Investing Guide

Remember the movie with Bill Murray, a television weatherman who is sent to Punxsutawney, Pa. to cover the annual appearance of the town’s groundhog. In this movie Murray finds himself doomed to relive the same day over and over. His alarm rings at 6:00am and his time loops starts again. At first, he is confused by the phenomenon, denying that this can be happening to him. But as he is forced to relive each day, he finally decides to take advantage of the situation, learning its “secrets,” and he becomes the better weatherman for it.

Day trading and night trading are exactly the same… a time loop. The Market does the exact same thing every day, day in and day out, month in and month out, year in and year out. It is so repetitive, that there are actually a handful of stocks, known as Cyclicals, that perform the same way every year. Talk about Groundhog day, Morgan Stanley even offers what they call a Cyclical Index, the CYC, composed of roughly 30 stocks that perform the same each year, and big name stocks to boot — Alcoa, Citicorp, 3M, Honeywell, Ford, Goodyear Tire, etc. Continue reading ‘Day Trading and Night Trading – Welcome to Groundhog Day’ »

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Ever see the movie, the Untouchables? It’s about a government agent, Eliot Ness who, along with his band of G-men (Government men), fights gangsters (like Al Capone) during prohibition. There are great shots in the film, guys hanging from moving cars, holding onto swinging doors while they shoot up restaurants with Tommy guns. Today we have our own Untouchables. We’ve replaced Tommy guns for computers and trading platforms. We sit in chairs instead of swinging from moving cars. And the killing, well, we’ve traded in the G-men for the G-word: Greed.

What is greed? Wikipedia defines greed as “an excessive desire to possess wealth or goods with the intention to keep it for one’s self.” Probably the operative word here is “excessive”. To investors day trading or night trading, the G-word may as well be 4 letters.

Lets look at how insane greed can be as it affects futures trading, especially emini futures. Emini futures, just like stocks, trade in price fluctuations, but with futures, price fluctuations are known as ticks. In the world of stocks, one price fluctuation is 1 penny. Generally, 1 tick, 1 price fluctuation, pays out about $12.50…that’s correct 1 tick. Futures trade in contracts not shares. Investors can easily find futures brokers who allow you to trade for $500 per contract. Stocks trade in multiples of 100 shares. Stocks that have enough volatility to day trade start anywhere from $25/share to $75/share and more. Even on the low end, realistically, you need $2500. Then when your 100 shares move 1 penny, you make $1.00. But compare that to trading with emini’s. For $2500, you can trade 5 contracts. For each tick movement, you make $60. So it’s a 60 to 1 ratio, perhaps a bit less, given that the commission for trading futures is a bit higher than stock trading, so call it 50 to 1 ratio. Continue reading ‘What Kills Day Trading (or Night Trading) Emini Futures? The G-Word’ »

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