daytrade, you’re able to get away with using less money or less margin. That also usually lessens the risk. Unfortunately, people usually keep the losers on and take the winners off. That’s a big problem in the industry.
Another reason is you have more opportunities to make money when daytrading. Those opportunities have risk associated with them, but if you are looking to make income every day, then leaving trades on for weeks, or what people call swing trading, will leave you with days or weeks with no income. You will need to trade every day if you are looking to make an income.
When you’re trading something for such a short time period, are there certain markets that you trade?
Yes, we love to trade the S&P emini contract. It has a lot of liquidity, strong volume, and is very popular. There’s a lot of information available about it, but you don’t have to limit yourself to the S&P emini. We trade different commodities such as oil, soybeans, and gold. Gold is really exciting and has great liquidity.
The four major commodities we trade are the S&P emini, oil, soybeans, and gold.
When you teach people to trade, what do you encourage them to look for when it comes to identifying which market to trade?
If people have no experience at all, we like them to trade the S&P emini for a couple of reasons. One is that the liquidity and interest is very high. That goes a long way to making sure that you can get decent fills. Beyond that, if
someone has traded before and they are interested in a specific market to trade, we won’t push them away from it. But if they don’t have any particular markets that they’re interested in, I believe the S&P emini is the easiest market to train people on because it’s got so much move-ment. There are so many opportunities when it comes to trading the S&P 500 emini. It’s very popular so it’s easy to find lots of information about it. It’s a great place to start.
But going back to what I said earlier, no matter what market someone starts trading or what type of experience they have, they still need to start on a simulator so they can learn the techniques and methods without risking any money. Otherwise, they could lose a lot of money when they start, which will get them frustrated and at that point, they’ll stop learning.
When it comes to trading futures, including the four markets you just mentioned, what kind of fundamental data should traders look at?
What is important these days — and you wouldn’t necessarily put a trade on because of this — is to be aware of the Federal Reserve (Fed) and the influence they’ve had in our markets since 2008.
That’s something you want to watch. You want to keep an eye on the movement of interest rates. The Fed can influence the movement of interest rates so it’s important to pay attention to what they are up to. Are they going to continue with the monetary easing or are they going to continue to pull away from that? I wouldn’t necessarily put on a trade based on the Fed’s decision, but if I was long equities or long stock index futures contracts and the Fed announced that they were planning to pull away from monetary easing sometime in the future, I would lighten my load.
The second thing I would pay atten-tion to, as far as fundamental activity is concerned, is the economic data that is released almost on a daily basis, whether it’s new home sales, the employment report, or anything. All of those things
have a big influence on the way futures move on a daily basis.
For example, the employment number that was released this past Friday was worse than expected. A layman would think that if a number is much worse than expected, that the market would drop on that day. But the market did the opposite. So you have to be careful how you interpret and apply the data.
You have to connect the dots. The likely reason the market went up on Friday is because the Fed is not going to be eas-ing and not get out of the way. All those things are connected and you have to have basic knowledge about them. You have to be careful not just about the data that is released but also about how they affect the market. You need to do some research and have some knowledge about the fundamental data and how they are likely to influence the market.
How important is it to understand the specs of a particular market that you are trading?
I would say that knowing the funda-mentals is much more important than knowing the specs of a particular market.
Obviously, you need to know what a tick is worth and what the dollar value of each tick is, but I would say that you’d be hard-pressed to find too many professional traders that really know what the specs of a contract are. Obviously, they know the tick values, and they know when they are getting close to the upside or downside limits, but beyond that, I don’t think it’s necessary to know other details. It’s not bad to know the details of a contract; it’s just not necessary to know them to trade the contracts. Knowing the support &
resistance levels is more important.
Since you’re looking at such short-term movements on something that’s very liquid, what type of technical indicators or patterns do you look at?
We look at a lot of technical data. In fact, we’re much more technical than we are fundamental, but both are extremely important. You wouldn’t want to have one without the other. We use a num-ber of technical indicators, and we use algorithms. That’s one of the things we teach our students when they’re trading