S0 I started doing some research into the mechanics of the futures markets as well as the point values of the different contracts that you could purchase. Here is the .pdf of the margin requirements that I found for Tradestation.

What I found out regarding the advantages of trading the Nasdaq Futures over the QQQQ were astounding. Here’s an example:

For simplification purposes, lets just say that I had a $25,000 Day Trading Account and when I was trading the QQQQ and wanted to buy 1,000 shares. This would cost me $42,000. Then say that the market moves in my favor by 1.00% during the day. For the QQQQ, this would net $420 and tie up a significant portion of my equity & margin.

Lets say that I wanted to yield that same $400 in the futures markets, how much money would it take? Well, when day trading futures contracts, you only need to place $1,000 margin down on each NQ futures contract. As of today the contract is trading in the 1720 range. A 1.00% move in the contract would net 17 points per contract. Each point is worth $5 for a total of $86/contract. So in order to yield the same $400, all one needs to do is buy 5 contracts (5 x $86 = $430) but it only costs you $5,000 not $42,000.

This leaves the rest of your capital in tact to pursue other market opportunities that crop up throughout the day. The downside is that if you are wrong, that leverage can really work against you. So it is imperative that you have a tested and proven method for extracting profit from the markets before ever thinking of trading an account with real money.

While I have a number of tools that I use to complement my decision, the basic structure that leads to my placing a trade is relatively simple and straight forward. Don’t believe anyone who tells you that trading has to be complicated. It doesn’t. That doesn’t mean it is easy, but the hardest part is fighting the demons within yourself, not the market itself.

I was able to apply the same methodology that I did when trading the QQQQ to the index futures markets (I now trade mainly the Dow Mini = YM, and E-Russel = ER2 contracts) to catch some trends. My methods have continued to evolve as I have added some indicators to help in my decision while removing others. A great deal of it is just trial, error, and personal preference.

I’ll be creating a post soon about the exact setup and indicators that I use for trend trading, but at the core of the system is price, volume, some kind of momentum indictor and trendlines. If I had to, I could trade profitably with just Price alone, but these basic indicators, if used properly, can help decisions be made much faster and more accurately. Add in a few properly gauged market internals and different timeframes and you have more than enough info to trade profitably.

So I was able to trade profitably when the markets were trending, but I’ve always felt as if something was missing. Enter Bill of ViperSpeedTrader.com. Under the tutelage of Bill, I began to learn how to successfully scalp the futures markets. The goal is to go for really small, but high-probability setups that you can use both when the markets are and are not trending to help have a more rounded approach to trading. He showed me that it is ok and entirely profitable to go for really small gains mulitple times a day.

I trade 2 contracts fo the ER2 going for 2 Ticks = $30 profit after commissions. The trades last anywhere from 2 to90 seconds and I’m out. Depending on how many contracts you are trading, you don’t need a lot of these in a day to really help boost your PnL Statement. If anyone is interested in getting a hold of Bill, I know that he does offer Private and Group lessons. I’ve only been scalping with his method a short period of time, but I can notice a huge difference in my trading already.

And really that is it. I’m sure that while I will continue to develop and evolve as a trader, this is the first time since I started trading that I feel as if i have a solid foundation upon which to build in each of the areas/timeframes that are important to me (From scalping for seconds, to daytrading from minutes to hours, to swing/position trading from hours/days/weeks.)

That being said, I have much I need to add to my “How I Pick Stocks” page & will start the process of updating it this week.

Jason