ES trading margin and tick

G

ggoyal

Hi,

I am have mostly been trading equities, but I am looking at futures.

If ES only has a 10 point range on a gievn day, thats 500+/- right? People say futures are too risky. how is this so risky? Each contract has a 4500$ margin($1125 intraday).

Say you have $5000 in an account and you trade intraday 4 contracts with it, if Es moves 2 points against you, thats 400 bucks. Before I did some reading upon, someone I was talking to made it seem like you could lose 5k and much more instantly. ES doesnt even move that crazyily to begin with.

2nd- When the market is trading within congestion, you could trade stocks that have a trend as not all move with the market. Seems to me like stocks are still riskier than eminis.

I just wanted to get the margin requirements and balances in check for ES. PLus, if you are trading intrday, no one would be foolish enough to have a wide stop.

If I am wrong about anything, please explain.
 
You pretty much have it correct, futures are only as risky as the trader doing the trading. Some thin and crazy markets like crude can get a bit too hairy.

There are some firms that only make you pony up $500 per contract on ES for day trading, so it is possible to get stupid with the leverage. If you have good money management, most futures are no riskier than stocks. I personally only trade one ES per 5k in my account, and never risk more than 2% on any one trade. That example where you said losing 400 wasn't bad, would be stupid in my book. That's 8% on one trade, day trading! That is Ok for longer term stuff cause your gains are also much larger, and you make fewer trades. This is suicide eventually for day trading unless you have a really high win ratio, which few people do. Look up "risk of ruin" calculations on Google.

Even at one ct per 5000 bucks, you can make very good money with an account 25k or greater, and risk very little. Or risk zero over the long term actually if you have the skills.
 
Your numbers and assumptions are correct; however there's one thing being missed here...

Trading 4 cts and lose 2 pts = $400.

Now, let's say you have 3 losing trades in the day and no winners.

Now that loss is $1200 = 24% of account in one day.

And if you happen to get trade crazy, w/ commissions it's easy to wipe that $5000 account in a matter of DAYS.
 
Quote from brownsfan019:

Your numbers and assumptions are correct; however there's one thing being missed here...

Trading 4 cts and lose 2 pts = $400.

Now, let's say you have 3 losing trades in the day and no winners.

Now that loss is $1200 = 24% of account in one day.

And if you happen to get trade crazy, w/ commissions it's easy to wipe that $5000 account in a matter of DAYS.
More...

Right, i was just being extreme on cases for clarification purposes. As an intraday trader, my stops are tight, 8% was just an example
 
Quote from ggoyal:

Right, i was just being extreme on cases for clarification purposes. As an intraday trader, my stops are tight, 8% was just an example
More...

Losing 2 total points was EXTREME?

Make sure you papertrade a bit to get a feel for the ES before you jump in.
 
Quote from brownsfan019:

Your numbers and assumptions are correct; however there's one thing being missed here...

Trading 4 cts and lose 2 pts = $400.

Now, let's say you have 3 losing trades in the day and no winners.

Now that loss is $1200 = 24% of account in one day.

And if you happen to get trade crazy, w/ commissions it's easy to wipe that $5000 account in a matter of DAYS.
More...

Very true!

I also picked up on the fact that I needed to start out (still am LOL!) only trading 1 contract.

I paper traded 100 contracts (nuts!), then scaled it down to 5 contracts per trade. I'll note that slippage, and a couple of pretty big moves against me made me think twice before going 5 contracts per trade with real money.
 
Futures are very risky for those people who underestimate the risk. Who needs a black swan? A white swan with some soot on it can wipe out a overleveraged futures account.

Look at the data at www.mypivots.com for various futures contracts. ES has had an average daily range of 26.63 points over the last 20 trading days. The range on August 05 was 37.25 points.

If you are overleveraged, you don't have to be wrong much at all to see your futures account rapidly evaporate.
 
Quote from brownsfan019:

Losing 2 total points was EXTREME?

Make sure you papertrade a bit to get a feel for the ES before you jump in.
More...

losing 8% is. not my style of trading
 
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