Futures Strategies for Stock Traders

02/01/2012 1:30 pm EST


Markus Heitkoetter

Author, Educator, Trader, and CEO, Rockwell Trading Services, LLC

The futures markets allow traders to cover a variety of different asset classes without losing focus, says Markus Heitkoetter, who has successfully transitioned from stocks to futures.

Today, Markus Heitkoetter will tell us why he made the shift from trading equities to trading futures.  Why did you do this?

Well, when trading stocks, right now there are around 8000 stocks that you can trade in the US. So, in order to narrow these lists down, you’re using filters or short lists, and that’s what I had when I was still trading stocks. 

Every day, I came into the market with a short list of maybe ten or 15 stocks. Then I’d notice that something was moving in one of the stocks, would start trading it, be focused on that trade, but this didn’t go anywhere while the other stocks took off.

My list selection was perfect, but I just didn’t have the focus to trade all the stocks that were in my basket. 

That’s why I’ve switched to futures, because while trading futures, I’m just watching six markets where I can easily diversify over a variety of markets. 

So even though there really is a broad spectrum to choose from, it sounds like there is a better chance of focusing with the futures.

Yes, I can do great focusing on six markets, and I like to follow the E-mini S&P and the E-mini Dow, so I’m following two stock indices. I follow the euro currency versus the dollar, so I have a currency in there. I follow crude oil and gold as commodities—especially these days because they’re moving really nicely—and then I follow the 30-year bonds as an interest rate.

So, by watching just six markets, I have two commodities, I have currencies, I have interest rates, and stock indices all covered. 

For an investor or trader who has been accustomed to trading stocks, what’s the best way to educate oneself on some of these other asset classes?

Well, futures trading is very similar to stock trading. The main difference is that we have something like the tick size and the tick value. 

Traders need to know about the tick sizes and the tick values of the various futures markets, and after this, it is pretty much the same as trading stocks.

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