Give advice to a Forex guy exploring Futures

I have been in forex for goin' on 5 years. I have just never wanted to mess with anything else. However, these days trading is my business. And like any business, I want to reduce my expenses.

There are two fronts that have me considereing Futures. The first is the actual transaction costs, Spreads, commissions, etc. So far my Futures Demos have all predominantly had a pound spread of 1 pip. Trade Station Secutites claims to have commisions of $3 per contract round turn. So by comaparison that is about 1.3 pip total spread in Forex terms. No retail Forex can compete with that. In my mind it is a poor man's Prime Broker. Throw in superior execution and true transparency and it just seems to make too much sense to ignore.

The second cost consideration was my E-signal account. I am paying them $160 per month. If I want to get a globex feed, it is another $60 per month. I know all about the free meta charting but it does not satisfy my needs. However, Trade Station is supposed to have all of the goodies that I like about My E-signal chart and If I do 10 contracts (same as 10 std. lots Forex) per month, charting is free.

So my reason for exploring the Futures market is as simple as that. I am looking for input from all of the Futures guys as to anything else that I should no about Futres/ Globex trading. Be it good or bad, educate me please.

FXO

Personally I liked futures better -- except that they trade limited hours so you have the gaps to contend with. Other than that, the futures are great so I suppose it would depend a lot on how long you hold your trades and the times you prefer to trade.

Jim

well, futures are a lot more complicated, but its nothing a monkey cant pick up with some study. just make sure you know the difference between the "expriation day" and the "last trading day" for all your contracts. the trading costs are about the same as forex, maybe a little cheaper depending on how you trade (because the spread can vary wildly).

trade very small for at least a few months. there are so many stupid mistakes for you to make, you should definetely learn while trading small. i cant tell you how many times i got confused when first trading futures.

oh and btw, nice move going to TS platform. you wont regret it. this is the professional quant's platform, and you will rarely fine a limit to it's capabilities. but for actually trading, TS may not be the best choice, they are fairly weak on the brokerage front (i know from experience). i would recommend IB for trading.

oh another thing about futures...

not sure how much you backtest, but it is very hard to do with futures. there is no big long chart, because the market is made up of several different contracts. there are synthetic continuous charts etc, but for backtesting purposes they do not work.

My futures trades will be limited to intraday trades. Mostly on the pound. I plan to contimue to use my Forex brokers for swing trades.

Merlin, tell me more about the spread variations. I have been primarily looking at an ATC demo. So far, the spreads have always beeen 2 pips or less. The vast majority of time it has been 1 pip. Oh, and be specidifc about what makes a good futures broker vs a bad one.

Thanx,
FXO

Well, besides what Merlin mentioned, I would like to add some major points I discovered while trading futures:

1- There is much more leverage in futures than in the forex markets

2- Leverage in the forex market can be adjusted by the trader, but in the futures, rarely would you be able to adjust your leverage to the point you need...This is because of the natural concept of the contract specifications itself...For example, a corn contract consists of 5,000 bushels, this is the minimum position size you can take (Excluding the mini contracts of course because mini contracts are not traded electronically, only in the open outcry auction)...So you are already stuck with this type of leverage...5,000 bushels per contract...This could be a burden to your trading

3- You won't be able to fetch precise charts of more than 1 year (At most) for future contracts, because as Merlin said, trading is always rolled over...Sometimes, this deceives you, specially on the day which the whole market is rolling over their positions...You will find the volume extremely light which might worry you if you don't check the volume of the next contract

4- Futures trade electronically almost 24 hours...Even the Ag products trade electronically now

5- Futures are better than forex in my opinion because they are regulated to some extent

6- Huge amount of money are being traded in futures just as being traded in currencies because futures trading are not made for pure speculation, they are made for the hedgers, exporters & all other market participants who have an interest in the underlying commodity...Speculators are actually intruders into the market

7- Fundamentals of many futures are less complicated than forex fundamentals

8- If you are looking for a good broker, go with Interactive Brokers...They have great commissions, great execution, very fast data feed & excellent trade management tools in their platform

9- It is always easy to check the website of the exchange to get the latest news about any contract you are trading, but in forex, there is nothing like that

10- There exist so many strategies which you can apply while trading futures which can't be applied trading the forex market...For example, you can use spreads if you think that the underlying is going to be volatile & you don't want to stuck yourself as net long or net short


Thanks,

Nader

Come on guys, Help out a helpful guy

Tell me the pitfalls and what to look fors in the futures game.
I understand that it is all centrally cleared and is transparent. I am under the impression that the only difference in futures brokers is the software and the service. Is this so?

