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The risks associated with emini day trading.



Guys, I am new to this, so bear with me.

I regularly come across warnings that emini day trading is not for everyone, that one faces the potential for unlimited risks. Does that apply, regardless of how carefully one trades? Regardless of stops, and stop limits instituted in the contracts? And that the trader tries his/her very best to stay out of the very volatile trades?

Does anyone know more or less how many traders got wiped out when the DOW fell by more than a 100 points in a single day? And of that, how many were experienced traders - let's say, have been trading for more than five years?

I haven't come across anything that tried to state the risks in emini day trading along the lines above. I find that strange.

Or against the known risks involved in driving a car. Or of getting mugged in a big city.

This is not exactly an academic exercise for me. I still need to convince a wife, and a few friends, that this is not lunacy.
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Originally posted by maskiepop


Guys, I am new to this, so bear with me.

You've come to the right place. Welcome!
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I regularly come across warnings that emini day trading is not for everyone...

This is true.
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...that one faces the potential for unlimited risks. Does that apply, regardless of how carefully one trades? Regardless of stops, and stop limits instituted in the contracts? And that the trader tries his/her very best to stay out of the very volatile trades?

Yes it does. If the market locks limit-up or limit-down against you then you cannot close out your trade and if this happens day after day and you cannot get out of the trade then the loss is theoretically unlimited. I am not sure what the potential for this happening in the modern market is because I am struggling to imagine a price shock greater than 9/11 and the market did not lock limit when the market re-opened after that event.
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Does anyone know more or less how many traders got wiped out when the DOW fell by more than a 100 points in a single day?

A 100 point fall in the DOW is a small drop and it will regularly drop by this amount. It is very unlikely that this drop would wipe anybody out. Did you mean a 100 point drop in the S&P500? If so, what date did that happen on?

It is also impossible to measure the number of traders that are "wiped out." A trader will usually have a small amount left in their account and stop trading but the broker will not know if the trader is wiped out. If you want to measure if someone is bankrupted then you would have to measure bankruptcy filings as a result of day trading and I don't know if there are figures for this.
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And of that, how many were experienced traders - let's say, have been trading for more than five years?

Again impossible to measure.
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I haven't come across anything that tried to state the risks in emini day trading along the lines above. I find that strange. Or against the known risks involved in driving a car. Or of getting mugged in a big city.


This comment of yours prompted me to post a new topic about Nassim Nicholas Taleb's book on risk. Here it is: Fooled by Randomness. Read this book! It has all the information that you need.
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This is not exactly an academic exercise for me. I still need to convince a wife, and a few friends, that this is not lunacy.

Read Fooled by Randomness before going back to your wife and friends and this should give you a much better feel for the risks that you will be taking.

Remember also that you should start out paper trading and keeping excellent records about everything you do. Be realistic and don't cut corners. Don't get excited and start trading real money until you have paper traded profitably for at least 4 weeks.
I agree with this recommendation about the book. As I mentioned in the other thread I have also read this book and consider it in my top 6 recommended books on trading and also in the top 6 books not to lend to "friends" who might not return it. The story that I cannot remember is the one about the Spa but the one that I thought was excellent was when he was considering putting a penny in all of the urinals in the trading office to see what would happen with traders that were too superstitious to pee in a urinal with a penny in it.
I want to say that it surprises me that you don't remember the Spa story because I thought that it was one of the pivotal stories in the book. It is, however, human nature that each of us will take something different away from a book and what inspires, teaches or touches one person will be very different from the next. Both of us may find a book excellent for different reasons.

Going off the subject (I'm not trying to threadjack this thread): An extreme example is how the Apartheid supporting Afrikaners in South Africa used the Bible to support and justify apartheid while the disenfranchised used it to support majority rule.
I find that I usually get something different from books than other people. I also get this with films. I come out of a film having seen a competely different movie to my girlfriend usually. Wierd sometimes. But that is life.

Back to Randomness. Watch all the stats and headlines and see how misleading they are. Then watch the adverts for trading and see if you can interpret what they are really saying.