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sdpercussion

Stocks or Futures for Day Trading (Not the Same Old Which is "better")

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Hello There,

This is my first post and I would like to start off by saying thank you to anyone who takes the time to consider my questions. I am currently a swing trader with about a years worth of experience. I am very familiar with TA concepts as well as money/risk management. What I do not have is years and years of hands on experience. I aspire to become a day trader but was thinking of switching to futures to avoid (not to be impatiant, Im just not a very rich person) having to wait untill my account size meets pattern day trading rules.

 

My style of trading relies heavily on volume. The guys over at TodayTrader (not a plug) have been a big inspiration. To over-simplify, They among many other things have alerts coming through when stocks are making highs or are running up on heavy volume (they use Trade-Ideas). They will then either jump on board this momentum or find sympathy plays (again this is a very simple description of their methods). In any case I have found that wheather entering on a breakout, pullback or sympathy play if there isnt a lot of volume you might want to pass up the trade. So, these guys will screen a universe of stocks basically using volume to generate trade ideas in real-time. This doesnt mean to trade just because of a volume spike but rather volume is your main confirming indicator and the fuel for momentum, the more the better.

 

So...

 

1. Do you think that by limiting yourself to a few intruments (like trading a couple of different futures) rather than screening a universe of stocks for higher quality opportunities like the guys at Todaytrader do would put me at a disadvantage?

 

2. I feel like with trading stocks you have many more choices to find the "right" trades and by trading futures you will be forced to trade mediocre opportunities to avoid sitting on the sidelines all the time. Agree/disagree?

 

3. Many traders say that it is much easier focusing on a small number of instruments, such as trading 1 or 2 indexes but I would think that this forces you to trade through a lot of "chop". Where as with stocks you could just look elsewhere for a better opportunity (ie. whatever sectors/stocks the volume is flowing into using a scanner like Trade-Ideas)

 

4. I use Tradestation and I see that I can add data feeds for many different futures (indexes, agri, curreny, metals). Might this be the solution to my concerns or would I be getting myself into trouble trading commodities that I have no experience with the fundamental factors that effect price? I trade on technicals but I don't want to get stopped out of a trade everytime it rains in Florida...

 

I know this was a loaded post and I appreciate any comments!

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Hi SDP,

To get to the core issues which are only a few let me say this:

I personally am a brilliant stock position trader and a mediocre to sometimes lousy futures trader while being a very competent analyst .

 

What makes the difference : 1. Leverage , I trade stocks with my money and no margin. This helps.

2. The more trades you take in and out the higher the costs , slippage and %ge of errors.

3. Noise can have a disastrous effect on leveraged futures accounts.

So it is a misconception to prefer Futures because you streamline the knowledge and information overload because you pay for it dearly . Also daytrading has seen many a good trader come to grief.

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ditto to what Coogee says.

Plus I would add that stocks often have a lot more interesting things happening in them; eg; corporate actions, market and sector drivers.

Plus to a certain extent - even though i am not a fundamentals person. Yuo can to a certain extent put a reasonable idea of value on a stock with a limited number of shares available.

when it comes to most futures, value seems to go out the window for a very long time..... good if you are a trend trader. :)

Have a great NY

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1. Do you think that by limiting yourself to a few intruments (like trading a couple of different futures) rather than screening a universe of stocks for higher quality opportunities like the guys at Todaytrader do would put me at a disadvantage?

 

As a trader that focuses on a few futures, I do not think you are at any disadvantage. You will learn your market(s) and start to get a feel for what is normal.

 

2. I feel like with trading stocks you have many more choices to find the "right" trades and by trading futures you will be forced to trade mediocre opportunities to avoid sitting on the sidelines all the time. Agree/disagree?

 

Disagree. 1) You will have to develop a reliable screener that screens stocks in real-time (which then means developing a scanner that works). 2) As I said, you will get a feel for a market(s) and learn it's tendencies.

 

3. Many traders say that it is much easier focusing on a small number of instruments, such as trading 1 or 2 indexes but I would think that this forces you to trade through a lot of "chop". Where as with stocks you could just look elsewhere for a better opportunity (ie. whatever sectors/stocks the volume is flowing into using a scanner like Trade-Ideas)

 

I'm not sure you are forced to trade chop, that's dependent on your trading methodology. If you feel the need to trade for the sake of trading, then you may get caught into some chopping areas. With the stocks you are back to having a scanner that is consistent b/c there's no way you can manually flip through potentially thousands of charts.

 

4. I use Tradestation and I see that I can add data feeds for many different futures (indexes, agri, curreny, metals). Might this be the solution to my concerns or would I be getting myself into trouble trading commodities that I have no experience with the fundamental factors that effect price? I trade on technicals but I don't want to get stopped out of a trade everytime it rains in Florida...

 

You should never trade anything - futures or stocks - w/o first watching a market(s) and learning how it moves. You should also know what can impact a market. Stocks can be impacted by unexpected news, commodities can be affected by unexpected events such as storms, etc.

 

All markets will be affected by unexpected events so you have to prepare for that.

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