The transition to Futures trading

[pavilion103]

Nice setup to the short side tonight.
5 min chart.
Entry sell-stop 6564
Initial stop 6571
7 point risk

Price was always going to come down and fill the gap around 6540.

Setup was on a lower high with bearish behavior.

Exit 6534

30 points

 

[pavilion103]

Enormous clarity since working on a proper playbook.

There are good setups which repeat themselves.

Huge help knowing exactly what to look for and then executing.

 

[>Apocalypto<]

I have two conflicting views;

1. I have traded the Australia 200 Cash successfully for 18 months, completing 2000 or so trades. Trading capital is now 15x what I started with and I take a wage out weekly which I can comfortably live on. I have learned many things about how this particular instrument behaves and adapted my trading around its characteristics. Why mess with a good thing?

2. I am starting to occasionally hit liquidity issues which so far have not created too many issues and for which I have strategies that work OK at present. There is no market depth information as the Australia 200 is a synthetic market maker instrument. I think to take my trading to the next level of return I would need to go to real futures, not market maker. The learning curve, however, both excites and daunts me at the moment. The prospect of further automating my trading is very tempting and exciting. Learning the quirks of a yet another new instrument is very daunting.

not trying to be smart or rude, but if you have achived this why stay with IG? not move into futures?

 

[CanOz]

Nice setup to the short side tonight.
5 min chart.
Entry sell-stop 6564
Initial stop 6571
7 point risk

Price was always going to come down and fill the gap around 6540.

Setup was on a lower high with bearish behavior.

Exit 6534

30 points

Indeed....

 

[Caveroute]

Enormous clarity since working on a proper playbook.

There are good setups which repeat themselves.

Huge help knowing exactly what to look for and then executing.

How would you have described "Setup was on a lower high with bearish behavior" in your playbook Pav ?

Not trying to be smart - but I would have described it as a second entry short [l2] at the trendline, at the 20 bar ema with a strong reversal bar.

Very high probability - and relatively easy to recognize and understand as a playbook reference.

 

[pavilion103]

How would you have described "Setup was on a lower high with bearish behavior" in your playbook Pav ?

I'll get into my files on the laptop tomorrow.

It would have to:
1) be already in a downtrend (and taking into consideration the daily chart context)
2) likely more downside potential
3) pullback to form the first high
4) pullback again and reject this area on bearish characteristics (eg a few bars on low volume closing on the low). Often in the form of a descending triangle but not necessarily.
5) offer a low risk entry (usually say 4-7 points) and RR that is worthwhile.
6) can enter on a) limit order b) sell-stop depending on circumstances (I need to get more clear here).

I save the 3 min and daily chart each night.
I analyse these charts.
I mark up all good setups plus my real time setups in detail and save them to a folder.
I analyse them in terms of the daily chart for context.
I chategorise these folders so that all the 'same' type of setups are in the same folders.
I print off and review these setups looking for similarities and differences.

A lot of work but worth it!

 

[pavilion103]

Yeh that's good Cav. I need to give them names and be more concise with my description.

Only in the early stages of developing a proper playbook so open to any suggestions.

In this case, all I know is I keep seeing the same setup and I keep making money!

 

[CanOz]

6534 is looking like 50% of that move

 

[pavilion103]

Wow!
Just wow!

I will definitely need to trade 2 contracts!
30 points would have been 130 points!!!

 

[pavilion103]

I've learnt many lessons over the past 6 months or so in futures. There are a couple that stick out and have been reiterated over and over.

Big profits will come when:

1)
Identify a playbook of good setups.
Trade them in the right market context.
Wait patiently for them to appear (don't chase).
Pull the trigger.


2)
Hold the trade for the "real move".
Get stop to break-even ASAP. Then HOLD (don't sell on noise).


I have experienced profits but not big profits.
This is because I do 1) very well but I do 2) poorly.
I put this down to a mixutre of A) lack of experience (not realising just how far a trade can run and not understanding noise in the futures market) and B) psychology (not wanting to give back 30 points).
Both of these can be easily overcome. They aren't big issues for me. Just need to continue to study study study and understand the market well.

I think that trading 2 contracts will help me with B) psychology and once I understand A) how to read the market noise properly, I may choose to hold all contracts for the big move.
I think it's a sensible compromise for the short term.

 

[tech/a]

Big profits will come when:

(1) Consistent small profits.
(2) Longer winning trades than losing trades.
(3) Frequency.
(4) Size.

Trick here is to get it right without blowing up.
Futures can blow you up real quick!

There are multiple ways of setting up trades.
But unless you have a proven method
$100K min
I personally think trading Baby Pips with M/M structures is going
to be the best way to cut your teeth.

I'm pretty sure you can trade both DAX and FTSE with Baby pips
but have no idea of codes?

 

[pavilion103]

Of those, frequency is my main issue at the moment.

I definitely agree with consistent smaller profits adding up but I also believe that holding for a day/bigger move can lead to substantial profits over time.

Maybe it comes down to a strategy that works for the individual. From the beginning of my trading I've had a picture in mind and it is becoming clearer and clearer.

Frequency needs to increase.
Size is my next one. As someone who traded on a sim for 2 years, I am very patient. I will increase size over time and only following greater consistent profit.

Many will think that I suffer from delusions of grandeur but I see no reason why in the near future profit of $100,000 can be made (50 points per week x 2 contracts).

