# Newbie: Trading Futures?



## sunny_123 (7 December 2009)

Hi all,
i am a newbie who try to get into futures market. i have a few questions:
1. what type of broker i should use: full service broker Or internet broker?
2. could you please recommend the brokers? what about MF Global? i want to do paper trading first. which broker provide such function?
3. what trading platform do you use? i did research on this, and found TradeNavigater has highest rank. Has anyone used it?
4. I want to trade both US and OZ market, if trade US market, do I have to stay up some nights to trade some products? because we have 15 hours time difference.

some questions might seem silly, but i really want to know the information about how you guys trade global market especially US market.

thanks a lot


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## Mr J (7 December 2009)

*Re: Newbie:Trading Futures?*

1. An internet broker.
2. I can only suggest Interactive Brokers, as that is the only broker I've used. They offer a very large range of markets with low commissions. They require an equivalent of a 10k deposit, but if you were to trade futures with them, you wouldn't be despositing less than that anyway.
3. Interactive Brokers has their own trading application but horrible charts, so I use Amibroker (for the charts).
4. Depends on the timeframe you trade. If you're trading the 4hr chart or slower, you might be able to get away with just placing overnight orders - seems a number of people here do just that.


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## sydney_hawka (7 December 2009)

sunny_123 said:


> Hi all,
> i am a newbie who try to get into futures market. i have a few questions:
> 1. what type of broker i should use: full service broker Or internet broker?
> 2. could you please recommend the brokers? what about MF Global? i want to do paper trading first. which broker provide such function?
> ...




Sunny,

I use Halifax Online (Halifax Investment Services. They supply the Trading Platform (Includes Charts & most common Technical Indicators), Live Data from Globex (major Currencies & Commodities). Brokerage is approx $30 AUD per completed Trade (both sides). Margin per Contract less than 2k. I don't know what others use, but I think I'm on a pretty good wicket. 

Regards

Darren


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## MRC & Co (7 December 2009)

sydney_hawka said:


> Sunny,
> 
> I use Halifax Online (Halifax Investment Services. They supply the Trading Platform (Includes Charts & most common Technical Indicators), Live Data from Globex (major Currencies & Commodities). Brokerage is approx $30 AUD per completed Trade (both sides). Margin per Contract less than 2k. I don't know what others use, but I think I'm on a pretty good wicket.
> 
> ...




Ouch, that is hefty brokerage for an online round trip on a futures contract.


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## sydney_hawka (7 December 2009)

MRC & Co said:


> Ouch, that is hefty brokerage for an online round trip on a futures contract.




I don't pay for the data or Charting. No complaints my end.


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## skyQuake (7 December 2009)

sydney_hawka said:


> I don't pay for the data or Charting. No complaints my end.




Not bad if you trade once a month...
Data/charts can come free with IB; or $50 through most respectable data providers. $30/rt sounds a bit pricey


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## wayneL (8 December 2009)

sydney_hawka said:


> Margin per Contract less than 2k.
> Darren




How so? You're telling me overnight margin on say... CL - is <$2k?

I'd like to see that!


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## sydney_hawka (8 December 2009)

wayneL said:


> How so? You're telling me overnight margin on say... CL - is <$2k?
> 
> I'd like to see that!




1100 Initial Margin, 800 Maintenance Margin. Thats a fact!!! I'm assuming you're talking about Nymex Crude.


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## wayneL (8 December 2009)

sydney_hawka said:


> 1100 Initial Margin, 800 Maintenance Margin. Thats a fact!!! I'm assuming you're talking about Nymex Crude.




Overnight Margin on Nymex Crude is $5,400 - $4,000 maintenance.

The mini contract is $2,700 - $2,000 maintenance.

These margins are set by the exchange, NYMEX in this case and as far as I understand, cannot be varied downwards by brokers.

Intraday margin is a whole 'nuther bowl of wax however.

Intraday on the mini (with my broker) is $1,350 - $1,000 maintenance, which is the only margin even remotely close to yours.

So exactly which margin are we talking about here? 

BTW I pay USD $2.75 a side on CL trades. 

