The transition to Futures trading

[Bayronus]

It's great to see some renewed interest in this thread. I hope I can contribute a little bit in the future but for now I'm still very much at the ground floor stage with research into a data feed/broker and learning ninja trader. I have not really begun simming on a grand scale but I do really enjoy NT's replay ability.

Apocolypto - hang in there buddy, confidence is something that I'm finding to be a major factor in the ability for a person to trade. I'm not sure if you've heard of a guy called FuturesTrader71 but he talked about emotional capital in one of his webinars and it seems like an interesting concept. Sorry I can't offer more haha.

 

[>Apocalypto<]

Bayronus

Apocolypto - hang in there buddy, confidence is something that I'm finding to be a major factor in the ability for a person to trade. I'm not sure if you've heard of a guy called FuturesTrader71 but he talked about emotional capital in one of his webinars and it seems like an interesting concept. Sorry I can't offer more haha.

thanks for the info, i will look into it

dipped my toes in a couple more times... still closing a little to fast.. difference between 4 and 7-9 pts. you will always get a few wrong... so holding is important imo as a few loses can cut into a good day.

 

[CanOz]

thanks for the info, i will look into it

dipped my toes in a couple more times... still closing a little to fast.. difference between 4 and 7-9 pts. you will always get a few wrong... so holding is important imo as a few loses can cut into a good day.

Heya mate, did you get that short at the edge of the abyss?

Dropped like there were no bids at all....all this while 80% of IGs traders were long

 

[>Apocalypto<]

Heya mate, did you get that short at the edge of the abyss?

Dropped like there were no bids at all....all this while 80% of IGs traders were long

Sorry Can missed it... didn't trade tonight... can you post a chart... Poor IG guys feel from them if that's the case.

**very nice sell just went off then though**

 

[CanOz]

Will try and post one after the HKFE open....

There is a nice abyss waiting to be tested on the HHI and HSI as well. The HHI being the bigger opportunity. I call these areas of no volume an abyss because the market really accelerates through these and they provide some great opportunities....On these two charts you can see the area below the the current brackets. Each market is currently at value on the yearly VWAPs. This bracket could hold but today i expect the low extremes to get tested anyway. IF we can trap enough short then maybe we'll get a covering rally if the XINA50 can drag them up...

 

[sinner]

Out of curiosity, for those "transitioning to futures trading", what kind of expected long term return are you after? Would you be happy with 5% per annum? 10%? 30%?

 

[tech/a]

Out of curiosity, for those "transitioning to futures trading", what kind of expected long term return are you after? Would you be happy with 5% per annum? 10%? 30%?

For me I'm happy with an average return of $500 to $2500 when I sit down and trade the DAX.
Sure I have losses of $200 to $1000----but on average.
.
I only trade 1 or 2 contracts and only a few hrs. a week. So I guess you are benchmarking your % return on say margin to trade the future/s. Its about $6500/contract for the DAX---so I would be aiming over a year for many times the return on capital on margin.

I wouldn't be happy with 5% as that would mean that I've spent a whole lot of time for little return
5% $13000 = $650

Its not something I want to do for a living.
Couldn't think of anything worse.

I enjoy the challenge and being rewarded for accepting it.

 

[sinner]

For me I'm happy with an average return of $500 to $2500 when I sit down and trade the DAX.
Sure I have losses of $200 to $1000----but on average.
.
I only trade 1 or 2 contracts and only a few hrs. a week. So I guess you are benchmarking your % return on say margin to trade the future/s. Its about $6500/contract for the DAX---so I would be aiming over a year for many times the return on capital on margin.

I wouldn't be happy with 5% as that would mean that I've spent a whole lot of time for little return
5% $13000 = $650

Its not something I want to do for a living.
Couldn't think of anything worse.

I enjoy the challenge and being rewarded for accepting it.

