[shortbleu]

Hi all,


This is my first post on this website, I read a few threads here and I really like Traders Laboratory Forums.


Just to introduce myself:

I am not new to Equity Index Futures trading (FCE CAC40) that I've been trading as a long term investor, holding positions from a few months to over a year and rolling the contracts every month when they expire.


I am quite new to day trading however, I worked for a prop firm 5 years ago for just about 3 months and I left because I was "forced" to scalp financial futures like bobl, bund, and eurodollar on a tick by tick basis (very short term scalping) and I hated it. Just to put it right, I am not and will never be a short term scalper looking for a tick target beccause 1) I don't have the skills and aptitude to do this, and 2) I don't have any interest in this kind of extremely short term day trading.


Basicly, I can't trade financial futures in a trading range as it does not fit my personnality. I am a trend follower and I like equity index futures because they are less likely to trade in a range, they are more volatile and large moves can easily allow a single trade to capture between 5 points (10 ticks) and 50 points (100 ticks).


I am very new to equity index futures day trading, I started 3 days ago on the future dax with only 1 lot at a time and I have a few questions for you.


1) Am I trading the correct equity index future (Dax) or should I trade the CAC40?


Although I have a better knowledge of the CAC 40 than the DAX, I thought the Dax would be better for me because his movements are a bit larger than the CAC40, eg. when the CAC40 takes 5 points, the dax might take 6 points, so i thought the larger moves would suit well my approach. Also, I thought about the ratio commission / profit which is I believe better for the Dax as the Dax has a larger nominal. My reasoning is has follow:


If it costs me EUR 4 round turn and I make 5 points on CAC40, the ratio commission / profit will be: 4/(5*10)= 0.08

Comparing with Dax, if I make say 5 points on Dax (could be 6 points), the ratio will be 4/(5*25)=0.032. Therefore my conclusion is the Dax is lot more cost efficient because the nominal is a lot larger: 4700pts *25eur = 117500 eur for dax against 3200pts*10eur = 32000eur.


I'd like to know if other people have the same reasoning and if you look at profit / commission ratio in the same way? Can you please confirm the Dax will suit my trading style better than the CAC40?




2) what margin should I use to day trade the DAX?


The value of the Dax at the moment is 120,000eur more or less.

At the moment, I use a capital of 30,000eur for one lot (leverage 4). Do you think this is conservative enough or too risky? From your experience, is it likely to blow out the capital in a few weeks / months with this sort of leverage? I was thinking the capital to trade 1 lot should be anywhere betwen 24,000 eur and 60,000 eur (somewhere between leverage 2 and 5). I can't imagine myself using a leverage 5 as I really want to preserve the capital.

Can you tell me your thoughts, what sort of leverage are being used by profitable trend following day traders who have been successful over at least 2/3 years without blowing their capital?


I read other threads and read that other day traders were complaning about brokers asking 5,000 eur for intraday margin and they were turning to brokers asking 2,000 eur intraday margin or less for DAX. From my perspective, this is madness as I believe there is a potential to lose 80 points (2,000 eur) in a few seconds on a single trade if the market goes mad on news and a gap / mini krack can happen and people who use 2,000 eur or so would blow out their capital straight away. Am I just wrong or is there something I don't understand? I am asking because I've read threads on other forums where people ask for very low margin and high leverage. I just don't get it.


Many thanks for your advices.

[monad]

Dax indeed does trend well, however it is pretty volatile and if you read another thread on the subject here, the volume on the DOM i.e orders on the offer and bid are not great (20-30 average) and overall the market moves can be pretty volatile.

You would be better off with Eurostoxx where the liquidity on the order book is very good, behaves smoothly like ESmini and though the point move may be somewhat less than Dax, you can always increase size to compensate for that

[shortbleu]

Thanks Monad for the quick reply. I am aware of the volume on the DOM, it's rarely over 25 lots per price at one time but this is really not an issue for me as I am trading with only 1 lot. I am in the learning process and do not expect to ever trade lots of cars by clip.
If I am doing well with 1 lot, then I will increase the size progressively. I think one can earn good money (over 1,000 eur a day on average) trading around 5 lots per clip.

My daily average target would be to make 0.2% a day with a DAX at 4700 pts, therefore 4700*.002= 9.5 points clean after commission = 237 eur per day per contract on average. Do you think this is achievable?

What about the margin question I asked above, any advice on this please?
Many thanks

[shortbleu]

also, what about my profit / commission reasonning, does it make any sense?

[bathrobe]

I agree with Monad, the Eurostoxx contract has less of the hyper-volatility than the DAX contract and many of the setups used to trade the ES work on the Eurostoxx50 also.

[shortbleu]

Thanks, I'll do some research on the Eurostoxx50 also then?
What about the other questions?

[uexkuell]

Originally Posted by shortbleu »

Hi all,
I am quite new to day trading however, I worked for a prop firm 5 years ago for just about 3 months and I left because I was "forced" to scalp financial futures like bobl, bund, and eurodollar on a tick by tick basis (very short term scalping) and I hated it. Just to put it right, I am not and will never be a short term scalper looking for a tick target beccause 1) I don't have the skills and aptitude to do this, and 2) I don't have any interest in this kind of extremely short term day trading.

Ok, sounds as if you found your personal style and what you do not want, which is very important.

Originally Posted by shortbleu »

Basicly, I can't trade financial futures in a trading range as it does not fit my personnality. I am a trend follower and I like equity index futures because they are less likely to trade in a range, they are more volatile and large moves can easily allow a single trade to capture between 5 points (10 ticks) and 50 points (100 ticks).

This is unfortunately incompatible with your first statement cited above:
If you prepare yourself to go for 5 points this means, that you are heading towards short term daytrading.
In these days DAX makes sometimes 200 points a day easily.

Originally Posted by shortbleu »

If it costs me EUR 4 round turn and I make 5 points on CAC40, the ratio commission / profit will be: 4/(5*10)= 0.08

Once again incompatible with your opening statement.
If you go for (large) interday moves commissions will only be peanuts for you.
There are other things that have higher priority.


Alltogether:
DAX is a wild beast that will rip you apart in seconds if you do not know what you do.
Therefore it is essential to know what kind of trading style suits you well and where you are profitable.

If you don't have quite deep pockets DAX is nowadays only for short term trading (seconds - 3 hours) and you have to be ready to take actions immediately.

Otherwise (as said above) ESTX is perhaps more suitable.

[bathrobe]

Originally Posted by shortbleu »

What about the other questions?

I trade one ES contract for every 2,500 USD in my account. In the past I have leveraged up very 1 per $500, but only if I feel strongly about the position.

Your personal risk assessment must be made by you, not an anonymous poster in a chat room. Otherwise you could talk to a registered financial rep.