Returns achievable for Futures trading

[pavilion103]

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.

 

[ThingyMajiggy]

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.

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.

 

[CanOz]

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.

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

 

[Beej]

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.

 

[Beej]

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?

 

[Caveroute]

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.

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.

 

[ThingyMajiggy]

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.

 

[CanOz]

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...

 

[Beej]

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.

 

[ThingyMajiggy]

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?

 

[Caveroute]

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 ?

 

[CanOz]

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!

 

[Beej]

$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! :

 

[Pager]

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.

 

[CanOz]

Great post Pager...

Are you 100% systematic now?

 

[tech/a]

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

 

[Pager]

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.

 

[Bronte]

Great post Pager...

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...

 

[merlinnn]

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.

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?

 

[Pager]

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?.