How to start trading Futures – A systematic approach.
Introduction – How i started trading futures:
With this article I intend to discuss today the best method to trade Futures for someone with no previous knowledge, so this article will be long.
First of all, let me introduce to you how i started trading this market, i’ve been trading with algorithms since 2013 in Forex and the Stock Market, and i was introduced into the Futures Market by another algorithmic (and quantitative) trader i met a year ago.
This person always told me things like: “You should trade Futures, the fees are lower and the inefficiencies are more profitable”. So, after a while, i decided to try it, how hard it can be? I had at the moment 6 years of algorithmic trading experience.
Well, i signed up with Tradestation, since their platform is quite easy to use and learn, and the code is even more easier, specially if we compare it with Metatrader 5 or Ninjatrader, i didn’t want to waste much time since i wanted to create code fast to do my habitual research process.
He was right, some futures contracts are very profitable with simple strategies, and the way to look for edges is very similar to my Forex approach.
Since then, i fell in love with this market, specially the Commodities market.
How to learn the basics:
I’m going to focus on what i do, algorithmic trading, i only trade with algorithms since i’m a better coder than rather a ‘calmed person who can make decisions quickly in a accurate way‘, yes, with quotes, this is correct.
I’m not a person who can make fast decisions and be accurate at the same time, in fact, i tend to block myself if i trade manually. But i’m lucky, i code for a living (i have my own software business), and you are lucky too even if you don’t. know how to code, is easy in general, but coding with EasyLanguage is ridiculously simple.
EasyLanguage, the programming lenguage for Tradestation is probably the easiest programming language ever, even easier than Python.
So, as you can see, i’m going to recommend you trading with Tradestation, i’m not affiliated with them, but, they have done a good job with their platform. They are the broker who granted access to algorithmic trading to every single person.
Getting used to Tradestation:
Once you know the basics of the Platform is time to start coding, in this case i won’t recommend learning pseudocode as an intermediate step to coding, in this case start with simple source codes. Coding is your best choice to trade Futures.
As always, Tradestation got us covered:
Can i trade Futures now?
Waaaait, wait. We are starting to know the basics, in this case about the broker, we have a platform, let’s talk about the Market.
The futures market is different than the rest of the markets, contracts are bigger, we have settlement processes, contracts expiration… etc.
We need to understand that before trading, i don’t think you want to recieve a phone call from your broker telling you something like: ‘Dear client, we have 10,000 OIL Barrels for you pending for delivery, where we can deliver it?’
At least, i don’t want to buy 10,000 physical barrels. Or 125,000 Pounds of Soybeans. I don’t even have where to store it!
This series of videos by CME will cover the basics about the market, so feel free to watch them.
Your first trading strategies:
Now yes, we know the basics about coding, the basics about the market. Time to code and study some strategies.
The first source for strategies is books, here you got some strategies in this video where i review the book ‘Entry and exit confessions from a champion trader’, a great book. Plus a free strategy for financial indexes such as SP500 based on the book and the Ultimate Oscillator made by Larry Williams.
Remember to study first the risks of Trading Futures, and then, study by code and backtesting your strategies. Finally decide if you want to trade it or not.
Hope this can help you.
Víctor – Follow the Edge.