I just ran some numbers using the back of my napkin:

Assuming your avg win week at ~$1500 (halfway between $500 - $2500), avg loss week ~$600 (halfway between $200 - $1000) with a 50% win rate, that is:

$1,500 * 26 wks = $39,000
$600 * 26 wks = $15,600

$39,000 - $15,600 = $23400

assuming a 30% flat tax rate, after tax profits at $16,380 per annum, or $315 per week, or ~$100/hr assuming you only trade a few hours per week.

 

[tech/a]

Based on those assumptions
your napkin maths are fine.

 

[minwa]

Out of curiosity, for those "transitioning to futures trading", what kind of expected long term return are you after? Would you be happy with 5% per annum? 10%? 30%?

30% to be minimum happy (satisfied)
50% to be very happy (target)

with less than 15% max peak to valley draw down.

 

[tech/a]

Based upon want benchmark?

 

[tech/a]

So perhaps ghats not clear

The % return what is that benchmarked to?

A capital base of $200k/$50/$20

Really 50% as no meaning without a reference.

 

[minwa]

So perhaps ghats not clear

The % return what is that benchmarked to?

A capital base of $200k/$50/$20

Really 50% as no meaning without a reference.

What do you mean it has no sense ? Total trading account equity obviously. When I started with $3k I aimed for 50%. I now trade 6 figures (no not all compounded from $3k, had deposits) I still seek 50%.

Not understanding your question. 50% on $10 is not much yes but if you risk 5cents each trade and return $5 for the year over a series of trades I will be impressed. If you going to go into the psychology/scaling is not linear then that's another discussion.

 

[tech/a]

What do you mean it has no sense ? Total trading account equity obviously. When I started with $3k I aimed for 50%. I now trade 6 figures (no not all compounded from $3k, had deposits) I still seek 50%.

Not understanding your question. 50% on $10 is not much yes but if you risk 5cents each trade and return $5 for the year over a series of trades I will be impressed. If you going to go into the psychology/scaling is not linear then that's another discussion.

Lets borrow Sinners napkin and make some assumptions in line with Sinners 50%.
$500,000 return 50% = $250,000.

Taking his table maths on my return based on his 50% and averaging assumptions $39,000 on one
contract pre tax.

So trading 7 contracts would do it.
Lets assume $10000 per contract margin.
If you have a method that swings wildly 7 x margin over the full 7 contracts you'll need a trade equity of $500000
I'm assuming that's the case in your instance.

If not then you wont need $500K just a portion of it.
So it is important.

 

[sinner]

30% to be minimum happy (satisfied)
50% to be very happy (target)

with less than 15% max peak to valley draw down.

This is actually the kind of answer I was interested in.

So assuming a starting capital of $100,000 you make an annualised return of $30,000 - $50,000. After tax @ 30%, we are talking $21,000-$35,000 in profit.

How is your track record so far? You don't have to get specific, but I am curious about how many years you have traded with this expectation and how many years of those was your expectation met? How many years in the future do you expect to be able to maintain that kind of posture successfully?

Do you feel the stress and risk (leverage risk especially) is worth it?

Personally I have stopped trading with margin (only leverage through buying puts/calls now) and pretty much do only long term investing now (and some hedging), with an expectation of 7-20% per annum total returns over the very long term. This takes up almost none of my time, is extremely low stress and comparatively low risk.

I used to do intraday FX but stopped that kind of thing a while back and felt extremely validated by my decision when the SNB removed the EUR peg and caused EURCHF to go bananas.

 

[skc]

This is actually the kind of answer I was interested in.

So assuming a starting capital of $100,000 you make an annualised return of $30,000 - $50,000. After tax @ 30%, we are talking $21,000-$35,000 in profit.

How is your track record so far? You don't have to get specific, but I am curious about how many years you have traded with this expectation and how many years of those was your expectation met? How many years in the future do you expect to be able to maintain that kind of posture successfully?

Do you feel the stress and risk (leverage risk especially) is worth it?

