how to start futures trading (emini)

[butterfacetrader]

AMP/Cannon/Mirus etc. will all give out $500 margins - Unless, in my opinion, you are trading 50/100 lots, every trader should use the discount brokers.

And I am against overnight holds esp. on ES if his goal is growing a trading account. True on risking but losing $5K to start is really an education to the market. We've all been there ..... its part of the process.

Do these brokers put in stop losses for their clients to prevent them from going negative NAV? Or is it the usual margin call? When does the broker react to close client positions? $500 is skating very very close to the edge. Its very easy, especially with people holding a few contracts for it to move $500 on a gap.

Sometimes trading opportunities actually happen overnight. For example, last year swing shorting the ES on momentum, the ES dropped I think down to 1765 around december, but only in the overnight trading hour sessions. It then rallied HARD and went positive ever since. So those shorting the ES could have got out at a profit that is only afforded to you during overnight trading.

I think a guy with $5K account should try to double that money using safer conventional methods first, before even considering playing beyond their means with futures leveraging to the hilt and skating on the edge like that. But to each their own. Its like how people max out a credit card and make minimum interest payments, or maybe miss payments. Not what I would recommend.

 

[dbphoenix]

I'm not saying people should trade based on what news events are. These are strats for some but thats not what I'm saying.

Im saying you can't predict it, as you say so yourself, but you still need your account to be protected from violent moves or high volatility. Thats the point. If the market moves in your favor then thats great. If the news causes the markets to move against you, even briefly and triggers margin calls, then not so great.

Or one can trade the volatility. It all depends on the approach.

None of which has anything to do with the OP's initial question. If he characterizes his market, does the research and testing to come up with a theoretically profitable plan, then simtrades it to see if his hypotheses hold, then starts small in something easy, like the NQ, then he can learn to trade his market in relative safety. This will put him in a far better position to succeed than most of what I see here.

 

[butterfacetrader]

Or one can trade the volatility. It all depends on the approach.

None of which has anything to do with the OP's initial question. If he characterizes his market, does the research and testing to come up with a theoretically profitable plan, then simtrades it to see if his hypotheses hold, then starts small in something easy, like the NQ, then he can learn to trade his market in relative safety. This will put him in a far better position to succeed than most of what I see here.

It has everything to do with OP's situation. You have guys here telling him to max out day trading ES with a small account.

Which means, because his account is so small, he can't withstand much of a price move. With no staying power, he will be out of the game long before he can see through his game plan to completion. For example, some news event can trigger algos to push the market in a direction, but then recover over time. But that action alone could have margin called you already being that levered.

This isn't about having a trading plan or being a good trader. You need that no matter what. This is about trading within your means. Like spending within your means. If you don't, it will come back to haunt you. People trading levered to the hilt may hit a few home runs. But law of averages might mean eventually they hit that one big loss that is unrecoverable and they walk away with nothing. Seen it a million times. Lots of pit traders used to pull in 6,7 figures on good trades. And then they'd put on one bad trade out of thousands to send him packing forever with nothing. Again, because he lived on the principle of maxing yourself out every single time. You are setting yourself up for failure by doing that. Its all probabilities. You are bound to put on a bad trade.

 

[dbphoenix]

It has everything to do with OP's situation. You have guys here telling him to max out day trading ES with a small account.

Which means, because his account is so small, he can't withstand much of a price move. With no staying power, he will be out of the game long before he can see through his game plan to completion. For example, some news event can trigger algos to push the market in a direction, but then recover over time. But that action alone could have margin called you already being that levered.

This isn't about having a trading plan or being a good trader. You need that no matter what. This is about trading within your means. Like spending within your means. If you don't, it will come back to haunt you. People trading levered to the hilt may hit a few home runs. But law of averages might mean eventually they hit that one big loss that is unrecoverable and they walk away with nothing. Seen it a million times. Lots of pit traders used to pull in 6,7 figures on good trades. And then they'd put on one bad trade out of thousands to send him packing forever with nothing. Again, because he lived on the principle of maxing yourself out every single time. You are setting yourself up for failure by doing that. Its all probabilities. You are bound to put on a bad trade.

AFAIK, he said nothing about being fully leveraged, nor about being leveraged at all. Nor did he mention the ES.

