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1. Question:
What is the minimum sized account to trade each sector?
Answer:
Here is a table that lists the sectors by minimum account size.
| Sector |
#markets |
Min. Acct Size ($) |
| All |
32 |
100,000 |
| Select |
8 |
18,000 |
| Currencies |
6 |
22,000 |
| Stock indexes |
5 |
15,000 |
| Energy |
4 |
20,000 |
| Metals |
3 |
18,000 |
| Grains |
5 |
13,000 |
| Interest rates |
2 |
6,000 |
| Livestock |
2 |
4,000 |
2. Question:
What are the advantages to trading futures instead of stocks or other instruments?
Answer:
There are many very compelling reasons why most serious traders prefer to trade futures to stocks or forex. Here are a few of those reasons.
- Commissions are exceptionally reasonable compared to stocks and forex. (With forex, you pay a spread instead of a commission.)
- Small account size. Anyone can day trade without needing $25,000+ in the account! You can day trade and swing trade our livestock sector with as small as $4,000 in your account.
- Taxes are less complicated. You are not required to list every sale on your tax return! (US).
- Profits are subject to a lower tax rate. All gains and losses are capital gains allocated 60% long-term and 40% short-term regardless of the holding period (including day trades).
- Market liquidity. Our popular Futures contracts are always liquid enough and offer low slippage. Market orders are instant.
- More bang for the buck. Futures contracts offer more leverage than stocks.
- No market makers playing games with the particular stock. The futures markets are so huge it is almost impossible for anyone to manipulate them.
- No insider trading.
3. Question:
Is there a way to decrease the slippage?
Answer:
Slippage can sometimes be large. Especially when there is a "surprise" announcement.
Some brokers and their clients have their own way of removing more than half of all slippage. They report they have had good results using stop limit orders for the entries instead of simple stop orders.
As with anything there is no free lunch. Sometimes this approach may miss a winning trade.
For my website, I cannot recommend this entry method. 1) It would be almost impossible for me to show hypothetical results. I would have to look at time and sales on every trade entry. Also there would be many times that some subscribers would get filled and others would not. 2) Can you imagine the clamor of complaint if the subscriber missed a very profitable trade? If a broker uses this method the client must be fully aware that they are giving up a few infrequent profitable trades for the benefit of no slippage on ALL entries.
4. Question:
Do you use the stop limit orders for entries with Day trades and Swing trades?
Answer:
We use them for both. We rarely miss a trade because of it. It's especially effective in the meats, since they are primarily pit traded and also on the CME. When the market blows through our stop limit and then pulls back even 1 tick below/above the limit price, we can hold the floor to a fill at the limit price.
I wanted my subscribers to be aware that there is a way to remove the slippage on entries. As with anything there is no free lunch. Sometimes this approach may miss a winning trade. Mark claims this is rare and the gain from no slippage is well worth it.
For my website, I cannot recommend this entry method. 1) It would be almost impossible for me to show hypothetical results. I would have to look at time and sales on every trade entry. Also there would be many times that some subscribers would get filled and others would not. 2) Can you imagine the clamor of complaint if the subscriber missed a very profitable trade? If a broker uses this method the client must be fully aware that they are giving up a few infrequent profitable trades for the benefit of no slippage on ALL entries.
Now you can decide for yourself if this method of entry is for you.
5. Question:
When are the updates available?
Answer:
The market recommendations for the day and swing trades are needed before the markets open for pit trading. They are usually posted on the Website about midnight. After posting, an email announcement is sent to each subscriber. On the weekends, the Elliott Wave counts are updated and available before each new week begins. The market turns are updated each evening before the day and swing trades.
6. Question:
Why can't I see the wave counts you describe on the natural gas or crude oil charts?
Answer:
You may have trouble following my NG and CL counts. If I look at a daily chart of NG or CL using the most active contract month, I can't see them either. My data looks more like you will see if you ask for a weekly chart using nearby contracts.
