# Returns achievable for Futures trading



## pavilion103 (23 December 2013)

It seems to me that in terms of return on initial outlay, futures trading can provide by far the best return and "bang for buck".

Let's assume that someone is a proficient trader; incredibly disciplined and with great risk management. 

Assume one contract (of whatever it is) requires, say, $7,500 to be in your account.

I trade the FTSE, so I'll use that as an example. I don't think it's unrealistic at all to assume that a good trader can make, say, 50 points per week on average (almost AU $1000). 
That's around $50,000 for the year, only requiring an initial $7,500 (not sure what the FTSE amount is) or so.    

If we are talking in terms of substituting income. Let's say someone even trades 2 contracts, required between $15,000 and $20,000 in the account. And can make $100,000 for the year.


Of course, this all assumes that the trader is actually very proficient. I'm not saying anyone can just go and do this. But if they in fact are, then the returns that they can generate would have to be almost unmatchable using any other vehicle?

To generate $100,000 in shares. Even a whopping return of 30% would require around $300,000 of capital. 


I know futures is far riskier (and of couse returns are never guaranteed), but if you are someone who knows how to trade it, it seems like this really is a very good way to generate a good income, for small intial outlay. 


I must admit that when Tech first got me onto futures, my thinking became 100 times bigger! And generating some very good results has solidified this thinking. 


What are other people's thoughts?
"Bang for buck" can you think of a better alternative?
It seems to buck the 10-30% return thinking.


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## ThingyMajiggy (23 December 2013)

pavilion103 said:


> It seems to me that in terms of return on initial outlay, futures trading can provide by far the best return and "bang for buck".
> 
> Let's assume that someone is a proficient trader; incredibly disciplined and with great risk management.
> 
> ...





You never realised this? Futures always have been a far better bang for buck instrument to trade. It's always baffled me why some here day trade stocks, when there are futures to play with. Also WAY cheaper to actually trade, $2 a round trip vs what.....$20-30 for stocks? Unless you go IB.


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## CanOz (23 December 2013)

pavilion103 said:


> It seems to me that in terms of return on initial outlay, futures trading can provide by far the best return and "bang for buck".
> 
> Let's assume that someone is a proficient trader; incredibly disciplined and with great risk management.
> 
> ...




There is only a better alternative in options or methamphetamine...


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## Beej (23 December 2013)

All you (the OP) are doing is describing the impact of *leverage*. Your $300k equity portfolio returning 30% to make $100k is an unleveraged example. If you could borrow ~$270k-$280k to get into the same position/outcome, then your result would be just as good as the futures example relative to the capital you actually put in.

The key difference with futures vs cash equities is that for most people more leverage is available more easily via futures. To get the 10-15 x leverage that most futures markets provide, all you have to do is be able to stump up the margin - no need to apply for, or service, a loan facility. 

Of course the counter to this is daily mark-to-market and margin adjustments - if your position goes against you, you need to be able to fund that change in value of your position in full every day with cash. I think this coupled with a lack of understanding of the leverage in futures is what causes most small plyaers to blow-up thei accounts from time to time.


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## Beej (23 December 2013)

ThingyMajiggy said:


> You never realised this? Futures always have been a far better bang for buck instrument to trade. It's always baffled me why some here day trade stocks, when there are futures to play with. Also WAY cheaper to actually trade, $2 a round trip vs what.....$20-30 for stocks? Unless you go IB.




You only pay $1 brokerage per contract buy/sell?? Who is that with???

PS: Having said that, futures are cheaper to trade as the leverage is built-in. A $300k cash equity trade will ikely cost you $330 through most retail online brokers, in and out. Whereas the same exposure could be bought with say 2-3 futures contracts, at a cost of maybe $30-$60 in or out. Maybe that's the point you were making?


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## Caveroute (23 December 2013)

pavilion103 said:


> It seems to me that in terms of return on initial outlay, futures trading can provide by far the best return and "bang for buck".
> 
> Let's assume that someone is a proficient trader; incredibly disciplined and with great risk management.
> 
> ...





Why are futures far riskier ?

Assuming you know how to place a stop,

and your s/w places a stop loss order on entry,

and you orders are stored on the exchange.

If you want to be really smart you can hedge using options - something  I have yet to explore. 

As for account size, triple your margin for whatever size you trade, so if your margin is $1000 and you trade 3 contracts - that's 9K  - should be enough. as long as you are consistently profitable.

And if your not you should't be trading more than one contract anyway.   

I guess EOD trading means less screen time and that's real benefit.


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## ThingyMajiggy (23 December 2013)

Beej said:


> You only pay $1 brokerage per contract buy/sell?? Who is that with???
> 
> PS: Having said that, futures are cheaper to trade as the leverage is built-in. A $300k cash equity trade will ikely cost you $330 through most retail online brokers, in and out. Whereas the same exposure could be bought with say 2-3 futures contracts, at a cost of maybe $30-$60 in or out. Maybe that's the point you were making?




Most of the futures brokers are around that depending on what you trade. IB, Global futs, Velocity, ABN AMRO, and the more volume you do the better rates you get in most cases. Some are even 60c a side or lower, especially for big popular markets like the ES, with 500$ margin to get into the trade. As a day trading venture I don't get why people would choose stocks.


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## CanOz (23 December 2013)

Caveroute said:


> I guess EOD trading means less screen time and that's real benefit.




If anyone wants to position trade or swing trade futures EOD then you must look at trading spreads...


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## Beej (23 December 2013)

ThingyMajiggy said:


> Most of the futures brokers are around that depending on what you trade. IB, Global futs, Velocity, ABN AMRO, and the more volume you do the better rates you get in most cases. Some are even 60c a side or lower, especially for big popular markets like the ES, with 500$ margin to get into the trade. As a day trading venture I don't get why people would choose stocks.




Fair enough - but I don't think you can get $1 per contract say on the SPI can you? $10 is what I recall paying last time I was trading it personally? Note I haven't been able to trade futures personally for quite a while for various reasons related to my professional work.

I also agree that for day trading, futures are far better/easier.


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## ThingyMajiggy (23 December 2013)

Beej said:


> Fair enough - but I don't think you can get $1 per contract say on the SPI can you? $10 is what I recall paying last time I was trading it personally? Note I haven't been able to trade futures personally for quite a while for various reasons related to my professional work.
> 
> I also agree that for day trading, futures are far better/easier.




$5 a side with IB for SPI as a start base figure................Why on earth would you want to trade the SPI anyway?


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## Caveroute (23 December 2013)

CanOz said:


> If anyone wants to position trade or swing trade futures EOD then you must look at trading spreads...




Why is this Can ?

Spreads are another grey area for me.

Wouldn't options be the obvious way to go  - for eod futures swing trading ?


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## CanOz (23 December 2013)

Caveroute said:


> Why is this Can ?
> 
> Spreads are another grey area for me.
> 
> Wouldn't options be the obvious way to go  - for eod futures swing trading ?




