Why traders prefer equities over futures?

[Robert]

I find that most traders start of day trading stocks. What is the main attraction people turn towards stocks? Futures and forex offers more leverage and bang for the buck. Also commission is alot lower when trading futures.

Any thoughts on this?

[carter]

People are more familiar with stocks to begin with. Also alot of traders use futures as a leading indicator.

I also think there is a smaller percentage of successful futures traders compared to stocks.

[Soultrader]

Like Carter mentioned, I think people are not familiar with futures. Whenever someone asks me what I do for a living, I prefer to say I am a stock trader. When I mention futures, most people turn clueless so its saves me the time from explaining.

Although the leverage is good in futures, the risk is there also. Either way, I think if a trader can make money in the stock market he should be able to make money trading futures.... and vice versa.

[jperl]

Well, I think of my own background. I started out trading stocks back in the days when there were no electronic trading platforms, and you had to call a broker to do anything. Futures? what were those? something farmers and cattle ranchers used for hedging. Most brokers couldn't or wouldn't handle them. I eventually did start trading futures manually (calling a futures broker to make trades) but found that unlike stocks you had to be on top of what was happening on a daily basis or you could get nailed quickly. I stopped trading them because I wasn't ready to give up my day job. Today of course, with the ease of electronic trading, futures trading is in my humble opinion the best way to get the most bang for your buck. I'm a dedicated futures trader, and haven't looked back

[carter]

	Quote:	jperl
	Well, I think of my own background. I started out trading stocks back in the days when there were no electronic trading platforms, and you had to call a broker to do anything. Futures? what were those? something farmers and cattle ranchers used for hedging. Most brokers couldn't or wouldn't handle them. I eventually did start trading futures manually (calling a futures broker to make trades) but found that unlike stocks you had to be on top of what was happening on a daily basis or you could get nailed quickly. I stopped trading them because I wasn't ready to give up my day job. Today of course, with the ease of electronic trading, futures trading is in my humble opinion the best way to get the most bang for your buck. I'm a dedicated futures trader, and haven't looked back

Very interesting jperl. Not excatly sure when electronic trading came into play... but you must be trading for quite some time now. Do you find the futures market an easier market to trade? What would you say the biggest difference is in terms of market concept. Thank you

[jperl]

Yes, I've been trading for more than 30 years. Electronic trading for the average trader didn't come into its own until the arrival of the internet.
As far as differences between stocks and futures, if I were to put up two live charts, one of an equity and another of a futures contracts, I doubt you could tell the difference. The real difference lies in the leverage you have. A $70000 futures contract for instance requires you to put up only $2000 to $3000 of capital compared to 50% for equities. That's a real difference.

[Follow The Trend]

I have dabbled in Futures and Traded options, but do not feel 100% comfortable with them.

I would not have the confidence to trade in decent size on the Futures and Options markets. With my current knowledge of Futures and Options I feel the risk / reward ration is not in my favour.

I do however feel a lot more confident buying stocks and would think nothing of opening a large position in a stock I was confident about.

Maybe I should take a closer look at Futures and Options............

[Maverick]

I have traded both futures and stocks for several years and my track record is much better in stocks. Maybe the difference is I swing trade stocks but trade futures on a one minute chart. Swing trading must agree with me.

[Soultrader]

	Quote:	jperl
	Yes, I've been trading for more than 30 years. Electronic trading for the average trader didn't come into its own until the arrival of the internet. As far as differences between stocks and futures, if I were to put up two live charts, one of an equity and another of a futures contracts, I doubt you could tell the difference. The real difference lies in the leverage you have. A $70000 futures contract for instance requires you to put up only $2000 to $3000 of capital compared to 50% for equities. That's a real difference.

I use alot of market profile in my market analysis and to understand balance from imbalance. I do not trade stocks but would like to know if the same market profile concept applies to the stock market? I trade the YM primarily and feel like the market is a complete auction. However, when I take a look at the stock market there seems to be alot more external things such as earnings, M&A, rumors, etc... I guess my question is: Can I apply the same market understanding/concept of the futures market into the stock market?

[Anonymous]

Personally I do not trade stocks and do not really know why a retail trader would want to. Especially if you are short term trader (read day trader). The account requirements are excessive, the tax implications are worse than futures (taxed at a higher rate), and you can't short on a down tick.

Having said that, I do understand that many people fear the futures markets. Even today, young traders , or new older ones, are warned to stay away from futures or, "you may end up with a dump truck full of corn on your front lawn". The idea of not being out by expiration and having to deliver, or take delivery of some product still worries many people.

As far as Market Profile goes, it should work in any freely traded market. I would be a little skeptical of some penny stocks, because of over-manipulation related to illiquidity issues.

BTW, the inherent nature of the stock market is to rise. This goes a long way for those who want to be optimistic and don't understand selling something they don't own in the first place. Before you ask, here are some reasons:

1. Companies use the stock market to raise capital. They use stock as defacto currency in acquisitions. Hence they need prices to go up.

2. Because stocks do have a monetary value, they need to keep pace with any rise in inflation. (yes, I know that inflation is nothing more than an increase in the money supply, but most people get this wrong. And assume rising prices is inflation. In truth it is not. Inflation may bring rising prices but it doesn't have too).

3. The role that mutual funds pay in a persons ability to retire at a certain predefined age is such that mutual funds need higher prices. The companies that do not pay workers past retirement, want those higher prices. This allows older workers (the ones that have higher salaries0 to retire, and they can higher younger workers at less cost. Government, which only want to provide the smallest "safety net" needs prices to rise so retirees need less subsidies.

4. Foreign capital seeks the highest rate of return. Rising stock market makes for attractive capital. The dollar is strong therefore as foreign capital enters an buys dollars to buy stocks. Strong dollar less inflationary. See 1 and 2.

There are more reasons but you get my point. As far as I am concerned, this is the reason to invest in the stock market and trade the futures market.