Trading £75,000 futures contracts with £5,000?

[ATV]

I've been speaking to my cousin for a couple of months about trading futures. He trades on IB for a couple of hours a day and says he is leveraged 15:1

I've just had a look at their website and they are asking for a £5000 minimum opening balance ($10,000) http://www.interactivebrokers.co.uk/en/main.php?re...

He says he does a maximum of 3-4 trades a week, usually going short and he has an account balance of £50,000 all of it generated profits from his initial stake of £20,000 which he started with three years ago and has since removed (he's also taken some out to pay his taxable profits and some out for his new car). Some weeks he doesn't trade at all but with a rigid risk management programme in place (I think he said 7% loss on any contract is his maximum and then he gives up for the day) he has consistently come out with £2-3000 profit each month. He's by no means a professional trader, he has just learnt himself going along

Wouldn't mind having a go myself. I've opened a demo account and my cousin has said he is willing to talk me through his trades so I can get the hang of it. I can afford the 5k and the possibility of losing it (although with the controlled risk management and stop losses in place, there's no reason why I would blow up my account).

Any reason why I shouldn't have a go?

[limpsfield]

ATV said:

Any reason why I shouldn't have a go?

There is no reason why you shouldn't give it a go but you may want to consider going down the spread betting route at least at first because you can start trading smaller than the contract minimums required the futures markets. You would not have to stump up £5,000 of risk capital to try your hand at it.

Just my 2p's worth.

[Simpo Two]

Got to be beter than ShareHeads.

[limpsfield]

Whatever happened with that - or is everyone sworn to secrecy?

Was there a French bank involved.....?

[jazzybee]

ATV said:

I've been speaking to my cousin for a couple of months about trading futures. He trades on IB for a couple of hours a day and says he is leveraged 15:1

I've just had a look at their website and they are asking for a £5000 minimum opening balance ($10,000) http://www.interactivebrokers.co.uk/en/main.php?re...

He says he does a maximum of 3-4 trades a week, usually going short and he has an account balance of £50,000 all of it generated profits from his initial stake of £20,000 which he started with three years ago and has since removed (he's also taken some out to pay his taxable profits and some out for his new car). Some weeks he doesn't trade at all but with a rigid risk management programme in place (I think he said 7% loss on any contract is his maximum and then he gives up for the day) he has consistently come out with £2-3000 profit each month. He's by no means a professional trader, he has just learnt himself going along

Wouldn't mind having a go myself. I've opened a demo account and my cousin has said he is willing to talk me through his trades so I can get the hang of it. I can afford the 5k and the possibility of losing it (although with the controlled risk management and stop losses in place, there's no reason why I would blow up my account).

Any reason why I shouldn't have a go?

I did this when I left Uni many many years ago. I think the point your cousin has made is an important one, you must rigidly manage risk. I used to similarly trade 3 times a week on average. I did it on the CME - trading currency futures. If you have to be someone comfortable with risk and the money you put up, must be considered 'risk' money. Try not to be too subjective in your selection process - I worked to trade based on a formula or clearly visable chart patterns. However, what really makes it work is using a stop loss every time. For each trade, you look to see what the realistic, potential upside is, and where the support and resistant points are for your stop losses. If your REALISTIC upside is 3 times or more the necessary point for a good stop loss (one that should not be hit) then you have a good trade. You will then need 3 losses for every profit to pretty much break even if you always hit your target. If you are that unlucky on an ongoing basis than you have a serious problem

That is not to say this method will always make you money, it simply enables you to control the downside. I traded for about 3 years, and with leverage facility of 10:1 (I usually used only 2:1 to 5:1) I averaged 15-20%+ returns per month, with the one 300% return in a month, to a low of 40% loss in a month. However, I was young, had no responsibilities and was quite happy to take risks. I know of people that have lost HUGE amounts trading futures, but this was usually because they did not fully understand how trading works, the concept of unlimited losses, stop losses not being guarantees and using too much leverage. Losing homes, borrowing on their parents home and all that money as well. You must treat it as investing, be disciplined and if your are getting excited by the trade, then you are doing something wrong.

This is just my 15 year old experience and opinion. Times will have changed, and spread betting accounts appear attractive and tax efficient, so please do take some more upto date advice - just don't do it for excitement or greed, thats all I can suggest.