Because spreading is a means to reducing the volatility in Futures that can frequently shake you out... the "new" instruments that are created when you spread two or more contracts tend to trend smoother. Calendar spreads are psychologically easier to trade as you know you are naturally hedged to a degree.

Ask TH, but a very high percentage of successful long term professional futures traders are spread traders. Outright directional futures traders are the minority, the mavericks. Crazy freaks of nature...

Even SKC is a spreader!


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## Beej (23 December 2013)

ThingyMajiggy said:


> $5 a side with IB for SPI as a start base figure................Why on earth would you want to trade the SPI anyway?




I used to trade it as part of a hedging/boosting strategy based around my long term ASX cash equity portfolio - not really any other index future that's any good for that! :


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## Pager (23 December 2013)

Futures and in particular day trading of futures is perceived as one of the most high risk ways of trading but for me and the way I trade I actually think the opposite, its very low risk and very high reward.

I only trade if the exchange is open so I have no overnight risk, going long or short is just as easy and costs the same, when the exchange closes I sit in cash, I can use high leverage with very low margin, I use very tight stops so im not risking a lot on each trade, this means although my win rate is lower than my loss rate when I do get a tiger by the tail I don’t let go and can often make 6,7,8 times the amount risked, my best trade ever was in 2007 and made 32 times risk in just a few hours in Hang Seng futures, once the exchange closes however im out, finished for the day but in a nutshell that’s what im looking for, those days the market opens on its low and closes on its high, these are usually high range days as well, check any chart for any market and you will see these days.

Costs with futures are low, the Spi for example at 5200 is like buying $130,000 of stock, with IB its $5 per contract with a full service broker still only about $20 and if you trade the ES or Stoxx even cheaper, now try selling a parcel that size of stock and how much will it cost?.

I can almost utilise my money around the clock Monday to Saturday morning, Spi opens first then the Asian Markets, then the Stoxx in Europe and then the S&P day session starts up late at night long after any positions in Spi and Asia have closed out then as the ES and Stoxx close I have only a couple of hours before it all starts again, with ASX stocks im limited to about 6 hours a day.

Even though I day trade I still work full time with very little impact from trading, I know my set ups and basically place the same orders every day in the markets I trade, I can do this with IB or a broker I just place my trades with attached stops and all I have to do is check in a couple of times a day from my smart phone to check everything is ok or with the Spi to close out any open positions at 4-30pm each day, some exchanges even have a Market on close order so you can place a trade with attached stop and MOC and it will all execute or cancel without having to go online at all if you wish.

I do trade stocks but I have all but given it away, futures is far easier, far cheaper far more transparent and offers far more risk/reward and IMO far less manipulated as non of us really knows the future and time and again I see prices and volume go crazy on stocks and then this or that announcement sending it substantially higher or lower and then the price sensitive announcement and then I wonder is inside trading going on, well im 100% it does, but to manipulate the futures would take massive amounts of money and would bring plenty of attention so for me index futures are the levelist of playing fields for traders.

Is it easier than trading stocks though ???, maybe not as the leverage involved in just buying one contract is substantial so unless your very disciplined leave them well alone, buying a $1000 of stock and seeing it slide so you think I will sit on it a day or would translate to taking on massive risk if you did the same with only 1 futures contract, it could wipe you out and some, but traded in a very disciplined way, then its one of the safest vehicles around. 

As to returns well im not a big trader about 3 or 4 contracts is about as big as I get, I then have a low win rate of about 35% but every so often I seem to hit a run of trades usually when things get volatile and uncertain and I kick ass, over the past 7 years futures has paid of my mortgage, bought cars, paid for overseas holidays and allowed for voluntary contributions to my super to give me a very healthy nest egg.

I would say to anyone, forget stocks, forget options if you really want to make good returns from smallish accounts then futures and specifically index futures on a short term basis is the way to go, but just remember your playing with fire, so at all times respect the market otherwise your toast.


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## CanOz (23 December 2013)

Great post Pager...

Are you 100% systematic now?


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## tech/a (23 December 2013)

Pager has my vote.
I concur with his sentiment.
Love Index Futures.


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## Pager (23 December 2013)

CanOz said:


> Great post Pager...
> 
> Are you 100% systematic now?




Yep, 100% mechanical, get set on about 2 or 3 trades a week in each market I trade and long periods of nothing, always seem to have a bad run when markets get bullish and are on the rise and less volatile so most of the past 12 months has been negative but still pick up the odd gem along the way usually when there’s a bit of a pull back happening.


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## Bronte (23 December 2013)

CanOz said:


> Great post Pager...






tech/a said:


> Pager has my vote.
> I concur with his sentiment.
> Love Index Futures.





Yes....Great post Pager
We just adore Index Futures.
We have traded them for nearly 20 years now...


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## merlinnn (23 December 2013)

Pager said:


> Futures and in particular day trading of futures is perceived as one of the most high risk ways of trading but for me and the way I trade I actually think the opposite, its very low risk and very high reward.
> 
> I only trade if the exchange is open so I have no overnight risk, going long or short is just as easy and costs the same, when the exchange closes I sit in cash, I can use high leverage with very low margin, I use very tight stops so im not risking a lot on each trade, this means although my win rate is lower than my loss rate when I do get a tiger by the tail I don’t let go and can often make 6,7,8 times the amount risked, my best trade ever was in 2007 and made 32 times risk in just a few hours in Hang Seng futures, once the exchange closes however im out, finished for the day but in a nutshell that’s what im looking for, those days the market opens on its low and closes on its high, these are usually high range days as well, check any chart for any market and you will see these days.
> 
> ...




Thanks for the info Pager, its certainly something I will look into down the track. I'm currently making sure I can learn how to trade common stocks before I leverage into a world of pain. How long were you trading before going into futures or did you jump in from day one?


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## Pager (23 December 2013)

merlinnn said:


> Thanks for the info Pager, its certainly something I will look into down the track. I'm currently making sure I can learn how to trade common stocks before I leverage into a world of pain. How long were you trading before going into futures or did you jump in from day one?




I tried stocks and then options and then after 2 or 3 years of getting it wrong and frustration I turned to futures, didn’t work straight away but learning about risk was the turning point in may ways along with mechanical trading, maybe get hold of a copy of long term secrets to short term trading by Larry Williams, this book presents strategy’s and gives insight into mechanical trading, think of it as a book about fishing and you now nothing about fishing so don’t  believe the strategy’s presented or you will get cleaned out !!!, take it as examples of the type of stuff that can work, Larry takes you to his river and shows you how to fish he doesn’t however tell you the best spots or what bait he uses…………..this is the bit you need to figure out, the book though is the best on trading that I have read.

Also I would say learn about trading in general and about risk specifically, there’s no rush either the markets are not going to disappear.

