Futures intraday trading - balancing act!

[Muttata]

Hi Fellow Traders,

I am trying to minimize the impact of commissions and margins on my intraday trading.
I am with Halifax at the moment and have a $4000 trading account currently.

In the last 3 weeks I have been simulation trading and on paper made about 280 ticks (gross) from 100 trades, across 4 derivatives AU, EC, ES, NQ. This is about $2400US. I trade a 30 minute chart and only take smallish risks i.e. 6-12 ticks.

Whilst this is good, the commissions I will be paying are $12US for a round trip. This means that my commissions will be $1200 US!! This seems a bit ridiculous to me. How much should I be paying on 30 or 40 trades per week? Does anyone else trade with Halifax and how much do you pay on a round trip for futures? I am trading single contracts at this stage.

The other challenge is that my system relies on trading multiple derivatives rather than just one. The reason is that I have found that my system works better on some markets than others - so it is important to diversify in this way. But, the challenge is that the margins I have to pay through Halifax are high e.g. S&P mini is about $3800 US. That means that I would need about $10000 to trade four different markets. Is it true that it is possible to pay much less for margins if day trading?

I have thought about going to IB, but I only have $4000 in my account at the moment and I believe that they need $10,000 min. From what I understand, they have lower commissions and margins??

Can someone give me some perspective about possible solutions. I do have access to $10000 if I need it, but I am conservative and would prefer to work with smaller accounts. How do the rest of you make any money nett commissions if you are intraday trading and with a small account and having to meet large margins requirements?

Cheers
Chris (Muttata).

 

[Gringotts Bank]

Re: FUTURES INTRADAY TRADING - MARGINS

Hi Fellow Traders,

I am trying to minimize the impact of commissions and margins on my intraday trading.
I am with Halifax at the moment and have a $4000 trading account currently.

In the last 3 weeks I have been simulation trading and on paper made about 280 ticks (gross) from 100 trades, across 4 derivatives AU, EC, ES, NQ. This is about $2400US. I trade a 30 minute chart and only take smallish risks i.e. 6-12 ticks.

Whilst this is good, the commissions I will be paying are $12US for a round trip. This means that my commissions will be $1200 US!! This seems a bit ridiculous to me. How much should I be paying on 30 or 40 trades per week? Does anyone else trade with Halifax and how much do you pay on a round trip for futures? I am trading single contracts at this stage.

The other challenge is that my system relies on trading multiple derivatives rather than just one. The reason is that I have found that my system works better on some markets than others - so it is important to diversify in this way. But, the challenge is that the margins I have to pay through Halifax are high e.g. S&P mini is about $3800 US. That means that I would need about $10000 to trade four different markets. Is it true that it is possible to pay much less for margins if day trading?

I have thought about going to IB, but I only have $4000 in my account at the moment and I believe that they need $10,000 min. From what I understand, they have lower commissions and margins??

Can someone give me some perspective about possible solutions. I do have access to $10000 if I need it, but I am conservative and would prefer to work with smaller accounts. How do the rest of you make any money nett commissions if you are intraday trading and with a small account and having to meet large margins requirements?

Cheers
Chris (Muttata).

Someone will answer your question. (Probably Canoz!) I have dealt with Halifax before and i don't trust them. I'm not going to go into details, just steer clear.

 

[Muttata]

Re: FUTURES INTRADAY TRADING - MARGINS

Someone will answer your question. (Probably Canoz!) I have dealt with Halifax before and i don't trust them. I'm not going to go into details, just steer clear.

Cheers Mate.
I have gotten pretty ordinary service to date - so I can relate!

C

 

[burglar]

Re: FUTURES INTRADAY TRADING - MARGINS

... I have thought about going to IB, but I only have $4000 in my account at the moment and I believe that they need $10,000 min. ...

I believe IB will accept shares etc., in lieu of cash, to reach $US10,000 (not AUD)
There is a thread for IB.

interactive+brokers
The man from IB pops into that thread from time to time to answer queries!

 

[skc]

Re: FUTURES INTRADAY TRADING - MARGINS

Can someone give me some perspective about possible solutions. I do have access to $10000 if I need it, but I am conservative and would prefer to work with smaller accounts.

If you are trading the same number of contract and risking same number of ticks, whether you have $4k or $10k in the account makes absolutely no difference in terms of how conservative you are trading.

Just make sure you stick to your own discipline and don't go open 2 contracts instead of 1 just because you can meet the margin.