[clubsport]

Give it a go, absolute piece of pi55, you are bound to make a fortune

[NoelWatson]

jazzybee said:

ATV said:

I've been speaking to my cousin for a couple of months about trading futures. He trades on IB for a couple of hours a day and says he is leveraged 15:1

I've just had a look at their website and they are asking for a £5000 minimum opening balance ($10,000) http://www.interactivebrokers.co.uk/en/main.php?re...

He says he does a maximum of 3-4 trades a week, usually going short and he has an account balance of £50,000 all of it generated profits from his initial stake of £20,000 which he started with three years ago and has since removed (he's also taken some out to pay his taxable profits and some out for his new car). Some weeks he doesn't trade at all but with a rigid risk management programme in place (I think he said 7% loss on any contract is his maximum and then he gives up for the day) he has consistently come out with £2-3000 profit each month. He's by no means a professional trader, he has just learnt himself going along

Wouldn't mind having a go myself. I've opened a demo account and my cousin has said he is willing to talk me through his trades so I can get the hang of it. I can afford the 5k and the possibility of losing it (although with the controlled risk management and stop losses in place, there's no reason why I would blow up my account).

Any reason why I shouldn't have a go?

I did this when I left Uni many many years ago. I think the point your cousin has made is an important one, you must rigidly manage risk. I used to similarly trade 3 times a week on average. I did it on the CME - trading currency futures. If you have to be someone comfortable with risk and the money you put up, must be considered 'risk' money. Try not to be too subjective in your selection process - I worked to trade based on a formula or clearly visable chart patterns. However, what really makes it work is using a stop loss every time. For each trade, you look to see what the realistic, potential upside is, and where the support and resistant points are for your stop losses. If your REALISTIC upside is 3 times or more the necessary point for a good stop loss (one that should not be hit) then you have a good trade. You will then need 3 losses for every profit to pretty much break even if you always hit your target. If you are that unlucky on an ongoing basis than you have a serious problem

That is not to say this method will always make you money, it simply enables you to control the downside. I traded for about 3 years, and with leverage facility of 10:1 (I usually used only 2:1 to 5:1) I averaged 15-20%+ returns per month, with the one 300% return in a month, to a low of 40% loss in a month. However, I was young, had no responsibilities and was quite happy to take risks. I know of people that have lost HUGE amounts trading futures, but this was usually because they did not fully understand how trading works, the concept of unlimited losses, stop losses not being guarantees and using too much leverage. Losing homes, borrowing on their parents home and all that money as well. You must treat it as investing, be disciplined and if your are getting excited by the trade, then you are doing something wrong.

This is just my 15 year old experience and opinion. Times will have changed, and spread betting accounts appear attractive and tax efficient, so please do take some more upto date advice - just don't do it for excitement or greed, thats all I can suggest.

I have a few questions.

Is this type of gambling a zero sum game? If so, what gives you the edge over other players (human or computer).

"I worked to trade based on a formula or clearly visable chart patterns"

I assume from this you are saying currency futures do not follow a random walk?

So if I showed you a spreadsheet, one with a random walk and one with some historical future data, you could tell the difference?

[Mattt]

Simpo Two said:

Got to be beter than ShareHeads.

What? You mean we didn't do well out of it? Balls.

[ATV]

limpsfield said:

ATV said:

Any reason why I shouldn't have a go?

There is no reason why you shouldn't give it a go but you may want to consider going down the spread betting route at least at first because you can start trading smaller than the contract minimums required the futures markets. You would not have to stump up £5,000 of risk capital to try your hand at it.

Just my 2p's worth.

Unfortunately I have know absolutely nothing about spread betting. Is there any information you could provide for a complete newbie (forums or books I could read, good trading systems etc.)

[Mattt]

There's a very long thread somewhere on here.

[shadowninja]

http://www.financial-spread-betting.com/

[jazzybee]

NoelWatson said:

I have a few questions.

Is this type of gambling a zero sum game? If so, what gives you the edge over other players (human or computer).

"I worked to trade based on a formula or clearly visable chart patterns"

I assume from this you are saying currency futures do not follow a random walk?

