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I'm looking for some perspective from members with more seasoning that
myself when it comes to choosing markets. There are other
considerations such as liquidity but my focus here is how well capital
is used.
In some materials I got from Bob Buran he talks about "margin
efficiency"--the amount of return you get from the amount of margin
capital you tie up in a trade. This seemed to lead him toward trading
several (5-10) markets form short periods and because his systems trade
every few days, he could move his capital around. This as opposed to
tying up capital on several long term trades.
I did my own analysis of this by first establishing the average dollar
movement per day ( I used 200 days) of about 30 markets. This ranged
from $175/day for corn to $5500/day for ND (these data are now several
months old and clearly changes in volatility need to factored in from
time to time). I then divided this number by the margin requirement to
get a figure representing the number of dollars in price change for each
dollar of margin commited. Metals and currencies yielded the least--in
the vicinity of 20-30 cents per day for each dollar of margin. The SP
was showing 24 cents. Cocoa was above $3.00 per dollar of margin (I
keep checking that calculation but it seems to hold up.).
Comments on this approach?
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