$2.40 a side for ES etc. $1.81 for options


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## sunny_123 (8 December 2009)

*Re: Newbie:Trading Futures?*



Mr J said:


> 1. An internet broker.
> 2. I can only suggest Interactive Brokers, as that is the only broker I've used. They offer a very large range of markets with low commissions. They require an equivalent of a 10k deposit, but if you were to trade futures with them, you wouldn't be despositing less than that anyway.
> 3. Interactive Brokers has their own trading application but horrible charts, so I use Amibroker (for the charts).
> 4. Depends on the timeframe you trade. If you're trading the 4hr chart or slower, you might be able to get away with just placing overnight orders - seems a number of people here do just that.




thank you, does IB has any account for me to do Paper trading? does IB provide free live data? if you use different platform such as Amibroker, do you have to pay the live data?

If you're trading the 4hr chart or slower, you might be able to get away with just placing overnight orders----could you please explain what 4hr chart is? 

thanks heaps


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## sunny_123 (8 December 2009)

hi all,
thank you for all your reply, i really appreciat it.

best regards


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## Mr J (8 December 2009)

Yes, you can set up a paper account with IB - but you must first have a real account (which requires a 10k desosit). Data is free or for charge depending on the market. US markets are free, but you'll have to pay for most Asian and Euro data. The ASX is about $35 if I remember correctly.



> If you're trading the 4hr chart or slower, you might be able to get away with just placing overnight orders----could you please explain what 4hr chart is?




Charts are usually measured in time, and the 4 hour chart is one the common ones. It means that every 4 hours a new data point will be formed (or a bar/candlestick).


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## matty2.0 (8 December 2009)

sunny_123 said:


> Hi all,
> i am a newbie who try to get into futures market. i have a few questions:
> 1. what type of broker i should use: full service broker Or internet broker?
> 2. could you please recommend the brokers? what about MF Global? i want to do paper trading first. which broker provide such function?
> 3. what trading platform do you use? i did research on this, and found TradeNavigater has highest rank. Has anyone used it?




Using an online broker is enough for your needs. I assume you won't be trading large amounts of capital and you're a retail investor. 



> 4. I want to trade both US and OZ market, if trade US market, do I have to stay up some nights to trade some products? because we have 15 hours time difference.
> 
> some questions might seem silly, but i really want to know the information about how you guys trade global market especially US market.
> 
> thanks a lot




Yes if you plan to trade the US markets you will have sleepless nights and it might affect your day job. That is, 'if' you trade ... if you invest for the long haul then you might be able to sleep a little easier. But it can still be a harrowing experience, derivatives can move a very wide range in one trading day, and you could get wiped out if you don't have your stops/limits in place. 

Right now, markets in the US usually open at about 12:30am or 1:30am Australian Eastern time for equities. So you will need to stay up late. 

I would consider this in the context of how busy your lifestyle is, if you want to pick up overseas trading.


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## RazzaDazzla (8 December 2009)

Interesting thread.

From the very very little I know... I beleive that if you are to try your hand at day trading; then the futures are the market to do it in. This is because of the liquidity.

I believe though that you need an account of $10K-$20k to cover margins.

Are these assumptions correct?

I've got an IB account and am thinking of paper day trading the SPI. I've got no idea of any day trading stratergies though. I fully understand expectancy etc.

any trading stratergy ideas?


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## matty2.0 (8 December 2009)

RazzaDazzla said:


> Interesting thread.
> 
> From the very very little I know... I beleive that if you are to try your hand at day trading; then the futures are the market to do it in. This is because of the liquidity.




There's more liquidity in large cap equities, or even options. With futures however you have more of an ability to generate an income from your trading due to the large margin and leverage built into futures positions. 

But yes, you will need to maintain initial and maintenance margins.


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## RazzaDazzla (8 December 2009)

so if someone wanted to day trade one or two days a week, what would be the 'best' instrument to trade?

From what ou say, sounds like they'd be better of watching a RIO chart all day rather than a SPI?


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## skyQuake (8 December 2009)

matty2.0 said:


> There's more liquidity in large cap equities, or even options. With futures however you have more of an ability to generate an income from your trading due to the large margin and leverage built into futures positions.
> 
> But yes, you will need to maintain initial and maintenance margins.




Even though the SPI is fairly thin, in terms of value its far more liquid than big cap stocks though


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## Mr J (8 December 2009)

RazzaDazzla said:


> Interesting thread.
> 
> From the very very little I know... I beleive that if you are to try your hand at day trading; then the futures are the market to do it in. This is because of the liquidity.
> 
> ...




