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Leaving CFD trading and learning futures

  #1 (permalink)
 
processing's Avatar
 processing 
Sydney, NSW
 
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Posts: 102 since Feb 2011
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Hi everyone,

I've been a long time lurker, but have only posted a handful of times.

I trade on and off. Sometimes I might trade for less than a month, then I take an extended break which might last at least a few months. I am unsure why I am not consistent, but something tells me it is a result of my mindset and/or psychology.

I am now in one of those phases where I'm starting to view charts more frequently. This chart-checking behaviour is usually followed by sim/demo trading. After a short period of time on sim/demo, I sometimes begin trading live again.

This time around, I'm looking to change the way I approach trading. Instead to mainly looking at charts, I am wanting to practice viewing market replay and using the ladder to spot patterns.

I've heard of traders who try trading CFDs on Metatrader 4 (MT4) for 10-15 years and they still haven't been able to achieve consistent profitability.

I believe the main reason is that CFD pricing is set by the broker. Every single instrument is priced differently at different brokers. The swap rates are different. The commissions charged for each trade are exorbitant, compared with the trade costs when it comes to trading exchange listed futures. In addition, at some brokers, Metatrader 4 just seems to freeze during periods of high volatility. When you are trying to get into, or exit a trade there is almost always negative slippage.

There is also the fact that almost every single CFD broker runs a b book. This means they profile their clients, keeping track of which ones are losing and which ones are winning. Usually they do not send out their clients' trade to the real market, instead they internalise them.

They also trade against their clients, especially the ones who are new and the ones who are consistently losing. For them, it's easy money.

If Trader A loses $100 per trade, the Broker just takes the opposite side of that trade, making $100 every time Trader A trades and goes on to lose $100.

I think the most common way that traders operate when using MT4 is they "trade what they think" instead of "trade what they see".

Predicting where the market is going to go (and at what point in time) is a much more difficult way to trade, than simply reacting to what you see is happening, right here right now.

I believe learning the ladder, although a little more difficult initially, will result in greater improvement over a similar period of time spent looking at charts.

During this journal challenge, my training days will consist of watching market replay on the ladder for 20 min at a time. Some days I might do 2 or more sessions, but my aim here is to do this at least once a day. With the goal of demonstrating to my subconscious that this is something I can do on a consistent basis. That this is something I want to pursue.

I will not be risking real capital yet.

In my subsequent posts, I will report on what I noticed viewing the market replay during each training session. I may make comments related to my emotions, and perhaps some thoughts I had during practice/sim trading. I may also post on the resources I am learning from, e.g. books I am reading, videos I am watching. I may also comment on the practices I am incorporating, e.g. breathing techniques, etc.

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  #2 (permalink)
 
AnvilRob's Avatar
 AnvilRob 
Smithfield, VA
Legendary Options Mando
 
Experience: Advanced
Platform: Tasty Trade, TradingView
Broker: Tasty Trade
Trading: Futures: Everything
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Duration: Weeks
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processing View Post
Hi everyone,

I've been a long time lurker, but have only posted a handful of times.

I trade on and off. Sometimes I might trade for less than a month, then I take an extended break which might last at least a few months. I am unsure why I am not consistent, but something tells me it is a result of my mindset and/or psychology.

I am now in one of those phases where I'm starting to view charts more frequently. This chart-checking behaviour is usually followed by sim/demo trading. After a short period of time on sim/demo, I sometimes begin trading live again.

This time around, I'm looking to change the way I approach trading. Instead to mainly looking at charts, I am wanting to practice viewing market replay and using the ladder to spot patterns.

I've heard of traders who try trading CFDs on Metatrader 4 (MT4) for 10-15 years and they still haven't been able to achieve consistent profitability.

I believe the main reason is that CFD pricing is set by the broker. Every single instrument is priced differently at different brokers. The swap rates are different. The commissions charged for each trade are exorbitant, compared with the trade costs when it comes to trading exchange listed futures. In addition, at some brokers, Metatrader 4 just seems to freeze during periods of high volatility. When you are trying to get into, or exit a trade there is almost always negative slippage.

There is also the fact that almost every single CFD broker runs a b book. This means they profile their clients, keeping track of which ones are losing and which ones are winning. Usually they do not send out their clients' trade to the real market, instead they internalise them.

They also trade against their clients, especially the ones who are new and the ones who are consistently losing. For them, it's easy money.

If Trader A loses $100 per trade, the Broker just takes the opposite side of that trade, making $100 every time Trader A trades and goes on to lose $100.

I think the most common way that traders operate when using MT4 is they "trade what they think" instead of "trade what they see".

Predicting where the market is going to go (and at what point in time) is a much more difficult way to trade, than simply reacting to what you see is happening, right here right now.

I believe learning the ladder, although a little more difficult initially, will result in greater improvement over a similar period of time spent looking at charts.

During this journal challenge, my training days will consist of watching market replay on the ladder for 20 min at a time. Some days I might do 2 or more sessions, but my aim here is to do this at least once a day. With the goal of demonstrating to my subconscious that this is something I can do on a consistent basis. That this is something I want to pursue.

I will not be risking real capital yet.