I cannot reiterate enough though, done correctly and in my opinion futures offer the least risk and highest reward but done wrongly in regard to risk and this is without having a strategy that works or not you will get destroyed, you could buy the Spi futures at the open everyday with a $200 stop (8 points) now that may not work but it would take you along time maybe even years to run down a small account of say $5000, in the past 12 months you would maybe showing a decent profit?.


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## beachlife (23 December 2013)

pavilion103 said:


> "Bang for buck" can you think of a better alternative?




yes, CFD's.  You can trade the futures contracts but are not limited to the contract sizes so you can position size for your stops much better, but the spread does make them a touch more expensive.

No matter what type of derivative you trade, opions, futures, warrants, cfd's, it still comes down to the combination of risk v's reward and win loss ratio.

Can you make $50k pa from a $7500 account, I wont say impossible because Larry Williams turned $10k into $1m and his daugher turned $10k into $100K at age 16.  So I would say very difficult to make that sort of return, but it has been done.


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## Caveroute (23 December 2013)

Pager said:


> I tried stocks and then options and then after 2 or 3 years of getting it wrong and frustration I turned to futures, didn’t work straight away but learning about risk was the turning point in may ways along with mechanical trading, maybe get hold of a copy of long term secrets to short term trading by Larry Williams, this book presents strategy’s and gives insight into mechanical trading, think of it as a book about fishing and you now nothing about fishing so don’t  believe the strategy’s presented or you will get cleaned out !!!, take it as examples of the type of stuff that can work, Larry takes you to his river and shows you how to fish he doesn’t however tell you the best spots or what bait he uses…………..this is the bit you need to figure out, the book though is the best on trading that I have read.
> 
> Also I would say learn about trading in general and about risk specifically, there’s no rush either the markets are not going to disappear.
> 
> I cannot reiterate enough though, done correctly and in my opinion futures offer the least risk and highest reward but done wrongly in regard to risk and this is without having a strategy that works or not you will get destroyed, you could buy the Spi futures at the open everyday with a $200 stop (8 points) now that may not work but it would take you along time maybe even years to run down a small account of say $5000, in the past 12 months you would maybe showing a decent profit?.




About 16K on one contract ytd in fact. 

With some smarts to determine the direction, when to exit and how to actually get in on the open.


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## TheUnknown (23 December 2013)

How does one learn how to trade it? anyone got an example of a trade to see how it works?


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## Valued (23 December 2013)

Why can't you do the same thing with CFDs though? The benefit of CFDs is you can limit your leverage. Of course, the profits will be far less. You could also use OTC CFDs with a high leverage but guaranteed stop losses of up to 5% from the last close. Wouldn't CFDs be safer then? You could trade at up to 20x leverage with a maximum guaranteed risk. In that sense, would CFDs be better if you were holding overnight and there is a risk of a gap?

I guess what I am getting at is what's better, futures or CFDs for say going long or short on the ASX200, by way of example. Does it matter if you day trade vs holding overnight? I believe trading CFDs will cost more in fees too and you also are open to the risk of paying dividends if you short without first checking when stocks are going ex dividend.

For some reason commsec does not appear to have an option to trade futures. I can't find it anyway. You can go nuts on CFDs though. I need to change brokers anyway. Commsec is changing their site next year and their stockbroking fees are stupidly high.


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## CanOz (23 December 2013)

TheUnknown said:


> 1.) How does one learn how to trade it? 2.) anyone got an example of a trade to see how it works?




1.) If you mean futures then the answer Lots and Lots of screen time.

2.) Plenty of examples around, looks for posts by Trembling Hand, or even some from Tech/A and Pavillion in the "transition to futures trading" thread...


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## beachlife (23 December 2013)

Valued said:


> Why can't you do the same thing with CFDs though? The benefit of CFDs is you can limit your leverage. Of course, the profits will be far less. You could also use OTC CFDs with a high leverage but guaranteed stop losses of up to 5% from the last close. Wouldn't CFDs be safer then? You could trade at up to 20x leverage with a maximum guaranteed risk. In that sense, would CFDs be better if you were holding overnight and there is a risk of a gap?
> 
> I guess what I am getting at is what's better, futures or CFDs for say going long or short on the ASX200, by way of example. Does it matter if you day trade vs holding overnight? I believe trading CFDs will cost more in fees too and you also are open to the risk of paying dividends if you short without first checking when stocks are going ex dividend.
> .





You can.

A couple of small disadvantages.
1. You pay interest on long positions, but only if held overnight.
2.  Your prices are the spread, so you can get flicked out or miss out.   eg the spread might reach 5025/5026.  Lets say your stop is 5025, it may never really trade there, it might trade at 5026 and go back up, but if the spread goes there for a couple of seconds, you will be filled with a cfd.
The other way is the same.  Say the spread is 5025/5026 and your target is 5026.  The market may trade at 5026 (meeting the ask) and then reverse.  Because the bid never got to 5026, you will not be filled.  The spread has to reach 5026/5027 for the cfd to be filled.  I have missed profits a couple of times because of this, but not too often.
3.  The spread might be a bit wider.

But for me the ability to position size exactly out weighs these.  Except for an MT4 Ea that I run on 15min chart, all of my end of day trades are using cfd's, no matter if bhp, msft, oil, beans, or fx.


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## Valued (23 December 2013)

beachlife said:


> You can.
> 
> A couple of small disadvantages.
> 1. You pay interest on long positions, but only if held overnight.
> ...




So you go long on stocks using CFDs too? I was only going to use CFDs to short stocks or go long on indices otherwise I just buy the underlying asset. Less risk and cheaper. That being said, if you wanted to go long with leverage then CFDs are probably better than a margin account. I dislike paying interest.


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## tech/a (23 December 2013)

Valued said:


> So you go long on stocks using CFDs too? I was only going to use CFDs to short stocks or go long on indices otherwise I just buy the underlying asset. Less risk and cheaper. That being said, if you wanted to go long with leverage then CFDs are probably better than a margin account. I dislike paying interest.




Seriously interest in the scheme of things is or should be of no consequence
You'll lose more on spread!!


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## RADO (24 December 2013)

Valued said:


> Why can't you do the same thing with CFDs though? The benefit of CFDs is you can limit your leverage. Of course, the profits will be far less. You could also use OTC CFDs with a high leverage but guaranteed stop losses of up to 5% from the last close. Wouldn't CFDs be safer then? You could trade at up to 20x leverage with a maximum guaranteed risk. In that sense, would CFDs be better if you were holding overnight and there is a risk of a gap?
> 
> I guess what I am getting at is what's better, futures or CFDs for say going long or short on the ASX200, by way of example. Does it matter if you day trade vs holding overnight? I believe trading CFDs will cost more in fees too and you also are open to the risk of paying dividends if you short without first checking when stocks are going ex dividend.
> 
> For some reason commsec does not appear to have an option to trade futures. I can't find it anyway. You can go nuts on CFDs though. I need to change brokers anyway. Commsec is changing their site next year and their stockbroking fees are stupidly high.