If you have a geniune edge (and 100 simulated trades over 3 weeks may or may not prove that) then you should certainly consider deploying that $10k in order to minimise your cost of doing business. You can build your account faster (again assuming your edge translates well into real trading) and you can always take that $6k back out in 3-6 months time if you must.

BTW, ES is $12.5/tick and you are risking 6-12 ticks per trade, or up to 3.75% of your capital per trade. The more experienced future traders here can tell you whether that is conservative...

 

[Trembling Hand]

Re: FUTURES INTRADAY TRADING - MARGINS

BTW, ES is $12.5/tick and you are risking 6-12 ticks per trade, or up to 3.75% of your capital per trade. The more experienced future traders here can tell you whether that is conservative...

It is not conservative.

 

[peter2]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Sorry Chris: You don't have enough capital to trade 3-4 futures markets. You must put up margin for every open contract you use. Some brokers can offer lower day trading margins, but only for experienced traders and people with another source of cash. Nobody trades without putting in a margin. Even John Corzine (MFGlobal CEO) had to find the money to pay the margin requirements for the company's (his) trades.

You will have a tough time trading 30min charts AU, EC using 6 - 12 pip stops. The ATR(300) on the AUD (30m) is 14, (EC is 10). You're trading amongst the 30min noise and will definitely get spiked out too many times unnecessarily (IMO). If your entries are good then you should be earning much more than you are. You are risking 6-12 ticks and only earning 2.8 ticks (gross). IMO you should be trying to get bigger rewards on your time frame.

Save like crazy and improve your trading skills. You could open a live FX account and see if your small edge holds up under the pressure of trading live.

 

[payday]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Sorry Chris: You don't have enough capital to trade 3-4 futures markets.

That is absolutely right. I have just checked the margin requirements for Interactive Brokers :
For ES - Initial margin $2187.50
Intraday maintenance $1750
For 6E (Euro) - Initial margin $3125
Intraday maintenance $2500
With $4000 you could only trade 1 market and as you state above you need to trade several markets for your strategy to work. $4k is not a lot of money ( nor is 10k for that matter) in the futures market. Sorry dude - gotto save up a bit more - bide your time - the market will still be there even if it does take a few years to save up your stake. In the meantime - keep learning. The market loves nothing more than fresh ignorant blood. Don't fall into that category. Good luck

 

[Muttata]

Re: FUTURES INTRADAY TRADING - MARGINS

It is not conservative.

Thanks for that. I didn't realize that this wasn't conservative. I may need to re-evaluate!

C

 

[CanOz]

Re: FUTURES INTRADAY TRADING - MARGINS

Thanks for that. I didn't realize that this wasn't conservative. I may need to re-evaluate!

C

Well thats the great thing about ASF, you'll get an answer to all your questions!

 

[Muttata]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Sorry Chris: You don't have enough capital to trade 3-4 futures markets. You must put up margin for every open contract you use. Some brokers can offer lower day trading margins, but only for experienced traders and people with another source of cash. Nobody trades without putting in a margin. Even John Corzine (MFGlobal CEO) had to find the money to pay the margin requirements for the company's (his) trades.

You will have a tough time trading 30min charts AU, EC using 6 - 12 pip stops. The ATR(300) on the AUD (30m) is 14, (EC is 10). You're trading amongst the 30min noise and will definitely get spiked out too many times unnecessarily (IMO). If your entries are good then you should be earning much more than you are. You are risking 6-12 ticks and only earning 2.8 ticks (gross). IMO you should be trying to get bigger rewards on your time frame.

Save like crazy and improve your trading skills. You could open a live FX account and see if your small edge holds up under the pressure of trading live.

Thanks for the advice Peter. I know I need to be realistic. $10,000 sounds like a more realistic figure and would allow me to increase the markets traded. This would also my risk management to be more conservative as has been pointed out (.75-1.5% of capital? seems better)?

I know that 2.8 ticks gross seems low, but you might be interested to know that I have literally flipped a coin to make my entry decisions and relied solely on good risk management to generate the profit figures stated. Intended Risk:Reward is 1:8, and the profit figure per trade on average is low, but that is because I have only been right 40% of the time (25% gains; 15% stopped out with 1 tick spare; 60% loss). Basically, I have ended up with lots of little losses and a few large ones. The only edge I have got is money management.

Why have I done this? Simply because I needed to prove to myself that it is money management that is what keeps you in the game! For years I was of the opinion that I needed to be right 80% of the time to make money and that it was my system that would make me the money. Having high probability entries is important, but useless if you have ****ty money management (my trading results over the years have been up and down a lot because of this). I reckon if I can toss a coin and still not lose, that must be a good premise to move forward on. I figure it is a part of my evolution as a trader and should help me with higher probability trades.