So if I showed you a spreadsheet, one with a random walk and one with some historical future data, you could tell the difference?

Hmm, not to clued up on gambling, but ultimately, if you treat it as luck - you keep your stops to a third of your projected upside, a 50/50 win/lose ratio should enable you to break even or a little better (given that you may bot always reach you objective and chicken out - take profits early - which is not always a bad thing if it is done only occasionally). The saying goes that 90% of small investors lose in currency trading. That is because they trade on gut instinct, take profits too early and get emotional when they are losing, eventually cutting losses too late.

I do not believe currency futures follow a random walk. Markets tend move is waves when they are trending and prices experience resistance at significant historical levels. These patterns can be quite clear looking at historical data, but if you keep a keen eye on current medium term and short term charts, you can see the patterns emerging and act on them (well I could when I did this 15 years ago). I used to use elliot waves, head and shoulders, and use support and resistance levels for market entry and exit points when using charts. In addition I used to look at Stochastics and Relative Stength Index (RSI) data based on 1 day, 1 hour and 5 min data to find short term entry points into medium to long term trend positions (bottom picking). I did work on some formulas that used values from Stochastics and RSI to automate buy and sell orders - but that was a long time ago, and can't remember how I did it. These techniques were used to hopefully better my win/lose ratio from a purely 'luck' based 50/50 level. It seemed to work. I would say I had about a 65/35 win/lose ratio, but I would chicken out more than I should have done - took profits to early, and I took a pretty conservative approach when it came to leverage.

If you gave me random data in a spreadsheet and I could chart it, yes, I could probably see that it was random. If it was random within guidelines to look like 'real' data, then I could look for patterns. I doubt you could identify elliot waves, but you may see Heads and Shoulders, and resistance areas. My guess is Stochastics and RSI charts would look very 'choppy' and would show few buy signals.

But these are my methods - I was lucky enough to have been taught by a well respected chartist, that had been using charts to trade since the early 70's. I used what I had learned. I would say that so long as you have a method (it does not too much matter what it is, within reason), apply discipline (stop loss/profit targets) and don't overleverage you should not go too far wrong. You will lose money at some point, and sometimes lots, but the method and discipline should help you average out in the long run. IMHO

[NoelWatson]

jazzybee said:

NoelWatson said:

I have a few questions.

Is this type of gambling a zero sum game? If so, what gives you the edge over other players (human or computer).

"I worked to trade based on a formula or clearly visable chart patterns"

I assume from this you are saying currency futures do not follow a random walk?

So if I showed you a spreadsheet, one with a random walk and one with some historical future data, you could tell the difference?

Hmm, not to clued up on gambling, but ultimately, if you treat it as luck - you keep your stops to a third of your projected upside, a 50/50 win/lose ratio should enable you to break even or a little better (given that you may bot always reach you objective and chicken out - take profits early - which is not always a bad thing if it is done only occasionally). The saying goes that 90% of small investors lose in currency trading. That is because they trade on gut instinct, take profits too early and get emotional when they are losing, eventually cutting losses too late.

I do not believe currency futures follow a random walk. Markets tend move is waves when they are trending and prices experience resistance at significant historical levels. These patterns can be quite clear looking at historical data, but if you keep a keen eye on current medium term and short term charts, you can see the patterns emerging and act on them (well I could when I did this 15 years ago). I used to use elliot waves, head and shoulders, and use support and resistance levels for market entry and exit points when using charts. In addition I used to look at Stochastics and Relative Stength Index (RSI) data based on 1 day, 1 hour and 5 min data to find short term entry points into medium to long term trend positions (bottom picking). I did work on some formulas that used values from Stochastics and RSI to automate buy and sell orders - but that was a long time ago, and can't remember how I did it. These techniques were used to hopefully better my win/lose ratio from a purely 'luck' based 50/50 level. It seemed to work. I would say I had about a 65/35 win/lose ratio, but I would chicken out more than I should have done - took profits to early, and I took a pretty conservative approach when it came to leverage.

If you gave me random data in a spreadsheet and I could chart it, yes, I could probably see that it was random. If it was random within guidelines to look like 'real' data, then I could look for patterns. I doubt you could identify elliot waves, but you may see Heads and Shoulders, and resistance areas. My guess is Stochastics and RSI charts would look very 'choppy' and would show few buy signals.

