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MostlyFutures
your local quant
Trading is essentially, buying and selling financial assets such as stocks, futures, forex, options with the goal of profiting from market fluctuations to generate profit. Trading is not to be confused with long-term investing.
At the end of the day, trading is all about understanding market structure, probabilities and discipline within the markets. In order to be a successful trader, you must detach yourself from the idea of “money”. You must disconnect all your emotions to the markets, the market does not care about your emotions or financial situation. Doesn’t matter if you’re an intraday trader or a swing trader, trading involves three main components: Strategy, Psychology and Consistency.
Stocks: Represent Ownership within a company. Whenever you go ahead and purchase shares, you own a piece of that business which gives you entitlement over capital appreciation and dividends. Usually traders who trade look at price movements done by earnings reports, market sentiment and other macroeconomic factors along with minor technical analysis.
Pros: Works for both short-term and long-term strategies
Regulated and transparent, rarely any shady things
Cons: Pattern Day Trading Rule restricting intraday trading
Significant Capital needed for proper returns
Futures: Leveraged contracts that allow traders to “bet” on the future price of commodities, indices and bonds. Compared to stocks, you don’t own the any asset, but are simply trading the contract
Pros: High leverage allows for massive gains
Trade around the clock (24/5)
No Pattern Day Trading rule
Cons: High leverage also means more losses
Requires much better risk management and psychology
Forex: The Foreign Exchange Market is the global exchange of currencies. This is usually the most liquid market in the world also being open 24/5. It’s quite simple, you’re just trading currencies, that’s all.
Pros: Low Barrier for entry, you can trade with literal 10 bucks
High Liquidity and tight spreads
Cons: Extreme leverage at disposal can liquidate your account fast
Stronger risk management and psychology
In this document we’re going to be mainly focusing on Futures. NQ and ES. why? and what are these? Nasdaq (NQ) and the S&P500 (ES) are indices which are used to measure the movement of 100 (NQ) or 500 (ES) stocks. These are available to trade 24/5 across NY, Asia and London session.
Futures can be analyzed on tradingview.com (free) but you will need market data or otherwise your data will be 10 minutes delayed. This market data thankfully does come with prop firms. Talking about prop firms, you can trade futures two ways, either on a live account with your own money and own personal risk or on a demo account with a firm that let’s you keep the profits in real time from the demo account.
Essentially demo trading on an account and paying yourself out with the profits you make. Sounds easy? If it was easy Prop Firms would be out of business.
Rules: Prop firms have rules and this is usually how it goes
You will start off with an “evaluation” account. You will be given a profit target to reach with a trailing drawdown. What’s a trailing drawdown? Let’s say you’re on a 50k account with the profit target of 3k and max drawdown (max loss) of 2k. If you make 1k (acc balance: 51k) your max drawdown will now be at 49k. If your balance goes below that your account will be liquidated and you will have to restart.
Once you pass this “evaluation” you’ll be moved on to a “funded/passed” account. This account will start from 50k not from the 53k target profit you hit on your evaluation account.
The drawdown rule still follows on this account, however it stops after it reaches the account balance in this case 50k. Let’s say you make 52k, the max drawdown is now at 50k. Now even if you’re at 58k, the drawdown remains at 50k. This allows you to build a “buffer-zone” to risk more in trades.
Once you have a fair amount of money in the account you can request a payout from the account as long as you follow all the rules. Make sure to read all the payout rules for the firm before trading on it since each firm has their own rules.
This is the most important part of trading, the how? As I said before
trading mainly consists of three things:
Strategy
Psychology
Consistency
For more information visit the trading tab in the top right.