The Wizards Handbook

I am a professional trader working at a proprietary firm outside London, England.

I am going to be concentrating on trading the Euro/Dollar Future.

I am currently still on simulator but expect to go live in the not too distant future with an initial 10 lot limit.

This thread will be a place for me to organise my thoughts.

Why trade the Future and not the cash?

1. Regulation: Funds are not safe in over-the-counter (OTC) FX firms as there is no differentiation between customer and firm assets. Therefore, in the event of insolvency, customers are treated as creditors and and must endure the bankruptcy legal process which can include final settlement months or years later at fractions of the original funds on deposit. When trading futures, customer assets are held in true segregated accounts that are legally separate from firm assets.

2. Market integrity: Retail FX traders are not trading in the $1.9 trillion daily market. The cash forex market is primarily traded between banks and institutions and they rarely, if ever, actually deal with individual traders. The true interbank market is only available to institutions that trade in large quantities and have a very high net worth. Most cash FX firms are counter party to your trade up to $20m which means they make every dollar you lose. In addition, since the cash market is an OTC market with no centralised point of exchange, the FX dealer determines the execution price so you are relying on the dealers integrity for a fair price.

3. Price data integrity: The real time data that OTC FX firms provide is completely discretionary and is not transparent, regulated or centralised. This means that different prices can be displayed to different customers depending on whether the customer is long or short and also means that the firm knows where all orders are working and can capitalise on this for themselves, often during the volatile times before and after key market reports.

4. Fixed spreads: With cash FX a trader has two available prices - pay the higher bid or sell the lower offer - with no execution options in between. CME FX futures offer a typically 1 tick wide, highly liquid, market that allows individuals to become the best bid or offer if the opportunity presents itself. The fixed spread structure offered by cash FX firms denies traders access to better prices if they are available.

5. Counter-party conflicts: Most cash FX firms take the other side of your trade meaning that your losses line their pockets. With that busines model, you can expect them to seek to profit from an individuals losses in much the way as a casino does.

More information: http://www.fxfutures.com/content/spot/index.php?show=1

The Euro Future trades on the Chicago Mercantile Exchange.

The contract size is 125,000 Euro.

It moves in $0.0001 per Euro increments which equals $12.50 per contract.

It trades in:

H - March
M - June
U - September
Z - December

The Euro Future trades virtually 24 hours per day during the trading week.

Nice journal...Keeping your post and analysis ...friend

Near the end of my eleventh week as a prop trader, I was given my first opportunity to trade live.

I was given a loss limit of $100 in the euro which at $12.50 a tick equates to a stop of just 8 ticks on a 1 lot.

Not much margin for error.

I sat there for two hours in the late afternoon but I saw nothing that gave me the conviction to trade and as a result did nothing but watch the market.

Did you work in Futex in those years? What prop firm was it?

Greetings