But these are my methods - I was lucky enough to have been taught by a well respected chartist, that had been using charts to trade since the early 70's. I used what I had learned. I would say that so long as you have a method (it does not too much matter what it is, within reason), apply discipline (stop loss/profit targets) and don't overleverage you should not go too far wrong. You will lose money at some point, and sometimes lots, but the method and discipline should help you average out in the long run. IMHO

The problem I have understanding is that if it is not random and has an element of predictability, then what chance would a human have against computers running in hedge funds and banks looking for these patterns and acting on the data in near real time?

[shadowninja]

NoelWatson said:

The problem I have understanding is that if it is not random and has an element of predictability, then what chance would a human have against computers running in hedge funds and banks looking for these patterns and acting on the data in near real time?

More opportunities to trade.

[NoelWatson]

shadowninja said:

NoelWatson said:

The problem I have understanding is that if it is not random and has an element of predictability, then what chance would a human have against computers running in hedge funds and banks looking for these patterns and acting on the data in near real time?

More opportunities to trade.

Can you elaborate?

[Vesuvius 996]

limpsfield said:

ATV said:

Any reason why I shouldn't have a go?

There is no reason why you shouldn't give it a go but you may want to consider going down the spread betting route at least at first because you can start trading smaller than the contract minimums required the futures markets. You would not have to stump up £5,000 of risk capital to try your hand at it.

Just my 2p's worth.

Spread betting offers the chance to get into this without a big initial outlay, you simply pay a margin of say 5%, plus interest on capital borrowed to finance the trade, plus fees.

Go for it, but don't use money you can't afford to lose.

HTH.

(Spread Betting Lawyer)

[shadowninja]

NoelWatson said:

shadowninja said:

NoelWatson said:

The problem I have understanding is that if it is not random and has an element of predictability, then what chance would a human have against computers running in hedge funds and banks looking for these patterns and acting on the data in near real time?

More opportunities to trade.

Can you elaborate?

Just guessing that things would move faster (there would be more volatility) which means many more opportunities... although you'd have to be quick (all assuming prediction was possible).

[NoelWatson]

shadowninja said:

NoelWatson said:

shadowninja said:

NoelWatson said:

The problem I have understanding is that if it is not random and has an element of predictability, then what chance would a human have against computers running in hedge funds and banks looking for these patterns and acting on the data in near real time?

More opportunities to trade.

Can you elaborate?

Just guessing that things would move faster (there would be more volatility) which means many more opportunities... although you'd have to be quick (all assuming prediction was possible).

But that is my point, a human would get torn a new one competing against a computer in reacting to price movements. And even if you wrote your own application, would your latency be as good as the instituions who have more money to throw at this?

[shadowninja]

NoelWatson said:

shadowninja said:

NoelWatson said:

shadowninja said:

NoelWatson said:

The problem I have understanding is that if it is not random and has an element of predictability, then what chance would a human have against computers running in hedge funds and banks looking for these patterns and acting on the data in near real time?

More opportunities to trade.

Can you elaborate?

Just guessing that things would move faster (there would be more volatility) which means many more opportunities... although you'd have to be quick (all assuming prediction was possible).

But that is my point, a human would get torn a new one competing against a computer in reacting to price movements. And even if you wrote your own application, would your latency be as good as the instituions who have more money to throw at this?

I see your point. But aren't computers already trading?

[NoelWatson]

shadowninja said:

NoelWatson said:

shadowninja said:

NoelWatson said:

shadowninja said:

NoelWatson said:

The problem I have understanding is that if it is not random and has an element of predictability, then what chance would a human have against computers running in hedge funds and banks looking for these patterns and acting on the data in near real time?

More opportunities to trade.

Can you elaborate?

Just guessing that things would move faster (there would be more volatility) which means many more opportunities... although you'd have to be quick (all assuming prediction was possible).

But that is my point, a human would get torn a new one competing against a computer in reacting to price movements. And even if you wrote your own application, would your latency be as good as the instituions who have more money to throw at this?

I see your point. But aren't computers already trading?

I would assume so (futures not my area of expertise). And if this is the case how can a one man band sitting in his bedroom at home hope to compete?