whether the move is likely to deliver it's target and if there's more to come. The Dow is highly predictable in this respect. A key indicator on the Dow is how a particulr TA formation is resolved at or very near the 100MA on a 1 minute chart.
Search the archives under Dow for all the clues....

 

[Skimbleshanks]

Peeps can't run their winners for one reason only - fear. Fear that they will lose some of their gains if they don't bank their profits. But they have no problem in running their losers! It's all emotion and psychology. And the hardest part of trading is conquering your fear. Once you can do that consistently, you're on the home straight.

 

[Burney]

Have to agree-the longer I trade the more I understand that what makes a winner is more about the ability to conquer the great demons of fear and greed.We are so programmed in life to be right that we find it difficult to admit we are wrong therefore hold on to the losers too long and also take profits too early to prove ourselves right or as Skimbleshanks says to remove the fear of losing some of the gains.
If we put proper moneymanagement principles in place and have assessed the trade correctly we should not move a stop further away nor ignore it -likewise we should let the trade run to capture the maximum gain.It is all about the probabilities.I can't remember which one it was but one of the people interviewed in the Market Wizards books reckoned they made the majority of their profits from a few big winners each year. I found Alexander Elders book "Trading for a living" a great insight into the Physcology of Trading as well as having some interesting insights into the oft overlooked Money Management and Risk side of trading.

 

[Skimbleshanks]

Elder's book is good. The other good one at covering risk size and money management is Trade Your Way to Financial Freedom by K Van Tharp.

In the latter, Van Tharp demonstrates that you can enter a trade direction on the flip of a coin and consistently win IF you are using proper money management.

So perhaps that is the Holy Grail.

 

[Burney]

I got both of K Van Tharp books over Christmas but havent started them yet-looking forward to getting my teeth into them as I have heard consistently good reports.It does surprise me that there are very few good books on Physcology of trading and Money/Risk management compared to all the others on indicators etc.Since as you say you can be a loser with 80% correct trades or a winner with 20% as long as you have you pay attention to risk and money management.For so long I was more focussed on being right all the time rather than managing the risk.As ever it is all a balance-I read a quote somewhere which said " If you don't bet you cant win-but if you cant bet you wont win either".So true-but how to do it !!!

 

[nigepl]

Hi all
Does anybody trade $5 mini-sized Dow Futures or are they still not liquid enough,it seems most seem to trade stoxx , naz and sp,
is there any reason for this
Nig

 

[Skimbleshanks]

I trade ES because a) the trading hours suit me, b) the liquidity is wonderful, and c) it's not boring to watch because of its volatility.

 

[Burney]

I trade the ES for similar reasons plus I only tend to trade one Index as they all move in a similar fashion.Also hopefully one day when I am a big boy . I will progress to the full size S&P which is the most liquid of all so since they more or less move together I should have a better understanding of its nuances(Thats the theory anyway)