Futures win hands down. The margin for ASX200 which would be the SPI is around $7,500 approximately 5% of face value the margin for the CFD contract from memory was .05% around $700 sounds good but in reality once your down 30 point your in margin call territory not to mention the $25 commission for the spread. With AMP Futures a round turn on the SPI cost around $2.70 with IB its $5 with Futures you can also do advanced order entries like breakout OCO orders and bracket OCO orders with an exit strategy if your using platforms like ninjatrader, esignal and multicharts. You can't do that with CFD'S 

An example of a 'Breakout OCO order with an exit strategy' would be just say the SPI opens at 5250 you can place an order to go long if the price goes to 5255 and an order to go short if the price drops to 5245 simultaneously, once one order is filled the other is cancelled and a stoploss is placed you also have the option of setting a target exit. This can be all done with one click of a button pretty much.


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## beachlife (24 December 2013)

RADO said:


> Futures win hands down. The margin for ASX200 which would be the SPI is around $7,500 approximately 5% of face value the margin for the CFD contract from memory was .05% around $700 sounds good but in reality once your down 30 point your in margin call territory not to mention the $25 commission for the spread. With AMP Futures a round turn on the SPI cost around $2.70 with IB its $5 with Futures you can also do advanced order entries like breakout OCO orders and bracket OCO orders with an exit strategy if your using platforms like ninjatrader, esignal and multicharts. You can't do that with CFD'S
> 
> An example of a 'Breakout OCO order with an exit strategy' would be just say the SPI opens at 5250 you can place an order to go long if the price goes to 5255 and an order to go short if the price drops to 5245 simultaneously, once one order is filled the other is cancelled and a stoploss is placed you also have the option of setting a target exit. This can be all done with one click of a button pretty much.




Valued - yes even for stocks because I want the leverage.  My trades are short term so I dont care about interest.

RADO, using the $7500 account, lets say you want a SPI trade with 90 point stop based on ATRx1.5 for example.  With the futures that means you must risk 90x25 = $2250 which is 30% of account.  If you want to limit risk to just 5%, ie $375, you can just buy 375/90= 4.1 so 4 CFD's.  CFD's allows people with small accounts to learn with less risk.  

And as you say for the equivalnet of 1 spi, 25 CFD's would only require a margin of around $700, so less margin is needed.

The OCO and stop orders are all available with cfd's (except  stop with limit entry) and spi cfd's are available so you can follow the spi contract price exactly, and also the SPI night market.  You are no longer limited to the asx200 index.


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## Valued (24 December 2013)

What about when looking at stocks and not indices? How do futures compare with CFDs then? Commsec points out in their PDS that if you short a stock you have to pay borrowing costs. They don't say what these are. 

I guess it's all about analyzing what the best vehicle is to gain the exposure you want.


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## skc (24 December 2013)

pavilion103 said:


> It seems to me that in terms of return on initial outlay, futures trading can provide by far the best return and "bang for buck".
> 
> Let's assume that someone is a proficient trader; incredibly disciplined and with great risk management.
> 
> ...




You are correct in your maths, but is it really realistic? What is calculated here is the amount of capital required to hold positions and is that sense, futures probably win the "bang for buck" and "lowest cost" contest.

But what you need to consider is obviously drawdown and risk per trade etc. Ask TH about what is his maximum drawdown vs capital required to hold positions (assuming he trades his own money). I'd bet you it's going to be many multiples of that. 

Then think about it in terms of reward vs risk. Many are familiar with the 2% rule in swing trading stocks. If you are day trading futures, you'd probably use a much lower number... and I'd be surprised if it was anything more than 0.5% per trade. If $7500 is truely all the capital you have - than it's <$40 or something like 1 tick. Clearly that's not workable. On the other hand, the annual profit of $50k means you'd earn 1250R. Again, seems highly unlikely.

On any individual year, it may be possible to make $50k profits from $7.5k capital. To treat that as an annual expectation, however, will likely lead to much disappointment.

And if someone is really that proficient (who should have more than $7.5k already), that 1 contract in year 1 would turn into 7 contracts in year 2, 50 contracts in year 3 and 300+ contracts in year 4. Then we will see how proficient he/she really is at that size.



ThingyMajiggy said:


> As a day trading venture I don't get why people would choose stocks.




You got to trade what you know I guess. Personally I trade stocks because I think it's easier. Stocks give you lots of information for you to assess and triangulate. I can see what price movements make sense and what doesn't. I have however zero ability in that in futures


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## Valued (24 December 2013)

Thanks SKC. All this talk of massive returns is both alluring and dangerous. My entire strategy is boiled down to carving out smaller more consistent returns by swing trading stocks and indices both long and short without leverage (using cfds for indices and to short stocks). Using highly leveraged futures (or highly leveraged cfds) to trade indices is clearly not within the strategy at this point in time. That, and I am leveraged somewhat already since I am partly using money I will end up having to pay the ATO next financial year. Using leveraged funds to buy leveraged derivatives seems like a poor financial plan.

Completely going to ignore the allure of getting millions of dollars for nothing.


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## tech/a (24 December 2013)

Looking from the futures side of the fence.

I personally trade technically.

(1) Its visual
(2) I can see if I'm correct or In correct immediately
(3) I can give myself a strict entry exit and stop point.
(4) I can trade any time frame
(5) I can manage my trades with pin point accuracy.

Personally I prefer Futures.

(1) I can trade long and short
(2) I can trade multiple time frames
(3) I can pick up a normal persons wage ($1300) in 30 min
with 1 - 3 contracts. (40 Tick on the FTSE X 2 contracts)
(4) I need only trade for a few minutes to an hr or so when I want.
(5) I can if I wish set and forget.
(6) I can make a decision in seconds without having
to quantify everything.(Very Time efficient).
(7) I don't have to trade everyday.
(8) I can position trade in one direction and counter trade opportunities in the other.
(9) I can trade from anywhere.
(10) Personally I find that Futures tend to conform more reliably to technical analysis.

I don't know why there is so much who ha about trading Size.
It impresses some.(Size to one maybe normal to another)
Its all in relativity.
Small fish and consistent catches are sweet.



> Completely going to ignore the allure of getting millions of dollars for nothing.




Why does any trading need to have a million dollar tag on it and why an allure?
Particularly Futures.
I think if you ignore Futures (It scares many---lack of understanding of trade and risk management
being the main culprit I think) 

*You are missing out on the true essence of financial freedom though trading!*


----------



## Valued (24 December 2013)

I guess it's the idea of laying out the relatively small amount of money for one contract but then getting a huge interest equal to say $130,000. Of course, you set your stop losses. It just feels like you are using very low capital to generate higher returns then you really should be able to. It feels like I am trying to get rich quick and that I am being greedy and that fate will strike me down for daring to think that big.