Haven't really looked into Forex, but maybe I should. Thanks for your comments - would be interested in your thinking about what I have just said.

- - - Updated - - -

That is absolutely right. I have just checked the margin requirements for Interactive Brokers :
For ES - Initial margin $2187.50
Intraday maintenance $1750
For 6E (Euro) - Initial margin $3125
Intraday maintenance $2500
With $4000 you could only trade 1 market and as you state above you need to trade several markets for your strategy to work. $4k is not a lot of money ( nor is 10k for that matter) in the futures market. Sorry dude - gotto save up a bit more - bide your time - the market will still be there even if it does take a few years to save up your stake. In the meantime - keep learning. The market loves nothing more than fresh ignorant blood. Don't fall into that category. Good luck

Ta Mate.

For some reason I thought that it was possible to get $500 margins for the ES and other minis??

C

 

[Trembling Hand]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

I reckon if I can toss a coin and still not lose, that must be a good premise to move forward on. I figure it is a part of my evolution as a trader and should help me with higher probability trades.

What sim program are you using? My bet is once you take this idea into the real market and then pay even cheaper IB brokerage you will be well into the red.

 

[Muttata]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

What sim program are you using? My bet is once you take this idea into the real market and then pay even cheaper IB brokerage you will be well into the red.

Sierra Charts...

That has been a thought in the back of my mind, and I know that these kinds of simulations are only approximations of reality...with slippage, psychology etc, which is why I am here fielding some feedback. My experience too has been that the 'theory' is different in degrees to the reality.

Can you throw a bit of light into why you think it will be in the red? My guess is that you don't think the gross margin is high enough compared to the risk?

For every 1 tick risked I made 0.7 ticks.

 

[Trembling Hand]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Sierra Charts...

That has been a thought in the back of my mind, and I know that these kinds of simulations are only approximations of reality...with slippage, psychology etc, which is why I am here fielding some feedback. My experience too has been that the 'theory' is different in degrees to the reality.

Can you throw a bit of light into why you think it will be in the red? My guess is that you don't think the gross margin is high enough compared to the risk?

For every 1 tick risked I made 0.7 ticks.

What is the avg time in a trade? the lower the time the less realistic the sim is.

Got any more stats for us?

 

[Muttata]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

What is the avg time in a trade? the lower the time the less realistic the sim is.

Got any more stats for us?

Haven't worked out how many bars I am in the trades. I can go through and have a look and will post if you are interested. What I have noticed is that almost without exception, the market either takes off and I make profit or it farts around and I get stopped out. Because of this, I fiddled with halving my stops i.e. 1-3 ticks instead of 6 or more ticks. Surprisingly, the number of losses increased by 15%, and the gains were less, but the risk:reward is a lot better. Of course, there were lots of little losses. I notice that your 'Nothing to Something' System works on very tight stops with lots of small losses also.

More stats:

Risk:Reward
Gross Gains: 284 ticks ($2,642.50)
Gross Risk: 645 ticks
Risk:Reward Ratio= 1: 0.44

Losses:Gains
Sum Losses = -376
Sum Gains = 616
Ratio 1.64

Nett (After Commissions: $2,037.50 US)

Trade Breakdown
Gains: (30) 24.79%
Losses: (71) 58.68%
BE +1pt (20) 16.53%

Total Trades 121

When I halve the risk:

Risk:Reward
Gross Gains: 246 ticks ($2,260.00)
Gross Risk: 345 ticks
Risk:Reward Ratio= 1:0.71

Losses:Gains
Sum Losses = -280
Sum Gains = 526
Ratio 1.88

Nett (After Commissions: $1665.00 US)

Trade Breakdown
Gains: (23) 18.5%
Losses: (90) 72.5%
BE +1pt (11) 9%

Total Trades 124

The psychology for me is mixed on this second strategy. Too many losses in a row for my liking. Will be interesting to see what this looks like in the real market. I should point out that I have assumed $5 round trip for commissions - not sure if that is realistic. If I used this approach through Halifax, the commission would double.

 

[payday]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Ta Mate.

For some reason I thought that it was possible to get $500 margins for the ES and other minis??

C

Mirus futures offers $500 intraday margins for a lot of futures contracts. I have never traded with them before so I cannot vouch for their service. Perhaps others here can.

 

[peter2]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Most sim trading platforms will fill your orders if the price is touched. The real market does not do this. Your orders go to the back of the queue when sent. I don't think you will get the same results in a real market.