Actually I construct my own data files with my own software. I use the following rollover rule for natural gas and crude oil. I roll the contracts into the next month on the eleventh market day from the end of the month preceding expiration. So I have a dataset that is very similar to a nearby futures continuation chart. That's why the difference. It's the only way I can fit Elliott Waves over a number of years.
7. Question:
Do you place stops in the night sessions?
Answer:
All the entry orders recommended in Dave's Corner are for the pit trading sessions on US futures exchanges in either Chicago or New York. They are always to be placed as day orders. If I ever intend for an entry order to be placed in the after hours trading session, I will explicitly state that in the commentary.
I always recommend placing protective stop loss orders immediately after a position is entered. Some of the futures markets have night sessions and trade virtually 24 hours per day. I definitely think that the protective stop loss order should continually be in the market all night. For most markets this prevents the occasional huge overnight move that can stop your position out far above your intended amount of risk. Risk control requires that you have protective stop loss orders working all the time the markets are trading.
8. Question:
What's the proper use of stops?
Answer:
Most people feel uncomfortable without any stop at all. The reasons are obvious. They think their loss is unlimited. The best measure of risk is the number of contracts you have on. This is your risk exposure. Everyone knows that the market may gap on the open or even during the day. The price that is set for the stop loss is not what you get. Brokers love stops. So do the people on the floor. Ever hear of running stops? Remember, manage your risk primarily by restricting the number of contracts you have on at one time.
I do use stops to protect profits as a trade goes with you. My stops are based the Elliott Wave count and my proprietary methods. Yes I use stops sometimes for entry and always for large loss prevention.
9. Question:
Do you ever recommend adding additional contracts to an existing position?
Answer:
No! "Losers add to losers" is an adage worth remembering. NEVER increase the size of your position if the market has gone against you. You are trading futures and they are highly leveraged instruments. Adding on contracts as the market goes against you is a good way to blow out your account.
10.
Question:
How do you get out of a day trade with a limit move?
Answer:
After an entry occurs a limit order is entered to exit the market at the
objective price from the recommendations table or at the exchange set limit
move price for the day. Use the one closer to the market price. For my
hypothetical trades I assume a fill occurs if the exchange limit move price
is hit (even though it is impossible for the market to trade through the
price). So for practical purposes if the exchange limit move is hit then
soon thereafter the limit order to exit should be changed to a market order
just to make sure the trade is exited near the allowed extreme price of the
day.
11. Question:
How many contracts should I trade?
Answer:
There are several factors to consider. The first is the size of your account. Larger accounts will need to trade more contracts. The second factor is your personal risk aversion. You should always keep your risk level low enough that you sleep comfortably. If you are worrying about your positions all going against you at once, then you are trading too many contracts. The third factor is the distribution of gains and losses from the trading system or advisor that you are using. The fourth factor is the estimated risk for the trade based on how close you can place your initial stop loss from the entry price.
For my trading recommendations I have two simple, effective rules that take all the factors into consideration. All you need to know is the account size, the estimated risk, and the initial required margin. The estimated risk is the difference between the entry price and the protective stop loss price converted into a dollar amount. They balance the need to trade enough contracts to make extraordinary gains with the risk of ruining the account by overtrading.
Each rule calculates the amount to trade. Then use the smaller of the two answers.
Rule #1
1. divide the account size by the estimated risk
2. multiply the result from step 1 by 0.01 if you are a conservative trader or by 0.02 if an aggressive trader.
3. drop the decimal from the result from step 2 (a result of 1.9 would equal 1) Rule #2
1. divide the account size by the initial required margin for one contract
2. multiply the result from step 1 by 0.1
3. drop the decimal from the result from step 2 (a result of 1.9 would equal 1)
A second part of rule #2 is to never trade more than 9 futures markets simultaneously.
If you follow these rules you no longer need to worry about money management. You will not get margin calls and you can concentrate on your trade management. |