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## tech/a (24 December 2013)

Valued said:


> I guess it's the idea of laying out the relatively small amount of money for one contract but then getting a huge interest equal to say $130,000. Of course, you set your stop losses. It just feels like you are using very low capital to generate higher returns then you really should be able to. It feels like I am trying to get rich quick and that I am being greedy and that fate will strike me down for daring to think that big.




You can change fate with a click of the mouse!

Once you learn how to fish!------


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## pavilion103 (24 December 2013)

I also find that there is a difference between being on the FTSE all night trying to find a stack of trades and coming on for only a couple of hours and IF there is a great setup, then taking it, if not then leaving it. 

Even 2 or 3 decent trades (20-40 points) in a week can be highly profitable. Heck it might even be one trade of 40 or 50 points!

The reason I thre in the word "risker" in the OP is because I knew people would be barking on about risk. 
I personally believe that you can manage risk very well with it. Particularly if like Tech, you are moving your stop to BE ASAP. 



People talking about this whole get rich quick mentality obviously don't understand the hours that go into understanding this stuff in the first place. 
But once you do, it's the best financial pay-off per hour devoted that I can think of. 


Tech, you mentioned making a wage in 30 mins at times which isn't unrealistic. 
This really is mindblowing if you think that most people work 40 hours for that.


----------



## Bronte (24 December 2013)

Bronte said:


> We just adore Index Futures.
> We have traded them for nearly 20 years now...



*Merry Christmas to one and all at ASF  
'Trading the SPI' was all about Futures trading.*


----------



## minwa (24 December 2013)

pavilion103 said:


> But once you do, it's the best financial pay-off per hour devoted that I can think of.
> 
> 
> Tech, you mentioned making a wage in 30 minutess at times which isn't unrealistic.
> This really is mindblowing if you think that most people work 40 hours for that.




You can't really compare trading to a per hour wage. Obviously you can make huge amount in a little time but it does not take into account many other factors such as:
1. its not 100% replicable. You might not be able to make the same amount the next 30 minutes. You are even less likely to repeat it every single time next few 30 minutes. I don't think the best day trader in the world can randomly pick few sessions to trade and make $1300 every single time without fail for the rest of his life.
2. does not take into account loss. People can have a killer trade and said they make X few grand in X few minutes and compare it to a wage but if you add up their total trades and their losses including all their time spent, it's not going to be the $X/hour they were claiming.
3. no guarantee. You cannot enter into a contract with the market that everyday you will trade this four hours and it will give you the $1300/30mins for that whole shift. You might sit for hours at $0/hour or negative ($1000)/hour.


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## pavilion103 (24 December 2013)

Obviously.

It just shows what is possible.


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## Valued (24 December 2013)

You can work out an average hourly rate over a good sample size e.g. a year. The larger the sample, the more accurate it will be. If you trade non stop for one million years your average hourly rate will be highly accurate.


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## tech/a (24 December 2013)

minwa said:


> You can't really compare trading to a per hour wage. Obviously you can make huge amount in a little time but it does not take into account many other factors such as:
> 1. its not 100% replicable. You might not be able to make the same amount the next 30 minutes. You are even less likely to repeat it every single time next few 30 minutes. I don't think the best day trader in the world can randomly pick few sessions to trade and make $1300 every single time without fail for the rest of his life.
> 2. does not take into account loss. People can have a killer trade and said they make X few grand in X few minutes and compare it to a wage but if you add up their total trades and their losses including all their time spent, it's not going to be the $X/hour they were claiming.
> 3. no guarantee. You cannot enter into a contract with the market that everyday you will trade this four hours and it will give you the $1300/30mins for that whole shift. You might sit for hours at $0/hour or negative ($1000)/hour.




Sure I make losses
Mostly brokerage $6
Sure I have trades of less than $1300
And sure I have trades well in excess of $1300.

Point I'm making is that once you know how to trade it's
Money for Jam.
Complicate it and argue it all you like


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## CanOz (24 December 2013)

tech/a said:


> Sure I make losses
> Mostly brokerage $6
> Sure I have trades of less than $1300
> And sure I have trades well in excess of $1300.
> ...




Would be quite curious on your FTSE record Tech, you've been trading it for quite a while now so must have a reliable sample of trades by now.


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## tech/a (24 December 2013)

CanOz said:


> Would be quite curious on your FTSE record Tech, you've been trading it for quite a while now so must have a reliable sample of trades by now.




What do you want?

I don't trade for a living
Don't have to --- don't want to.
I'll trade once a week
3 times a week.
Nothing for a month.
I don't need to trade. If I'm at the computer
The trade is staring at me I'll take it.
Often I'll set the stop and go to bed.
Often I'll get up and have been stopped out at B/E
Every now and again I'll wake up with 100 to 3000 pounds.

I can't see what all the fuss is about.
There is a vehicle at people's disposal which can make them 
A living and or a tidy second income.
Sure you have to invest a few 1000 hrs.

Let's trade live and see the results over time for the time and effort.
Will do it on the FTSE thread.
Or start a thread specifically based around this premise
Easy money for time spent.
Let m know and I'll crank a thread.


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## TheUnknown (24 December 2013)

FTSE ay...


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## CanOz (24 December 2013)

tech/a said:


> What do you want?




Just thought you have some stats to share by now, honestly I think they would be good for others to see, TH shares his P/L charts (all be it without the figures) to illustrate the ups and downs. Just thought you would have the stats handy Tech, that's all. Even an equity curve. Being the experienced trader you are i'm guessing you have a nice equity curve, maybe a win% in the low 40s and a nice R/R....

Don't mean it to become a pissing contest. Just sincerely asking for the sake of the people interested in seeing what a real record looks like.


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## TheUnknown (24 December 2013)

CanOz said:


> Just thought you have some stats to share by now, honestly I think they would be good for others to see, TH shares his P/L charts (all be it without the figures) to illustrate the ups and downs. Just thought you would have the stats handy Tech, that's all. Even an equity curve. Being the experienced trader you are i'm guessing you have a nice equity curve, maybe a win% in the low 40s and a nice R/R....
> 
> Don't mean it to become a pissing contest. Just sincerely interested for the sake of the people interested in seeing what a real record looks like.




Yeah..that would be good for people to see how a real record looks like...


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## Valued (24 December 2013)

tech/a said:


> What do you want?
> 
> 
> Sure you have to invest a few 1000 hrs.




What did you spend those thousands of hours doing exactly though? Was that all solid learning or did you get side tracked by things that didn't work?

There really needs to be a study guide lol.


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## tech/a (24 December 2013)

CanOz said:


> Just thought you have some stats to share by now, honestly I think they would be good for others to see, TH shares his P/L charts (all be it without the figures) to illustrate the ups and downs. Just thought you would have the stats handy Tech, that's all. Even an equity curve. Being the experienced trader you are i'm guessing you have a nice equity curve, maybe a win% in the low 40s and a nice R/R....
> 
> Don't mean it to become a pissing contest. Just sincerely interested for the sake of the people interested in seeing what a real record looks like.