I'd pick futures for liquidity and low commissions (daytrading stocks is quite expensive by comparison). There's the SPI, but the better choice in my limited experience was the STW, K200, and the HSI/mini. There's also the FTSE on London open. Forex is another alternative, with very low margin (good for keeping a minimal account balance), massive liquidity, low trade cost, and free data. I can't say which market is best, because to me they all seem alike - my view being that markets are markets.



> so if someone wanted to day trade one or two days a week, what would be the 'best' instrument to trade?




Only intraday? I'd suggest futures or forex, due to the liquidity and low trade costs. I'm surprised so many trade the ASX, as the commissions are immense.



> any trading stratergy ideas?




I would approach intraday trading the same way as I approach a slower timeframe. The only difference would be the speed of action.


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## RazzaDazzla (8 December 2009)

Just browsing here;
http://www.asx.com.au/products/futures/equities/index/index.htm

Now;
There's the SPI 200 - I beleive this is the $25 contract over the ASX200
There's also mention of XJO futures with a $10 contract size.

I'm a little confused. I thought the SPI 200 which was the futures based on the ASX200 aka XJO.

so apart from the $25 and $10 contract size, whats the difference between th SPI 200 and XJO futures?

I'm guessing the XJO futures with the $10 contract size would be comparable to the e-mini in the US?


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## sleepy (8 December 2009)

When using Interactive Brokers do the initial and maintance margins apply to a specific market or also the number of contracts per market. For example would margin for US e-mini (ES) differ depending on whether I bought 1 ... or 4 contracts.

Also can anyone comment on their experiences trading forex via interactive brokers. Just wondering what advantages/disadvantages are if any (cf a forex only broker)... and can you use the same leverage ... etc

sleepy


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## wayneL (8 December 2009)

sleepy said:


> When using Interactive Brokers do the initial and maintance margins apply to a specific market or also the number of contracts per market. For example would margin for US e-mini (ES) differ depending on whether I bought 1 ... or 4 contracts.




Margin is per contract.

Each market has different margin requirements.


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## marknz88 (8 December 2009)

Whats the deal with maintenance margins?

Ive just started trading the SPI the last few weeks with FPMarkets...When I enquired about needing to keep 12k in my account (6k for initial and 6k for maintenance) they said I only need to cover the initial margin?

Currently I'm only trading intraday, but am considering taking longer term positions as my account isnt large enough to weather getting thrown around with scalp sized trades. If im holding overnight, is that where the maintenance margin kicks in?


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## cutz (8 December 2009)

Initial to initiate trade, maintenance to maintain position.

You don't require sum of the two.


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## marknz88 (8 December 2009)

When you say to maintain the position, how exactly does this work?

Say you have 10k account...initial margin = 6k so your utilizing 60% of your available margin

You have 40% margin/4k left in your account which you cant do anything with unless you trade another derivative with a smaller initial margin. Any movements during the day say from 4700-4600 result in a 2500 margin loss if you were to sell at 4600.

This has only affected your initial margin and now your total account size down to 7500? I dont see where the maintenance margin comes into play?


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## sydney_hawka (8 December 2009)

marknz88 said:


> When you say to maintain the position, how exactly does this work?
> 
> Say you have 10k account...initial margin = 6k so your utilizing 60% of your available margin
> 
> ...




To place a Trade, you must have the Initial & Maintenance Margin in your Account. That is all. If you choose to let your Losses run, then obviously you will have whatever else is in your account wiped out as well. The two Margins are minimum acceptable amounts to place a Trade. I hope this make sense.


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## marknz88 (8 December 2009)

sydney_hawka said:


> To place a Trade, you must have the Initial & Maintenance Margin in your Account. That is all. If you choose to let your Losses run, then obviously you will have whatever else is in your account wiped out as well. The two Margins are minimum acceptable amounts to place a Trade. I hope this make sense.




Thats how I thought it would work...

But I only started trading with 11k (short of the 12k for initial and maintenance for the SPI with FPMarkets..)

So when I purchase a contract I'm utilising just under 60% of my total margin with the initial margin, but I could also go and purchase a very small fx contract with the remaining 40% margin, thus leaving me with no maintenance margin what so ever.

Hence why I'm a little bit confused where it comes into play


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## sydney_hawka (8 December 2009)

marknz88 said:


> Thats how I thought it would work...
> 
> But I only started trading with 11k (short of the 12k for initial and maintenance for the SPI with FPMarkets..)
> 
> ...