However I do like the work you have done and your attitude. If you really have a passion to trade (and I sense you might) then working extra hours and saving more money will not be a burden. Try to improve your reward when price goes your way. Your trading edge is created by your trade management, not by your money management. Creative money mgt will not overcome a losing edge in the long run. You might get lucky for a while but when the odds balance out a losing edge will create a loss.

IMO if you are using 30min charts then you should be getting a few +100 tick results when price takes off. Be more selective with your entries and try to identify setups that have a higher probability of working out than a random coin flip.

 

[Muttata]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Most sim trading platforms will fill your orders if the price is touched. The real market does not do this. Your orders go to the back of the queue when sent. I don't think you will get the same results in a real market.

However I do like the work you have done and your attitude. If you really have a passion to trade (and I sense you might) then working extra hours and saving more money will not be a burden. Try to improve your reward when price goes your way. Your trading edge is created by your trade management, not by your money management. Creative money mgt will not overcome a losing edge in the long run. You might get lucky for a while but when the odds balance out a losing edge will create a loss.

Cheers Peter. I appreciate your feedback and agree that the missing ingredient here is trade mngt. I guess the exercise was to keep things tighter than they have been for me in the past by tidying up my stop management. As far as entries are concerned, I was intending to use limit orders to avoid ****ty fills. This will no doubt keep me out of quite a few trades. I am conscious that given the small margins of profit, crappy fills for entry and exit could turn the paper profit into a loss - I can see that.

IMO if you are using 30min charts then you should be getting a few +100 tick results when price takes off. Be more selective with your entries and try to identify setups that have a higher probability of working out than a random coin flip

I instinctively think that you are right. I have had to ignore everything that I know about the market to follow this 'random coin flip' approach. I am sure that I can avoid many of the obvious losses (e.g. trading against a fast moving trend for example)!! I learned a lot though, mainly that I try and project my own expectations on the market instead of just trading the market action. Many times, I have thought that a trade had no chance of making a profit, when it did indeed make one and vice-versa. The psychology of fearing loss!

A few of the gains I have had are up around the 25-50 ticks, but nowhere near enough of the plums. I suspect that higher probability entries combined with stops that allow for the runs to happen is key. I need to get in on a Penny and out with a bucket of them to succeed in the long run.

Thanks Again.

 

[Muttata]

Re: FUTURES INTRADAY TRADING - BALANCING ACT!

Peter2 - If I am to achieve 100+ ticks in a trade on the 30 minute chart, i have to let my trades 'run, run, run'. My strategy has been to exit once profits get to 8x my initial risk, but perhaps I should be aiming for 20x (if my risk is 5 ticks)? My experience tells me that only 1 in 20 might do that and so the rest of my trades will be break even or a small loss. So, the object of the game is to get into a 'no loss position' early in the trade for the chance to let 1 in 20 make the money for you - is that correct? I am thinking that a loose trailing stop loss based on price movements at a higher timeframe once thing get moving might be the way to go to convert it into a longer-term trade. Would value your feedback.

 

[peter2]

I'm surprised to read that you were going for 8R wins. You did mention that earlier, sorry. 8R even 5R wins are worthwhile targets. With a W% > 50% a AW/AL of 2R is a good edge. 100+ tick wins would be rare in the ES (~25pts), maybe slightly easier in the NQ, but more common in the currencies. If most of your trading is done on the ES then your current results are understandable. The ES has enough liquidity to use a 6 tick SL and most intraday ES traders seem to think that a 2 - 3 point move is great. If you are managing your trades for more, you are on the right track (IMO).

You mentioned that you are trading the 30min charts. This confused me for a while. You're not really trading 30min charts as you use a coin toss (random) entry technique. A few authors have stated that traders could make money using a random entry technique and strict loss management. Your results have shown that it is possible and that the most important aspect of trade mgt is restricting your losses to as small amounts as possible. You have also demonstrated how much of a drag even basic commissions are on our accounts. Now you know that your edge has to be much bigger to overcome the basic costs.

You have demonstrated that you have the skill to keep your losses small. A huge start. Now you need to build on your very small edge as you know it's not enough to support you or reach your goals. The other costs of a trading business will soon erode your capital quickly.

There are two main aspects that you can work on to increase your edge. I discussed them before. Can you identify higher probability entries? This will reduce the number of losses and BE results (adds to your edge). Can you increase the size of your ave win? Once you have improved your edge, creative money mgt will help you reach your goals quicker.