I'd have to hand plot the trades.
All I do is supply the p/l to my accountant with
My personal tax each year.

Happy to get involved in a pissing contest though.
Love a challenge.


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## CanOz (24 December 2013)

tech/a said:


> Happy to get involved in a pissing contest though.
> Love a challenge.




I'll consider this...

It just depends if i get hired or not, if not i'll be able to start trading again in January.

We can set some ground rules now though if you like.

Shall i start a thread or you?


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## tech/a (24 December 2013)

CanOz said:


> I'll consider this...
> 
> It just depends if i get hired or not, if not i'll be able to start trading again in January.
> 
> ...




Crank it up.
Perhaps private mail me your ground rules and we can nut em out
Before unleashing them on the board.


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## CanOz (24 December 2013)

tech/a said:


> Crank it up.
> Perhaps private mail me your ground rules and we can nut em out
> Before unleashing them on the board.




PM sent....


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## tech/a (24 December 2013)

CanOz said:


> PM sent....




Like the concept.
Your trading method is at right angles to mine.
Mainly because it's not something I have investigated myself.
Very keen to see how you go for personal curiosity and education.

Happy to go head to head straight long/short Futures.
FTSE/DAX will be my choice.


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## wayneL (24 December 2013)

Where's FrankieD?

I'd love to get him in on this.

Frank? I know you're reading this.


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## beachlife (24 December 2013)

tech/a said:


> I don't trade for a living




Does that mean you earn the bulk of your income from something else?


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## tech/a (24 December 2013)

beachlife said:


> Does that mean you earn the bulk of your income from something else?




Yes
I own a Civil Construction Company
And was " Lucky Enough " to be heavily
Involved in property from 1995 - well now.
Ive probably been on the planet longer than most here.

Passive or least effort income ( other than the Company )
Is my focus. 
Along with more living and enjoying what time I have left here!


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## beachlife (24 December 2013)

tech/a said:


> Yes
> I own a Civil Construction Company
> And was " Lucky Enough " to be heavily
> Involved in property from 1995 - well now.
> ...




So can safely assume quite wealthy, that's great.  But that poses the problem, especially for newbies trying to learn,  that the capital required to be risked to earn your $1300 per trade is less significant to you that it would be to someone with say $20k account, and if your capital is significantly higher, your % return on capital might be quite small.  The only way to make it a level playing field is to bring it back to percenatges, not $$$.

Also you have no real pressure.  If you lose, you know you have income coming in from elsewhere, if you dont trade for a month, no big deal.  Very different to the trader that has no other source income.

I think its important to make this distinction.


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## tech/a (24 December 2013)

beachlife said:


> So can safely assume quite wealthy, that's great.  But that poses the problem, especially for newbies trying to learn,  that the capital required to be risked to earn your $1300 per trade is less significant to you that it would be to someone with say $20k account, and if your capital is significantly higher, your % return on capital might be quite small.  The only way to make it a level playing field is to bring it back to percenatges, not $$$.
> 
> Also you have no real pressure.  If you lose, you know you have income coming in from elsewhere, if you dont trade for a month, no big deal.  Very different to the trader that has no other source income.
> 
> I think its important to make this distinction.




I don't know about that.
PAV doesn't seem to have a problem.

While I understand what your saying as I've been in that position many times
Over the years.
I still believe that good risk management can instill confidence.


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## cynic (24 December 2013)

beachlife said:


> You can.
> 
> A couple of small disadvantages.
> 1. You pay interest on long positions, but only if held overnight.
> ...




Further to the disadvantages mentioned there are additional counterparty risks associated with OTC CFD's. The provider will normally not be obliged to quote prices in alignment with the actual market at all times. OTC CFD providers are widely rumoured to have been exploiting this freedom to the detriment of their clients! 

In respect to charges for holding positions overnight, a few further things are worth mentioning:

(i) Interest charges may also be incurred on short positions if the interest rate is particularly low!!!
(ii) Certain CFDs can also involve debits/credits to the clients account in lieu of dividends.
(iii) When trading indices, annoying charges in respect to interest and dividends can usually be avoided by trading CFDs over the actual forward/futures contracts, however, a larger spread will usually apply.


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## Valued (24 December 2013)

I dislike a lot about OTC CFDs but at the same time ASX CFDs really limit what you can do. The ASX CFDs only allow you to trade in 50 stocks while for OTC Commsec says you can trade 600.

It's difficult to find the cost for OTC CFDs though. It's not clear in the PDS. I am not sure why you incur a borrowing cost for OTC CFDs when shorting stocks. Is it something to do with them hedging? They don't explain what this cost is either.


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## beachlife (25 December 2013)

Valued said:


> I dislike a lot about OTC CFDs but at the same time ASX CFDs really limit what you can do. The ASX CFDs only allow you to trade in 50 stocks while for OTC Commsec says you can trade 600.
> 
> It's difficult to find the cost for OTC CFDs though. It's not clear in the PDS. I am not sure why you incur a borrowing cost for OTC CFDs when shorting stocks. Is it something to do with them hedging? They don't explain what this cost is either.




Not sure what you mean by OTC but City Index has over 200 ASX listed stocks that can be traded.


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## Valued (25 December 2013)

beachlife said:


> Not sure what you mean by OTC but City Index has over 200 ASX listed stocks that can be traded.




OTC means over the counter as in a contract with the broker with the broker as the person on the other side of the contract. With ASX CFDs the ASX clearing house guarantees performance. With OTC CFDs since your contract is with your broker then you rely on your broker for performance of the contract. It's not regulated like ASX CFDs are. 

The only ASX listed CFDs are the ones on their website:

http://www.asx.com.au/asx/markets/cfdPricesList.do

This is 50 stocks. OTC CFDs can comprise of whatever your broker wants to accept the risk of. Commsec offers three times the amount of stocks than city index offers. City Index must be OTC due to offering more than the ASX will allow on their CFDs. I would personally choose Commsec over City Index if going for OTC CFDs since you would need a reliable broker who isn't going to go insolvent or not perform their end of the contract. I also consider it somewhat of a conflict of interest if your broker is trading against you.


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## cynic (25 December 2013)

beachlife said:


> Not sure what you mean by OTC but City Index has over 200 ASX listed stocks that can be traded.




OTC = "Over The Counter"

OTC products are by definition traded off exchange. The OTC CFD provider is the counterparty to your trade. Whether or not they hedge their exposure against other client trades or via placement of trades in the underlying market is at their sole discretion. 
As it happens the following statement has appeared on certain of City Index web pages and email correspondence: 
"As a part of our market risk management we may take the opposite side of your trade." 


My experience of City Index to date has been largely favourable, however, I still recommend extreme vigilance when trading any OTC CFD products offered by any provider. The clauses within the PDS and client agreement documentation are typically too liberal in that they allow wide scope for conflicts of interest within the client/provider relationship.


