I will be starting as a new trader at a prop firm in Chicago in February. I am wondering, as a new trader, what are some better futures markets to begin with (it is up to me)? What is the best way to go about finding a comfortable market? Less volatility, easier to understand and translate fundamentals, most liquid? I prefer metals, grains, and softs, over interest rate driven products and forex...Thanks!
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How much capital do you have? A lot of futures can have pretty high margin requirements, which might make it better to start of in commodity etfs. Check CME and NYMEX to lookup the requirements.
I have a minimum daily stop loss of $2,000. My guess would be a $100,000 account (2% loss per day). With so many futures markets price so high (gold, corn, coffee, wheat, etc.), risk-management wise, it makes it difficult to buy any more than a single contract at a time, whereas in silver and cocoa, for example, it is easier to buy 2-3 contracts.
You could look at minis? They may allow you more opportunity to work a position.
As far as WHAT to trade, I would try to find the top performers in the shop and follow in their footsteps. As long as its someone who is willing, you will learn much faster from the mentor relationship than by watching the markets by yourself.
Mini's...are you kidding me? Why not take a shot at the roulette table - 00 as a matter of fact...it will take forever for him to make a living. I trade crude and gold. Stick with the more liquid names..I'm with you...I don't like trading the DX or bonds because they are similar to the anti-christ...but I watch them to play the EUR and GBP....and by the way...I don't trade the ES since I use it as a barometer - just like the DX.
Why are e-minis are any harder then crude or gold? I trade and have made money in all three of those products and know many people who have made their year trading spoo eminis. Crude and gold are more volatile but that just needs to be factored in when sizing trades.
Think of how the futures markets (e-minis) really work. A major use of ES is probably as a hedge for options trading firms. Sell a put on an equity index, sell futures, etc. You think you can predict what trades will be offered and taken which will effect the futures markets? Most of those trades have no fundamental or technical aspects to them, simply if a bank or hedge fund comes in giving up edge.
I have reports for you to look at...but I can't do it thru here...it's in a pdf...but you can start reading up on the markets and get a handle before you start if you want. pm me and i'll send them to your email daily...it goes over currencies...grains...and metals...levels and supports...etc.
I would stick with 2 or 3 highly liquid names in the beginning until you have much more experience. Additionally, unless you are hedged overnight, any loss per day is relative since markets move overnight vs prior close and you easily could fall worse than that.
Also, you should study risk of ruin, not only of all your money, but through psychology.
How about if you lost 10 days in a row, that would be 20% of your account. 1) would that cause you to trade differently (meaning you are less risky) but now it will take you 3x as long to make it back since you change the daily win/loss parameters, and 2) What is your stated goal per day. Obviously its up to the markets and your choice of instruments, but if you are going to lose 2k per day (risk it), you had better expect to make at lease 3k per day. If that sounds unreasonable, then pick a lower dd
Thanks.
I plan on employing pretty strict risk management. I have a formula to standardize the volatility in dollar forms and will adjust amount of capital in play based on that. It makes unit sizes different for different commodities based on contract size and volatility. (I read it in a couple books - not my own formula, but it seems to work). Gold and Oil seem pretty standard for new traders, I was wondering about grains and softs? I.e. Coffee, Sugar, Wheat, soybeans...?
Also, do you suggest closing out my trades daily due to risk of loss overnight? I have simulated training first, and until I do well there, I wont trade live, so there is incentive to take a high number of small profits, instead of the way I would ideally like to trade, but may take a lot longer to prove worthy....
this is easily researched but i am quite sure that in terms of % moves oil is way more volatile then spoos. And day-trading spoos is a favorite pastime of many big name macro guys. I know because I have seen it with my own eyes. On this subject I am very very sure that my experience dwarfs yours so I think you should stop talking like you are so sure about this.
And of course it is very difficult to predict single day movements in stock futures, but that is true of every market.
The 2K stop is puny but you could still kick around very small size (like 1 or 2 contracts).
**"SPUs" hence S&P FUTURES. And you can take your "very very sure" self back to your parents basement. He isn't trading my money, do it however you or he wants. Just trying to contribute with information I believe to be beneficial. Didn't know Tudor was on the boards here. Have a happy new year.
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