In my subsequent posts, I will report on what I noticed viewing the market replay during each training session. I may make comments related to my emotions, and perhaps some thoughts I had during practice/sim trading. I may also post on the resources I am learning from, e.g. books I am reading, videos I am watching. I may also comment on the practices I am incorporating, e.g. breathing techniques, etc.

Is your goal to place longer term trades? Overnight? So that you donít have to look at charts as much?

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  #3 (permalink)
 
processing's Avatar
 processing 
Sydney, NSW
 
Experience: Beginner
Platform: Quantower
Frequency: Other
Duration: Other
Posts: 102 since Feb 2011
Thanks Given: 285
Thanks Received: 140



AnvilRob View Post
Is your goal to place longer term trades? Overnight? So that you donít have to look at charts as much?

My goal is to eventually day trade (scalp) futures, primarily making buying and selling decisions based on what I see on the ladder.

I am in the Asia Pacific timezone, so it would make sense for me to consider the Eurex, however I bought John Grady's basic course several years ago, and it mentions that the US treasuries are less erratic, in terms of how it moves. Futures are also much cheaper in terms of commissions and exchange fees.

Futures are also exchange listed and regulated. The pricing is transparent, unlike CFDs.

I've day traded index CFDs before, i.e. the FTSE100, AUS200, GER40, US30 using candlestick charts on the 1 min, 5 min, 15 min, 4h timeframes. It was very tiring mentally. In addition, the sneaky thing about CFDs is that the spread can widen significantly and it can really eat into the bottom line. I seem to do better on markets that are less volatile and more range bound.

Crypto is a whole different ball game - I do not day trade crypto at all. I do not believe crypto was invented to be day traded. However, I do understand there are those who day trade crypto.

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  #4 (permalink)
 
AnvilRob's Avatar
 AnvilRob 
Smithfield, VA
Legendary Options Mando
 
Experience: Advanced
Platform: Tasty Trade, TradingView
Broker: Tasty Trade
Trading: Futures: Everything
Frequency: Daily
Duration: Weeks
Posts: 672 since May 2017
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Ok. Yeah I wonít be able to help as I am allot better at overnight and long term positions. Good luck!!!

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  #5 (permalink)
 
processing's Avatar
 processing 
Sydney, NSW
 
Experience: Beginner
Platform: Quantower
Frequency: Other
Duration: Other
Posts: 102 since Feb 2011
Thanks Given: 285
Thanks Received: 140

Thanks!

I have tried overnight CFD positions holding up to 1 week.

I have also held exchange listed equities for around a year or so.

Glad to hear youíve found something that works for you.

Wishing you all the best!

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  #6 (permalink)
 Miesto 
Monte Carlo, Monaco
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processing View Post
I am in the Asia Pacific timezone, so it would make sense for me to consider the Eurex, however I bought John Grady's basic course several years ago, and it mentions that the US treasuries are less erratic, in terms of how it moves. Futures are also much cheaper in terms of commissions and exchange fees.

You might try the bund (FGBL) and Euro Stoxx 50 (FESX) on Eurex to see for yourself if the US treasuries are (still) less erratic. Personally I don't think so.

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  #7 (permalink)
 
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 blackgrey45 
Marco Island, FL
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This may sound unlikely but crude oil is actually a range bound market especially for day trading.

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  #8 (permalink)
 
processing's Avatar
 processing 
Sydney, NSW
 
Experience: Beginner
Platform: Quantower
Frequency: Other
Duration: Other
Posts: 102 since Feb 2011
Thanks Given: 285
Thanks Received: 140


Miesto View Post
You might try the bund (FGBL) and Euro Stoxx 50 (FESX) on Eurex to see for yourself if the US treasuries are (still) less erratic. Personally I don't think so.

That's interesting! So you're suggesting that the bund and FESX and the US treasuries might be the same in terms of volatility?

I remember several years ago, prior to COVID, that the GER30/GER40 CFD was quite volatile.

If there are some instruments on the Eurex which are now less volatile than they were in the past, that would be great!

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  #9 (permalink)
 
processing's Avatar
 processing 
Sydney, NSW
 
Experience: Beginner
Platform: Quantower
Frequency: Other
Duration: Other
Posts: 102 since Feb 2011
Thanks Given: 285
Thanks Received: 140


blackgrey45 View Post
This may sound unlikely but crude oil is actually a range bound market especially for day trading.

I'm glad to hear this! I'll add this to my list of things to watch on market replay using the DOM.

I noticed on the bio next to your post, that you've written MCL as the market you trade.

How does the mini crude oil market compare with the "normal" full size contract?

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  #10 (permalink)
 Miesto 
Monte Carlo, Monaco
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processing View Post
That's interesting! So you're suggesting that the bund and FESX and the US treasuries might be the same in terms of volatility?

I remember several years ago, prior to COVID, that the GER30/GER40 CFD was quite volatile.

If there are some instruments on the Eurex which are now less volatile than they were in the past, that would be great!

The GER40 CFD tracks the FDAX futures contract (German Stock Index) which is (still) very volatile (often causing large price swings) as it is a thin market due to low liquidity. The FGBL and FESX are thick, highly liquid markets and therefore much less volatile. You can see the difference clearly on the DOM.

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