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## Valued (25 December 2013)

cynic said:


> OTC = "Over The Counter"
> 
> OTC products are by definition traded off exchange. The OTC CFD provider is the counterparty to your trade. Whether or not they hedge their exposure against other client trades or via placement of trades in the underlying market is at their sole discretion.
> As it happens the following statement has appeared on certain of City Index web pages and email correspondence:
> ...




The clauses regarding them allowing to do anything with your money and positions at their sole discretion including not allowing you to withdraw money at sole discretion for any reason are generally absurd. 

CFD providers have to be very careful they arn't in breach of fiduciary duties. So far, no one has had cause to sue one (or their loss was too low). If a CFD OTC provider does something unfair one day the legal aftermath will be extremely interesting, at least for me. I am of the opinion that they would owe a fiduciary duty to you that goes above and beyond the words of the contract/s. Any statement trying to restrict equitable rights in a contract is void so they can't get out of it by saying that you don't have any rights.

The costs and risks of OTC CFDs often seem unclear though. The PDS and FSG don't explain things completely in my opinion. In the Commsec OTC CFD PDS they give off the impression that their future CFDs are real futures but really they aim to mimic futures sort of except for spread and the fact that they admit that the price will almost never reflect the underlying asset. It doesn't fill me with confidence.

BTW Beachlife did you not read the Product Disclosure Statement and Financial Services Guide before you signed up for City Index? I am guessing most people don't. I like to read them. I am surprised you are trading CFDs without knowing the difference between OTC and ASX CFDs. The ongoing risk profile for each may differ. That being said, with OTC you have guaranteed stop losses. The ASX states that if you want the same effect with their product you need to hedge with options. Generally you will be stuck without the guaranteed stop loss which increases risk if you hold overnight. Normal stop loss orders should work ok, it just sucks if you get a huge gap on open adverse to your position.


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## cynic (25 December 2013)

Valued said:


> ...
> CFD providers have to be very careful they arn't in breach of fiduciary duties. So far, no one has had cause to sue one (or their loss was too low). If a CFD OTC provider does something unfair one day the legal aftermath will be extremely interesting, at least for me. I am of the opinion that they would owe a fiduciary duty to you that goes above and beyond the words of the contract/s. Any statement trying to restrict equitable rights in a contract is void so they can't get out of it by saying that you don't have any rights.
> ...




Based upon my own personal experiences of a number of providers over recent years, I do not share your confidence in the integrity of this industry. I have encountered echoes of sentiments similar to my own within certain ASIC and FOS reports/submissions.

I again emphasize the need for extreme caution to any trader that chooses to trade OTC CFDs. 

Apologies for going a little off topic, but I feel very strongly about elevating awareness of counterparty risks with these products.


----------



## beachlife (25 December 2013)

cynic said:


> Based upon my own personal experiences of a number of providers over recent years, I do not share your confidence in the integrity of this industry. I have encountered echoes of sentiments similar to my own within certain ASIC and FOS reports/submissions.
> 
> I again emphasize the need for extreme caution to any trader that chooses to trade OTC CFDs.
> 
> Apologies for going a little off topic, but I feel very strongly about elevating awareness of counterparty risks with these products.




+1

The PDS didnt help the Sonray clients, and didn't keep the director out of jail either.  I also know people that had shares with a full service broker, and lost the lot because the broker went off the rails.  It's a risk giving money to anyone.  I think I joined before ASX cfd's existed - not sure but never heard of them.  The only thing I checked was segregated client accounts, and that spreads matched the market, other than that didnt read anything.  Just meaningless legal ar*e coverering.  I dont use guaranteed stops, cant get them in the real market so I dont bother.

So to get back to topic, I dont see futures as having any more risk or less than anything else, in terms of losses or broker collapse, provided stops and money management are used well.


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## Valued (25 December 2013)

beachlife said:


> +1
> 
> The PDS didnt help the Sonray clients, and didn't keep the director out of jail either.  I also know people that had shares with a full service broker, and lost the lot because the broker went off the rails.  It's a risk giving money to anyone.  I think I joined before ASX cfd's existed - not sure but never heard of them.  The only thing I checked was segregated client accounts, and that spreads matched the market, other than that didnt read anything.  Just meaningless legal ar*e coverering.  I dont use guaranteed stops, cant get them in the real market so I dont bother.
> 
> So to get back to topic, I dont see futures as having any more risk or less than anything else, in terms of losses or broker collapse, provided stops and money management are used well.




I am not saying the PDS will protect you. The PDS will inform you of the various fees and charges and when and why the broker may close your position etc. The PDS isn't designed to protect you. It's designed to tell you how you're going to be screwed over. You should read the PDS carefully for any derivative product to make sure you understand it. The risks of one broker may not be the same as the risks of the other broker. 

If you don't use guaranteed stop losses have you had any circumstances where you have lost a lot more than you would have if you had? I suppose the real risk of huge losses is some sort of fire sale where people are selling at any price. That doesn't happen that often. Just don't invest in FGE if you go back in time...


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## beachlife (26 December 2013)

Valued said:


> If you don't use guaranteed stop losses have you had any circumstances where you have lost a lot more than you would have if you had? I suppose the real risk of huge losses is some sort of fire sale where people are selling at any price. That doesn't happen that often. Just don't invest in FGE if you go back in time...




Yes.  This year out of 52 trades I had one trade that lost 5.2% because of gappy might market spreads.  My risk per trade is 4%.  But I also had a couple of wins that gap opened past my target giving me more profit than I was expecting.  I only scan top 50 ASX so FGE never came up, I wish it had, that gap was in the direction of the trend.  Closest to big loss would have been QBE but I wasnt in it.

As for broker risk, that's again where cfd's are superior because the margins are so small.  Say you want to trade a $100k account with 2% risk per trade.  You can leave $80k in your bank and just put $20k with the broker to cover margin, but still trade to the full size of $2000 risk because the margins are so low, you can even then split it and have 2 accounts of $10k each, while the bulk of your account sits in the bank or in a mortage offset.  If you have some losses you just top the account up.  You dont need to put the whole $100k with one broker.  Because futures require more margin, you have to give the broker more cash in order to trade.


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## Valued (26 December 2013)

If you only consider ASX50 stocks and don't use guaranteed stop losses then you have none of the advantages of OTC CFDs and all of the disadvantages. Imo ASX CFDs would be better for you since you can do the exact same thing but the entire process is safer since the ASX guarantees your contracts and it's far more regulated.


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## pavilion103 (6 March 2014)

I'm not achieving this level of consistency but I've been thinking a bit more about the achievable returns from futures trading. 

Please no one hang me for throwing around a few generalisatons and assumptions. I know this is not how the market behaves (and note these projections are for how I specifically trade). 

