Ticks

Why so much emphasis on "Tick charts" for trading es or er2?
Seem like could use technical analysis, price volume action, as one could do with equities.
What are the common setups everyone is using?
Tick charts? 1 5 30 min? Share bars?

msc

Take a look at the Range % in the Daily Notes and you will see that the ER2 almost always has a larger Range % than the ES. For example, yesterday, the ES was 1.4% and the ER2 was 3.0%. In other words, the day's range of the ER2 was more than double the range of the ES based on percentage move. So your comment about the jumpiness of the ER2 to the ES is justified.

(In fact I don't think that I recall a time when the ES day's range was greater than the ER2 in percentage terms - ever.)

The ER2, from what I've seen, allows you to achieve larger targets more frequently. However, that comes with the cost that you will be stopped out more often, unless your timing is amazingly good, or you use larger (riskier) stops. Nothing is free in this business.

You're not missing anything. The leverage that you get in futures allows you to double you account size in a few days. The corollary of that obviously applies and hence the risk warning. You can wipe out your account in the same period of time.

You may find these two related articles interesting:
The Edge - How long will it take to turn $5,000 into $100,000?
The Risk of Ruin (or How long will it take to turn $5,000 into $0?)

What are you missing? Nothing except the part about leverage msc. the main reason why people lose is that they over extend themselves vs account size. something they apparently dont do when trading a stock

why do you think that is alleyb? i.e. why would a person trade stocks rationally and lose their mind when trading futures?

a good question. Possibly because the majority trade stocks on a long only basis and because they frequently apply a scale in process whereas they seem in futures to jump "all in" especially when the market is active for they fear losing out on a move. In reality they should look at an indices just as they would a stock and apply the exact same methodolgy. It has to dop something with the margining in futures where for a very small amount of $ you are allowed to particpate and gain massive exposure to leverage but in stocks the entry level is higher and the degree of leverage available (unless utilising options) is less.

When you buy a house with 5% down and a 95% mortgage you are in effect also controlling a large amount of money with very little.

I was going to say that people (in trade2win's words) "don't lose their minds" when buying houses but I'm not sure if that is true anymore with the housing bubble.

DayTrading.LOL. perhaps as well the analagy with housing is that people on the whole do not conceptulise the process as they generally have a steady job to supplement the monthly repayment so they consider the household balance sheet in a different way from trading.

Which is strange, because it appears that people are ultra-conservative with a house investment (which has the same leverage as futures), cautious with stock investment (zero leverage under normal circumstances), and then out-of-control with futures (leveraged). I agree with your comments. Your average person does not understand or realized that the futures and house purchase can have the same risk profile.

(Of course I am here referring to high leveraged futures and a high % mortgage versus house equity.)

Been paper and real trading ES.
Doing ok.
Learning process everyday.
Been reading more information about emini traders really dont stand a chance when 70-80% of the trading is programmed trading.
I know quite a few who are trading futures, but wonder do we stand a chance against the big boys trading them?

quote:

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Originally posted by msc

...but wonder do we stand a chance against the big boys trading them?

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Draw an analogy to almost any industry. Consider yourself entering that industry. Where are you? Right at the bottom. You know nothing and you know no one. As time progresses you learn and your skill set becomes more valuable. The more your learn and the better you are at performing the skills required the more you earn.

All industries have the big boys. In software there are the Microsoft giants. In processors we have Intel. All sectors and sub-sectors have dominant players who through their size have advantages. The small players also have advantages which the larger companies don't.

Have you ever read Peter Lynch's One Up On Wall Street? He discusses and explains how the individual investor can often have a significant advantage over the money management companies. You have to remember that the companies that run the program trades do so to a formula. If you know the formula and understand what they are doing and when they are going to do it then because of your size and the fact that you're an individual then you can jump in front of them and ride their buying /selling program.

How do you do that? You might watch the volume in a certain stock, future or sector. Say Merrill Lynch are going to arbitrage the S&P500 cash against the E-mini S&P500 when the premium becomes too large or small. They will probably proxy the cash index with the 50 largest stocks (the might arb the entire index but I'm guessing they can get the same bang for buck with the 50 biggest and most liquid) and then arbtrage the two and then reverse them out.

If they are executing this type of trade then your job as an individual trader is to isolate when they are going to do this instead of worrying that you are up against big players that you can't "beat" just step in front of them and ride their trades as a one sided arbitrage. For more information on single side arbitrage take a look at Trade Like a Hedge Fund by James Altucher.

Here is a story in another topic that illustrates the point: Only one Move