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Dear Group,
Several years ago, I answered an ad in the back of futures magazine for the
Commodity BootCamp. I believe that it had been created by the CBOT floortrader
who has published several books and is an official CBOT floor "trainer" (his name
escapes me right now but I am sure many of you have heard of him, and a year or so
ago he was a participant in this newsgroup) and later sold to its present owner,
also a CBOT floor trader - I believe his name is Bill Greenspan or something like
that --- I will call him Bill for purposes of this note.
He told me what he offered, a course extending, at increasing tuition, for up to 5
days. I asked him in his experience what he thought was the best training an
off-floor trader could get. He repleied that he thought that before a trader
could trade profitably, he or she had to trade automatically. What he suggested
was to take some market that had the reputation of being as trendy over the
long-term as a market could be and as slow over the short-term as a market could
be, and then to make a contract with oneself to execute 5 trades a day in that
market, and to continue to trade it, at least 5 trades a day, for a week or a
month or however long it took to simply become automcatic --- BAM, this happens,
I enter immediately, automatically, without hesitation --- BAM, that happens, I
exit, immediately, automatically, without hesitation --- repeat over and over, day
after day.
Bill suggested the Canadian$ as an ideal market and thought that even though it
was then (as usual) going nowhere, one should be able to make expenses trading it
in this way --- that is, having one's negligible profits outweigh one's
commissions, remembering that the point of this exercise was NOT to make money but
to gain experience in execution without hesitation.
He told me that one of the most successful students that he had ever had was a
woman who had been going nowhere in her trading, had done this exercise for a
month with the Canadian$ (and had actually made a little money after all was said
and done), had taken his class thereafter, and was now consistently making
signifcant money trading.
I should say that I quit my dayjob in 85 to daytrade the S&P, a big mistake, among
other reasons in selecting the S&P to begin daytrading, even though the S&P was a
great deal quieter in 1985 than now (a 5 basis point daily range was then a REALLY
BIG DAY!!!). Needless to say, somehow I survived for over 10 years without
producing any profits worth mentioning, and somehow I kept at it until I began to
learn something besides how to change the variables in a Stochastic equation.
Having said the foregoing, my 15 years of experience echos Tim's note regarding
starting out daytrading the futures markets in general and the index futures
markets in particular, as well as Dennis' note regarding the insignificance of
margin requirements vis-a-vis one's choice of market to trade. At least when I
began to daytrade the S&P (and never more than one car at a time), and when its
margin requirement was then something like $5K, somehow I had the sense to begin
trading a $50K account --- one lesson that I didn't have to let the market teach
me, Hallelujah! I did something right for once.
Sincerely,
Richard
Dennis Holverstott wrote:
> > The
> > basic premise was that the E-mini may not be the best place for a new
> > futures trader to start because there are other more efficient markets,
> > e.g., CME's Canadian dollar, giving the largest dollar move for the required
> > margin.
>
> What a crock! That's my gentle response. What I really think of that is
> unprintable. :-)
>
> Tim made the excellent point that you have to be well capitalized in
> this business. If a new trader is using so much leverage that margin
> requirements enter into the picture, he is almost certain to go broke.
> So, while the mini S&Ps are a very tough game, it has NOTHING to do with
> margin requirements. My suggestion for new traders is to not use any
> leverage starting out. An emini contract controls about $70K of stock so
> you should have that much in your account for each contract. Same thing
> for any other future. With that kind of capitalization, the new guy can
> make some mistakes and still survive. Once he learns the game, he can
> start using more leverage, but it's still unlikely that he should ever
> lever up so much that margin becomes a factor.
>
> --
> Dennis
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