Lol I took out the actual figure that I wrote down first (it wasn't $100,000) because I don't believe the responses would be favourable

 

[pavilion103]

Continue to pick up 20 or 30 points consistently and then leave contracts to run also and capture some if the bigger moves.
This is what makes the most sense to me at the moment but I admit this thinking could easily change.

 

[Trembling Hand]

Therein lies several reasons why I am currently using CFDs.

1. Most of my trading capital can currently safely live in an interest bearing account away from the market maker's account.

No Therein lies some poor thinking and also I suspect some lack of knowledge of how markets trade. Err 2000 trades at a very conservative estimate of 0.5 point tax for crossing the spread twice every trade. ( I bet its way way more)



0.5 point/5120 asx200 = 0.00097 per trade X by 2000 trades = 0.195312 If you trade value is $100,000 you would need $20,000 in your CFD account and the other $80,000 in your 'high interest' account.

How are you going to make up paying another 20 grand extra cost from $80 grand in a savings account?

You would have to be crazy to trade CFDs for anything other than a hobby.

 

[Trembling Hand]

Or here is another way to look at it.

Assuming $100,000 position size. That is $19.53 per point ($100,000/ASX200 5120 = 19.53 per point)

Doing 2000 trades that is an extra cost of 20 grand ( 19.53 per point / 0.5 point CFD 'trade tax' = $9.765 * 2000 trades = 20 g)

 

[Trembling Hand]

Many will think that I suffer from delusions of grandeur but I see no reason why in the near future profit of $100,000 can be made (50 points per week x 2 contracts).

Lol I took out the actual figure that I wrote down first (it wasn't $100,000) because I don't believe the responses would be favourable

Yep all very easy IF you can be consistent. Its the big down days that fluff up the average. Also don't underestimate how hard it is to recognise and actually trade the big days. Its as easy as hell to have a look at the daily range the day after and pull the calculator out and go "boy next time I'll make XXXX"

But how many have we had in 6 months and how many have you rode? Bit of a reality check in that number I bet.

 

[pavilion103]

Yep all very easy IF you can be consistent. Its the big down days that fluff up the average. Also don't underestimate how hard it is to recognise and actually trade the big days. Its as easy as hell to have a look at the daily range the day after and pull the calculator out and go "boy next time I'll make XXXX" But how many have we had in 6 months and how many have you rode? Bit of a reality check in that number I bet.

I agree with you.
It's not easy at all.
My strength is that I'm very defensive minded.
In 6 months I haven't had a huge down day. A few where I've lost more than I should have but none that have been close to being disasters. Risk management is key for me.

It's not even about these huge runs that in am referring to. They are nice but like you said, I can't bank on them.

I'm talking more in terms of many many trades that I am identifying, reducing risk in, profiting from but just not letting run. Most of the pieces of the puzzle are there. I'm not talking about hypothetical profit for setups I'm seeing in hindsight or 400 point moved that I "should" have.

I know you aren't the biggest fan of my 2 contract idea. I know you think 'hold them all'. But psychologically, for the short term, I know this is a right stepping stone for me. Better to maximize profit on 1 out of 2 contracts than on 0 out of 1 contract (even if 2/2 is the best possible outcome).

 

[Trembling Hand]

I know you aren't the biggest fan of my 2 contract idea. I know you think 'hold them all'. But psychologically, for the short term, I know this is a right stepping stone for me. Better to maximize profit on 1 out of 2 contracts than on 0 out of 1 contract (even if 2/2 is the best possible outcome).

No, No I think its very hard to trade 1 contract, makes every decision an in or out one. That sucks. I'm just not a fan of letting go of the first contract at 1-2 R. (especially the 1 R :bad

If you can control the down side I'm all for sizing up.

 

[pavilion103]

No, No I think its very hard to trade 1 contract, makes every decision an in or out one. That sucks. I'm just not a fan of letting go of the first contract at 1-2 R. (especially the 1 R :bad

If you can control the down side I'm all for sizing up.

Yeh. That is how I feel.

I don't really even see my lack of willingness to let the trades run as a psychology issue to be honest.
I feel a little handcuffed by having the 1 contract.
Every choice becomes so difficult.
I could have entered a trade for 6 points risk. Eliminated risk quickly. And then be up 30 points.
Now this is a good 5R trade. Trading like this my strategy well and truly has positive expectancy.
Volume comes in and bearish signs. I think "hmm... I've got 5R on the table. This is a profitable strategy if I take these."
So I take it. In the back of my mind, I truly believe that it will pull back less than my BE stop and then continue down, but is it worth the chance/risk?

Obviously this is where 2 contracts comes in.
I take my 30 points off the table for a 5R profit. A great trade.
My other one is at breakeven (or a significant pivot level) and I let it run longer.
Depending on the chart, I may let it run over night. I may set a profit take target.
I've now got that versatility. The best of both worlds.

That's how I see it.
It is incredibly frustrating because I'm doing just about everything right, but just not maximising the outcome (with the level of risk that I feel comfortable with i.e. not giving back all of those 30 points).

 

[CanOz]

Many will think that I suffer from delusions of grandeur but I see no reason why in the near future profit of $100,000 can be made (50 points per week x 2 contracts).

Lol I took out the actual figure that I wrote down first (it wasn't $100,000) because I don't believe the responses would be favourable

Quite the contrary, i know guys that are making over $100,000 per month...their trading accounts are in the millions, former prop traders.

I reckon, my best guess...is TH here is pocketing 15-30k for a stellar day. I could be a little low here. He's likely got a 10k daily stop.

So i don't think you're wrong about the potential Pav.