Wednesday, September 03, 2008
Account and Position Size
I specialize in trading the e-minis. My basic approach to position size is to trade 1 contract per $15,000 in equity. This I like to call 1 unit. If I am particularly confident in a trade I will put on another contract, my second unit. Thus my maximum position per $15,000 in equity would be 2 contracts. Sometimes I refer to a normal position, 1 unit, as 100% while I refer to a maximum position, 2 units, as 200%.
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4 comments:
how did you trade before the emini's? normal SPU is 250x index... I only ask because you have been trading for many years?
Sorry to ask a question that will be obvious to all of you in the US but how big is the current contract? Is it $100,000 thereby making your leverage 6.66:1 or $1 mio thereby 66:1?
I am not sure whether spreadbet/cash for difference accounts are allowed in the US but they seem to offer some considerable advantages over futures namely:
1. Can trade any size you like.
2. Bid/offer spreads are fantastic ie 2 points in ftse and 4 points in dow.
3. 24 hours trading from 9pm GMT Sunday until 9pm GMT Friday.
4. Leverage between 100 and 125:1 if you want it.
5. In the UK , spreadbet accounts are tax-free. Great!
6. One click instant trading.
Catherine
The e-minis are 50 x the index, so when the S&P is at 1270 the nominal value of one e-mini is $63,500. The regular S&P is 250x the index, so at 1270 the regular S&P is worth $317,500 per contract. Overnight margin is about 7% of nominal value, depending on the broker.
1. If you can't trade $63,000 nominal value (down to $36,000 on the Nasdaq minis), you have no business doing leveraged trading.
2. Spreads in Dow futures are usually one point, and only one-half to one point on the FTSE during market hours.
3. U.S. index futures trade twenty-three hours a day - they close during a very quiet time of the day, when there is not much liquidity anyway.
4. That sounds impossible, or at least unwise. What happens if you lever up at 100 to 1 and the market gaps two percent against you?
5. U.S. citizens and residents must still declare and pay tax on any profits made outside of the United States.
6. Any reasonable trading program can do that. I wouldn't like it, but I don't have a style that demands instant execution.
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