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Jim,
Your opinion is interesting. It is true that the risk associated with the
S+P is higher right now than in any other US futures market. Traders
attempting to trade the S+P must understand the nature of leverage and how
important it is to manage risk appropriately. I think far to many new
traders have their sights set on pie-in-the-sky profits and don't consider
how they will manage a loosing position. Thus they tend to hold positions
longer than they should and wipe out. You can't trade futures the way many
trade stocks.
However, I believe that the E-Mini contract provides an excellent way for
new and experienced traders (that haven't traded S+Ps) to learn to trade
the S+P. I would rather learn how to trade S+P with mini contracts than
the DJ mainly because there is less risk associated per contract. The Dow
Jones is a sizeable beast and I think can wipe out new inexperienced
traders almost as fast as the S+P. At $10/pt in the DJ, most days have
$1,000-$2,000+ range. Whereas the Emini at $0.50/pt doesn't have nearly
that kind of risk. You can't buy and hold with the Dow but you almost
could with Emini.
I don't think new traders need to be concerned about the subtle advantages
of trading an open outcry market. My advice to a new traders would be
place your orders at the market and don't quibble over a few ticks. If a
new trader's methods call for limit orders then find a broker that will
take these. Same for stop orders. I've traded Eminis and Globex and my
broker takes a limit order for Globex the same way they would for any other
market. This makes open out cry for all but the most experienced traders a
moot point.
I love the Emini because I can adjust my risk according to market
conditions. If the setup calls for loading the boat, I buy the big
contract. If not, I buy a few minis. It also offers some interesting
hedging possibilities (but at 1/5th of the big contract it's expensive).
Unlike the Dow, the Emini offers a pure way to trade the S+P without as
much risk that allows you to conveniently increase your size as your
confidence grows.
Brian.
-----Original Message-----
From: Jim Cox [SMTP:cayenne@xxxxxxxxxxxxxxxxx]
Sent: Saturday, March 28, 1998 1:02 AM
To: omega-list@xxxxxxxxxx
Subject: DJ vs E-Mini
Hans,
I think you missed my point.
In my experience, the majority of new traders look forward to trading the
S&P Futures, which, as you know, during the day session is open outcry and
also capable of taking most kinds of orders. But, even though the contract
was cut in half last fall, the S&P remains the highest risk market.
So it was my suggestion, in order for to gain trading experience in a
similar market with similar fundamentals while minimizing the risk factor
vis-a-vis the S&P, that new traders start out trading the DJ futures at the
CBOT.
I certainly have nothing against the european electronic markets, and I
hope Globex improves in the future. Perhaps one day all the markets will
electronic.
Anyways, those are my thoughts. I have seen far too many new traders wash
out of the S&P. Perhaps trading the DJ futures would be a prudent first
step.
Jim
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