Go to the CME site and read all about Futures so you know what you are getting.

http://www.cme.com/

I've done all that good stuff.

I recently just left Tradestation, so I might be able to help you on that front. I also am decent with EasyLanguage, should you need any help.

TS is VERY good for futures. That and equities is what they specialize in. Forget about them for Forex -- they use GAIN, and GAIN sucks. Hence why I left.

Futures, overall, is a better choice, IMO, than Forex for all the reasons you just mentioned -- lower expenses for your business in the long run.

Tax considerations are the same, AFAIK...

I also just got rid of my eSignal account. Like you, I was paying 170 a month for my NASDAQ (I trade options with IB), and Forex feed. I just moved to Fibonacci Trader for only $55 a month. Big difference for me and that's how I reduced my expenses...

Just to add to this post -- Basically, for a professional, there's two really good platforms to backtest and code your strategies. You either go with a) Tradestation, or b) Neoticker.

Everything else, for the most part, is too expensive (eSignal) or just doesn't have most of the features you need, OR, you need to become a friggin' elite programmer...

With Tradestation, you could go with IB (I recommend them as well. They are the best IMO... mainly because their feed is ultra fast...), and just use Tradebolt or Ninja Trader to automate your strategies...

Just a thought...

Thank you very very much Mr. Trend. That is exactly the type of feedback I was looking for.

I am going through the process of setting up charts and feeling my way around Trade Station now. There are some things I like better and some less.

I like the trade matrix screen. Would be nice to have a forex broker that offered that. It is so fast and visual. Very cool.

I really don't do any backtesting at all. I am an old school technical analysis-no indicator trader. So, all of those items are not needed. I desire easy to use versatile charts with lots of fast intuitive drawing tools. The only indicator type thing that I am hooked on is Murrey Math.

How are the fibo trader charts Mr Trend?

I like 'em.. check it out.

Looks pretty descent.
I will check em out.
u know what they use for a data source?

FXCM for Forex. Included in the $55.

You have to get a seperate feed for everything else.

The other downside is you can't do studies based solely on price action. It's indicator-based...

It's got a nice little loyal following. It's perfect for me since I don't use indicators of any kind in my trading (not even MAs...)

Hi,

Well i havent trade anything else what so ever then 1000 or 2k oil barrels.

My expirence, I still am intraday trader,...but did try to catch the trend with 1k barells,...uf its hard,...just couldnt,...next try it will be defenetly 500 barrels.

In teory everything seems so simple,...

market moves very quickly, higher volatility then anything else, in summer or when the volatility is not so high,...i will still trade 1k. But otherwise i am realy gona try to catch a big wawe, i still dont have 50 post, to advise witch broker i use,... i like the platforma so much, (and some technical analizes)...there is even market deph for crude sweet and globex, costs arround 20-26 usd for 1 done trade.

O yes,...and ALL oil futures moves in the same direction,...so i did save my custom, to se all in 1 place (price and trade),...if they are all in green for some time,...the price will move up (dont try to sell it, i prefer buy),...otherwise red down... i prefer sell for entering the trade.

Watch the news, be aware of the hurricans in Florida or the gulf in mexico,...do some google research for some links,...if oil (when they came to Florida,...they can turn left or up,...anyway the price will go up if on Florida, but then will go down if it will go north, and maybe more up, if it will go left ) if trading oil ofcourse,....

It can happen that u will have some position in the system, and the market moves in the oposite direction,...if no stop loss entered,...just be cool and wait (if not to much margin exposure),...what goes up, comes down, and vise versa....