This post was contributed by a guest author, and does not necessarily
reflect the views of Richard or MovetheMarkets.com
Let me start by stating I lost $241.30 (commissions included) in the oil markets today.
Now I’m going to make a statement that I have believed since I began my quest to trade futures successfully. Futures trading is not harder than trading stocks.
My simple proof is these two charts. Pick any day, and the comparable stock index will trade the same as the futures counterpart. The main difference is leverage. If you can trade one, you can trade the other. My advice to anyone interested in learning to trade the eminis is to practice with a simulator, and/or the appropriate stock counterpart. SPY for the ES, DIA for the YM, and QQQQ for the NQ.
I keep reading posts on other blogs that talk about how futures trading is cut-throat, a zero-sum game, or whatever. They are right on both counts. Daytrading is cut-throat if you want to be dramatic. I also agree with the point about the zero-sum nature of the futures markets. However, if your time-frame is intraday, I don’t see how that matters. The only two requirements to trade any market are volatility and liquidity. That creates opportunity.
If a bear flag is printing on the NQ, it is also printing on the QQQQ’s. If you can trade a breakout on the SPY, you can do it on the ES. Leverage is a double-edged sword. The only difference between trading the different vehicles is the amount of money you will win/lose. So if you have a desire to learn to trade the eminis, start off trading 100 share lots of the stock counterpart. Your losses will be limited that way. Once you can successfully identify patterns that offer you an edge on a consistent basis, switch over to futures. If you find that the increased risk is messing you up mentally, then go back to stocks for a bit.
I have the luxury of not having to trade to feed my family. When going through a drawdown, I can always revert to paper trading. However, Phileo made the switch, and he is feeding his family quite well even with the added pressure of being a full-time trader. As far as I know, he jumped in with both feet as I did. Looking back I probably should have traded the QQQQ’s first. However, if you do that and are not a full-time trader there is one major drawback that I can see. Without the ability to claim Trader Status with the IRS, the wash-sale rule will be a nightmare if you make several trades per day in stocks. In fact that is one reason why I have not traded a stock in over four months.
If I’m wrong about my basic premise that futures trading is no different, then its only a matter of time before I’m broke, and publishing a porn blog (with ad revenue). If I’m right, then I will continue to trade the patterns that I see over and over. Any problems I have had trading futures has more to do with me than the instrument I chose to trade.
In no way am I trying to convince anyone to trade futures. However, there is a safe way to do it without jumping in with both feet.
On any given day, they look the same to me. But then again, I’m no rocket scientist. Maybe Prospectus (who is a rocket scientist) would like to give his thoughts. :-)
This post was contributed by a guest author, and does not necessarily
reflect the views of Richard or MovetheMarkets.com