Your Margins seem a little excessive. I pay 2.4k in total to Trade the SPI with my Online Broker.


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## sleepy (9 December 2009)

Some answers here:

http://www.sonray.com.au/info/edu-futures-contract

Margin

Futures contract margins are set by the exchange on which the contract is traded. Exchanges use a system called SPAN (Standard Portfolio Analysis of Risk) to determine the margin level for each contract. SPAN is a computer model that calculates the range of possible changes in price for a particular contract. The "worst case scenario," i.e. the most adverse change in price with the position a trader holds, is then used to calculate the initial margin. For this S&P E-mini contract, the initial margin is USD 4,000/contract.

Futures contracts also have what is called a maintenance margin, i.e. the amount required to hold the open Futures position. For the S&P E-mini contract, the maintenance margin is USD 3,150. If the margin on the trader's account falls below the maintenance margin, additional funds must be transferred or the number of open contracts on the account must be reduced. The margin associated with a particular contract is subject to change.


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## wayneL (9 December 2009)

sydney_hawka said:


> Your Margins seem a little excessive. I pay 2.4k in total to Trade the SPI with my Online Broker.



Whoa there Sapphire! Read Sleepy's link.

Once again we have to be explicit. 

The "margin" of a futures contract is the overnight margin set by the relevant exchange.

Let's stick with my example of CL, the standard crude oil contract. Initial margin = $5,400 maintenance margin = $4,000.

(NB *You only need the Initial margin to open a trade, not the sum of the two.* However, if holding position trades in futures you should have far far more money that that at your disposal to make sure you are position sizing correctly.)

I will have to to have $5,400 in my account for each contract to be able to open a trade. Let's say I entered long 1 contract at $70.00. My total margin therefore is $5,400, I have $6,000 in my account so no problem. I have $600 of spare cash in my account.

For each dollar of movement I win or lose $1,000 on one CL contract.

Maintenance margin is the amount of margin required to keep the trade open whitout a margin call. That means that oil can close down $1.40 (5,400 - 4,000) and I won't have to tip in more cash to may account.

Let's say oil closes at $68.50 the next day, down $1,500. I've fallen below the $4,000 maintenance margin and require $100 more margin for this trade. But Lo! I still have $600 cash in my account, so $100 of that is allocated to the margin for the trade. MM is still maintained, but my spare cash has fallen to $500.

No margin call.

Let's say the next day oil closes down another $1.00 to $67.50. 

We were already at maintenance margin the day before, therefore another $1,000 worth of margin must be allocated to this trade. But I only have $500 spare cash in my account.

Margin call time.

Broker rings and says, "Dude, we need another $500 cash to keep your margin at maintenance". You will therefore have to deposit the $500 into the account, pronto, or close the trade.

Some brokers have what is called "day margin". That is a reduced amount of margin requirement during the normal daytime session. With IB, day margin is 50% of the overnight margin.

So with IB I can open a crude contract with only $2,700 during the day session with $2,000 MM. So long as I close the trade before the end of the day session, that's all the margin I need (presuming MM isn't breached).

As soon as the session ends (or usually some minutes before the close), the margin reverts to overnight margin.

This is the type of margin sydney_hawka keeps referring to without explicitly stating that it is "day margin".

Some brokers have slashed day margins to very low levels in order to get day trader,s business. Quite a few offer e-minis at $500 and I've even seen $300.

But overnight margin is never lower than that set by the exchanges.


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## marknz88 (9 December 2009)

Thanks Wayne, thats a great explanation of how it works!


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## sunny_123 (9 December 2009)

it's interesting to view all threads and get the information from different traders. thank you all.


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## sunny_123 (9 December 2009)

matty2.0 said:


> Using an online broker is enough for your needs. I assume you won't be trading large amounts of capital and you're a retail investor.
> 
> 
> 
> ...




thank you for your advise. i will consider it seriously.


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## sunny_123 (9 December 2009)

Mr J said:


> Yes, you can set up a paper account with IB - but you must first have a real account (which requires a 10k desosit). Data is free or for charge depending on the market. US markets are free, but you'll have to pay for most Asian and Euro data. The ASX is about $35 if I remember correctly.
> 
> 
> 
> Charts are usually measured in time, and the 4 hour chart is one the common ones. It means that every 4 hours a new data point will be formed (or a bar/candlestick).




thank you heaps


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