Let's assume that 5 days a week, there are 10 reasonable opportunities (say 5 good moves from initial high/low, and 5 other opportunities - maybe a reversal after an obvious high/low is established). 

10 reasonable opportunities

Let's say we capture 3 of those. 
Break them down to 50 points, 30 points, 30 points. (no reason why it can't be more). 

Total = 110 points

Minus BE trades = 0
Let's say we give ourselves another 30 point allowance for losses incurred trying to capture moves.

Net = 80 points

Profit = $1,500 approx per week. 


Annual = $75,000 (for 1 contract)
Annual = $150,000 (for 2 contracts)


This is full of assumptions and is nothing concrete to go by. I admit that. 

But I believe the above returns are quite reasonable for someoene of my level. 
As I said I'm not quite here yet, but this is the short term goal for me. 

Anyone else have any thoughts?


----------



## pavilion103 (6 March 2014)

Even if we bumped the loss allowance up to 40 points. 

That's roughly 6 opportunities of 7 points risk. 

So that make our scenario:

3 wins from 9 attempts (33%) - quite achievable (not to mention the number of BE trades). 


For me, the key here is to identify these good opportunities and take them and to be patient and wait until they appear, rather than taking half-half setups.


----------



## Trembling Hand (6 March 2014)

pavilion103 said:


> Anyone else have any thoughts?




Yeah don't think like that. Aim for two things,

Good trading (you know blah blah)

&

To make $10,000 a day.


That way you may average $1000 a day. As soon as you start thinking my aim is Z amount what that does is cause you to be cautious once you reach that amount and therefore less likely to surpass it. Over time that capping greatly reduces your average day. When you are having a good day you never know what tomorrow or next week will be. If you stop at Z  that actually makes you average amount a fraction of that.

Have a look at any scatter chart of trading and the Avg trade is about 5-10 times the max trade. Simple maths would therefore suggest that to avg $z per day you need to aim for $Z x 10 each day.


----------



## pavilion103 (6 March 2014)

I agree that I can't just say I want, say, 100 points profit per week. I have no profit targets because it does have a psychological affect and doesn't improve trading.

Like you my number one aim is to trade well.


My example just shows what I believe I can average if I do trade well.

The key is to developing a method that can achieve good results and to trade it well.


----------



## CanOz (6 March 2014)

pavilion103 said:


> The key is to developing a method that can achieve good results and to trade it well.




So then, to get really good returns do you just 'size up' as much as possible without affecting your fills too much?


----------



## pavilion103 (6 March 2014)

I haven't traded size as yet.
2 is the most I've ever taken.

More lessons ahead when I'm trading 4 or 5 I'm guessing.


----------



## CanOz (6 March 2014)

pavilion103 said:


> I haven't traded size as yet.
> 2 is the most I've ever taken.
> 
> More lessons ahead when I'm trading 4 or 5 I'm guessing.





Well i guess my point is and I'm waiting for TH to comment here, but say you find a little edge and it works well on 2-4 contracts. Obviously to me the way to increase the profitability is to increase the size to the maximum efficient size possible. This would take some practice, but both SKC and TH have had to do this. Curious as to how they did it.


----------



## beachlife (6 March 2014)

Your system and style will be unique so I think by now you will know what your trading method returns, so it should be a matter of scaling up as your account grows.  Your results are telling you what your average $ per contract is.  I cant see that changing much unless you plan to change your trading style or frequency.

There is a great example on the world futures comp site today.  One trader has 3 of the top 5 positions.  I assume he has a different system in each account and his returns in each vary.  They are 88%, 80% and 43%.  Same person, just different systems.


----------



## pavilion103 (6 March 2014)

CanOz said:


> Well i guess my point is and I'm waiting for TH to comment here, but say you find a little edge and it works well on 2-4 contracts. Obviously to me the way to increase the profitability is to increase the size to the maximum efficient size possible. This would take some practice, but both SKC and TH have had to do this. Curious as to how they did it.




Interested to hear thoughts.

I'm not too fussed about going bigger and bigger and bigger. If I was consistently making a good number of points on average per week and I was trading 4 contracts, that would be more than enough for me.

My main goal is to make a few hundred thousand a year and then pour the money into both short term momentum ASX setups and a longer term low maintenance strategy also.


----------



## beachlife (6 March 2014)

After holidays and xmas new year there's about 240 worthwhile trading days per year, so you will need to average around $1000+ per day to reach your goal.  

Have a look at your last 3 months results and your expectancy will tell you how many contracts you need to trade, or how much improvement is needed to get an acceptable result from 4 contracts.


----------



## skc (6 March 2014)

CanOz said:


> Well i guess my point is and I'm waiting for TH to comment here, but say you find a little edge and it works well on 2-4 contracts. Obviously to me the way to increase the profitability is to increase the size to the maximum efficient size possible. This would take some practice, but both SKC and TH have had to do this. Curious as to how they did it.




I don't trade futures so my lessons are probably not really applicable to Pav. The main difference in shares when it comes to size is definitely slippage. Most of the time I cannot get the full desired size with one click. So previously at smaller size, a trade may quickly go my way after I get my fill. Whereas now, I may only had 10% of my size and I need to make a decision on whether to chase it or leave it. Same decisions with exits. Same decisions with trades that go against me... do I average in to get my full size? Or has my % of success already diminished. So another layer of decisions. 

And all these HFT and bots and phantom bids that melt away as soon as you hit them mean that I spend way more time micro managing entries and exits... and correspondingly less time to actually think about the trading.



pavilion103 said:


> But I believe the above returns are quite reasonable for someoene of my level.
> As I said I'm not quite here yet, but this is the short term goal for me.
> 
> Anyone else have any thoughts?




I think everything you've said is correct... they are certainly realistic as in that's what the maths said. Number of contracts x number of trades x (win % x average win - loss% x average loss). Plug in some "realistic" numbers and out comes the annual P&L. 

But until you have a few hundred trades as your sample size to actual calculate these parameters for yourself, any annual P&L projections are realistic but not applicable. How are your current parameters compare to your target? Is it R:R that needs improvement? Or trade frequency? Or win%?

And once you identify the area in need of work, you will need to watch how these parameters interact each other. If you try to improve your R:R by catching larger moves, it might mean fewer opportunities and lower win%. On the other hand, in keeping your losses small you might move your stop too quickly which in turn compromise your chance of catching a big move. 

That's why, as Beachlife said, increasing the contract size (up until you hit issues like liquidity and slippage) is perhaps the easier way to increase overall profits.


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## pavilion103 (6 March 2014)

beachlife said:


> After holidays and xmas new year there's about 240 worthwhile trading days per year, so you will need to average around $1000+ per day to reach your goal.  Have a look at your last 3 months results and your expectancy will tell you how many contracts you need to trade, or how much improvement is needed to get an acceptable result from 4 contracts.




Good call.


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## pavilion103 (7 March 2014)

The other idea is to increase opportunity by trading other markets. 

Something I will look at in time.


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