Personally I have stopped trading with margin (only leverage through buying puts/calls now) and pretty much do only long term investing now (and some hedging), with an expectation of 7-20% per annum total returns over the very long term. This takes up almost none of my time, is extremely low stress and comparatively low risk.

I used to do intraday FX but stopped that kind of thing a while back and felt extremely validated by my decision when the SNB removed the EUR peg and caused EURCHF to go bananas.

Sinner,

With futures I think looking at % return is not meaningful. If one has legitimate trading prowess, the correct metric would be something like profit per contract traded per month (or quarter or year).

With % return, there are too many ways to define "account equity".

E.g. 5 traders all made $25k this year trading 1 contract.

Trader 1 said his return was 250% as he calculated it based on the $5k he needed for margin.

Trader 2 said his return was 100% as he stared the year with $25k in his account.

Trader 3 said his return was 50% as he said he's allocated $50k to his trading overall, even though some of that cash was not physically in the trading account.

Trader 4 said her (yes it's a girl) return was 25%. She worked it out based on allocating enough capital so her drawdown was less than 10%. The maximum drawdown was $10k, making it a notional capital of $100k.

Trader 5 said his return was 12.5%. He worked it out based on the fact that the face value of the contract was $200k, and he doesn't use any leverage.

So what should a trader aim for? 12.5% or 250%? Or may be just plain $25k per contract per year traded.

 

[sinner]

Sinner,

With futures I think looking at % return is not meaningful. If one has legitimate trading prowess, the correct metric would be something like profit per contract traded per month (or quarter or year).

I calculate it only based on account equity like Minwa suggested.

You have some money. You could take it and start a bakery, or, invest it into an index fund, or trade it. To me they are all the same in the sense of "you have invested this money into a business".

The expected return on that money is what I'm specifically interested in. I think that would be trader #2 in your example.

What they should aim for, I dunno, I'm interested in expectations (i.e. I expect to sell 5,000,000 bread rolls this year at 30c a roll with 27c in costs per roll produced; or, I expect to make 1,000,000 trades at a 30% win rate and 1:5 Risk/Return Ratio). I'm also interested in how those expectations are arrived at.

 

[skc]

I calculate it only based on account equity like Minwa suggested.

You have some money. You could take it and start a bakery, or, invest it into an index fund, or trade it. To me they are all the same in the sense of "you have invested this money into a business".

The expected return on that money is what I'm specifically interested in. I think that would be trader #2 in your example.

What they should aim for, I dunno, I'm interested in expectations (i.e. I expect to sell 5,000,000 bread rolls this year at 30c a roll with 27c in costs per roll produced; or, I expect to make 1,000,000 trades at a 30% win rate and 1:5 Risk/Return Ratio). I'm also interested in how those expectations are arrived at.

I guess what I am trying to say is, asking others what their % return was is meaningless unless you know the specifics behind it.

Yes... you can sort of use it to compare alternate actions, as well as assess performance over time if you apply the methodology consistently.

As to arriving at the expectations... it's really a chicken and egg problem. You can't make meaningfully expectations if you haven't traded, yet how does one start trading if he/she doesn't know what to expect? To me the only way around that is to give it a good go in a risk controlled manner, and let it unfold to see if there's meaningful reward at the end of it. That's how I started trading

 

[peter2]

I operate like Trader 3 and allocate an amount of capital to the business of trading leveraged products. I position size based on the allocated capital (and realized P&L). One benefit with using leveraged products is that I don't have to place all the business capital in the brokerage account. This reduces the pain when the broker goes out of business (happens too frequently). There's a higher probability that my broker will go out of business before I get a margin call.

The EOY P&L is expressed against the amount of capital allocated for the business of leveraged trading.

I agree with minwa's minimum expectation (risk 0.5%/T, 200T/yr at an expectancy of 0.3).

 

[CanOz]

200T per year? Sheesh, I've done 130 since the 11 th of May