The transition to Futures trading
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Kryzz
shaun
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Ahh, I was looking at the E-mini Dow ($5). Cheers
CanOz
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There are several advantages of investing in futures over stocks. One of them being an efficient tool to hedge risk against future price fluctuations.
hi
i've been playing around with currencies and i noticed i've got gold (xauusd), oil , sugar, cocoa and indices on mt4 as well. wouldn't mind trading this as well later down the track. many people with forex trade a small basket of currencies e.g. 7 pairs or so, so opportunities are limited. but if i added the above commodities, it might be a real help in achieving the financial freedom i seek (more uncorrelated opportunities to trade, i'm thinking). small account here (30K) and i like to start out with microlot sizes so this might be the perfect place to trade futures (pepperstone allows me to trade small microlot sizes in some of the above commodities, using mt4). i know people here think cfds are unsafe and rubbish, but as a starting point for futures, until i have enough money, it would be worthwhile i wonder. my time-frames would be 4h and D1 . how would that go you think? is it a good idea or maybe there is something i don't know about that is fundamentally flawed. currencies can be correlated, and i'm thinking that the mt4 commodities e.g. XAU (GOLD) XTI (OIL)won't be as much correlated, so i will have more opportunities to trade, and this is a great idea worth perusing in the future. i'm just hoping that being a cfd broker product, if some disaster occurs (e.g. flash crash ) i wont get hammered to badly. i'll look at those charts on mt4 and see what kind of gaps have occurred in the past.
i've been playing around with currencies and i noticed i've got gold (xauusd), oil , sugar, cocoa and indices on mt4 as well. wouldn't mind trading this as well later down the track. many people with forex trade a small basket of currencies e.g. 7 pairs or so, so opportunities are limited. but if i added the above commodities, it might be a real help in achieving the financial freedom i seek (more uncorrelated opportunities to trade, i'm thinking). small account here (30K) and i like to start out with microlot sizes so this might be the perfect place to trade futures (pepperstone allows me to trade small microlot sizes in some of the above commodities, using mt4). i know people here think cfds are unsafe and rubbish, but as a starting point for futures, until i have enough money, it would be worthwhile i wonder. my time-frames would be 4h and D1 . how would that go you think? is it a good idea or maybe there is something i don't know about that is fundamentally flawed. currencies can be correlated, and i'm thinking that the mt4 commodities e.g. XAU (GOLD) XTI (OIL)won't be as much correlated, so i will have more opportunities to trade, and this is a great idea worth perusing in the future. i'm just hoping that being a cfd broker product, if some disaster occurs (e.g. flash crash ) i wont get hammered to badly. i'll look at those charts on mt4 and see what kind of gaps have occurred in the past.
Wysiwyg
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Things I notice are spreads widening significantly at some after hours periods which would take out close stop losses. The spreads themselves are different between providers. Also the price difference between CFD providers which highlights how they each set their own price and the reason why traders prefer to trade the regulated Futures market. I have seen some unbelievable price action.
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If you are starting really small- micro account what other option is there than otc/cfd providers?
$5 a point is a bit much, say if I am looking for a $1000-$2000 capital to start with.
If you are trading on 4h and D1 and you have 30k and are worried about CFDs (yes, you should be worried) you can trade equities (ETFs) on the currencies/commodities, if you don't like the leverage in the futures. Not much point looking on the gaps on MT4, your feed and fills will vary when you actually have live positions on.
For correlations you can check this page http://www.mrci.com/special/correl.php , the closer to 0 the less correlated.
Demo trade and save until you are well capitalized - yes the 2 words a beginner trader hate hearing the most - demo and save.
T0BY
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I trade stock index CFD's with Pepperstone 1:100 leverage. I always thought CFD providers offset risk exposure on their books from clients by hedging in the futures market.
I've looked at some of the soft commodities they recently introduced but honestly the spread to ADR ratio makes them untradable for myself as I'm a day trader.
If you're trading off the 4H and 1D chart the swap rates every day are going to hurt. You'd be better of trading futures. To open a futures account with Interactive Brokers I believe they only require $10,000 (might be USD?)
I've looked at some of the soft commodities they recently introduced but honestly the spread to ADR ratio makes them untradable for myself as I'm a day trader.
If you're trading off the 4H and 1D chart the swap rates every day are going to hurt. You'd be better of trading futures. To open a futures account with Interactive Brokers I believe they only require $10,000 (might be USD?)
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At the moment 10k is out of the picture.
demo it is.
CanOz
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You can open an account with AMP clearing with $500 and get CQG data. Go through Modest's or Pavs thread and then start to get some screen time.
Thanks for this.. Nice one.
Wouldn't mind a bit of clarification on why the spot and futures markets follow each other closely enough?
I'm thinking a gold watch manufacturer might buy gold from futures instead of the spot market if it's cheaper... This helps with keeping both markets at a similar price... The thing is, the futures markets are moved mostly by speculators and what they think, rather then real needs people. maybe their speculation is what mostly moves the futures price, and in turn the spot market follows ? Don't know, just thinking about it.
I'm thinking a gold watch manufacturer might buy gold from futures instead of the spot market if it's cheaper... This helps with keeping both markets at a similar price... The thing is, the futures markets are moved mostly by speculators and what they think, rather then real needs people. maybe their speculation is what mostly moves the futures price, and in turn the spot market follows ? Don't know, just thinking about it.
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Arbitrage in response to fair value adjustement considerations, seems the more probable explanation:
http://www.cmegroup.com/trading/equity-index/fairvalue.html
Commercial hedgers (real needs people - producers) of commodities are as influential to price as large speculators (funds).
I read somewhere that 98% of futures traders don't take delivery of the product (are speculators)
Yes, the producers do not take actual delivery via futures contract. Participants are big producer companies from all over the world, for them all to get their supply of commodity via the trading exchanges would be logistically impossible.
They do so via their usual suppliers of commodities. They participate in the futures market to hedge the price. This does not make them speculators. Their hedge in the futures market balances out price in their price fluctuations of purchases with suppliers.
You can see the trading volume of producers easily in a COT.
Okay then. Thx for the detailed explanation.
I got CQG data hooked up with mt5, to a futures exchange. Just playing around a bit. The tech-support people reckon it's real volume I've got , unlike Forex trading (it's got Volumes and tick volumes on the chart). The thing is, if I look at the same contract – emini SP 500 – the current chart and the one just expired don't have the same volumes and tick volumes values. They're not identical. Anyone know why? And i'm not talking about the rollover period. I wonder if I really am seeing correct volume data figures? I need charts with volume figures just like everyone else who trades futures
CanOz
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So what two s&p contracts are you comparing? What is the exact time on those that you are comparing??
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