As usual, everyone is dragging his own baggage into this, but the fact remains that one can learn how to trade futures safely without having 100K in his account. You're welcome to disagree. But since the OP appears to have moved on, I don't know that it matters one way or the other.

 

[butterfacetrader]

AFAIK, he said nothing about being fully leveraged, nor about being leveraged at all. Nor did he mention the ES.

As usual, everyone is dragging his own baggage into this, but the fact remains that one can learn how to trade futures safely without having 100K in his account. You're welcome to disagree. But since the OP appears to have moved on, I don't know that it matters one way or the other.

OP didnt. OP said he didn't even want to use margin (presumably meaning borrowing that incurs interest costs), but is willing to leverage via futures.

But I'm actually talking about others here such as busta21 who suggests OP goto some futures broker that allows $500 intraday margining and betting big, and then belittle everyone who cautions such approach with a small account by calling them bad traders.

Get a discount broker first. $500 day trade margins

you won't get rich trading like that. If you aren't going to make $50,000 USD trading each year at a MINIMUM do not even bother. The stress is not worth it.

Trade 4 lots to start - forget this math yadda yadda yaddda

Discount futures broker that allows extreme leverage because of $500 intraday margin. And using 4 lots are presumably his conservative recommendations.

So, such a $6K player can sustain, leaving out commissions, a total of 27.5 S&P point losing move against him (using whatever strategy) before he is down to $500 and liquidated, walking home with nothing. Thats if he put stops. If not, and he goes negative NAV from a gap move, then he gets margin called by broker, losing more than $6K he had.

And, going by what others are saying, such as targeting trades with small gains & losses at 1 s&p point, that means the combination of advices gives this user a minimum of 27 chances to play this game. If he is so unlucky as to have 27 losing moves in a row, he is out. Even if the odds of winning are slightly better at more than 50%, law of large numbers only guarentees expected result from large number of trials. Having a bad losing streak in 1000 trials enough to wipe out such an account is small but probable, even though a good strategy is still expected to win in the long run. THis is why you need staying power, even with a good strategy.

 

[tiddlywinks]

Do these brokers put in stop losses for their clients to prevent them from going negative NAV? Or is it the usual margin call? When does the broker react to close client positions? $500 is skating very very close to the edge. Its very easy, especially with people holding a few contracts for it to move $500 on a gap.

Sometimes trading opportunities actually happen overnight. For example, last year swing shorting the ES on momentum, the ES dropped I think down to 1765 around december, but only in the overnight trading hour sessions. It then rallied HARD and went positive ever since. So those shorting the ES could have got out at a profit that is only afforded to you during overnight trading.

I think a guy with $5K account should try to double that money using safer conventional methods first, before even considering playing beyond their means with futures leveraging to the hilt and skating on the edge like that. But to each their own. Its like how people max out a credit card and make minimum interest payments, or maybe miss payments. Not what I would recommend.

You don't understand how futures work! And you are giving advice!?! E T E T E T!

Dude... it doesn't matter if the "margin" per contract is $500 or $1,000,000. That is the amount of UNENCUMBERED money NEEDED IN THE ACCOUNT to establish and/or maintain a position of one contract INTRADAY. The "margin" has NOTHING to do with "skating very very close to the edge" LOL. If the account is 500 or 5 billion you can lose 500, 5 billion, or more, regardless of the amount of margin per contract. The amount of margin only determines the amount of unencumbered money that must be available (unencumbered) across all open positions simultaneously.

As for your question, any brokerage worth doing business with has risk management through a compliance and/or risk department. Generally speaking, they will not let an account go negative, but each brokerage and each client is different. On a professional level you are notified IN ADVANCE of issues so you (the trader) may take corrective actions. On a non-pro level, you are auto-liquidated with minimal if any notification. In all cases, IT IS THE TRADERS RESPONSIBILITY TO UNDERSTAND HIS/HER OPEN POSITIONS AND OUTCOMES.

 

[butterfacetrader]

You don't understand how futures work! And you are giving advice!?! E T E T E T!

Dude... it doesn't matter if the "margin" per contract is $500 or $1,000,000. That is the amount of UNENCUMBERED money NEEDED IN THE ACCOUNT to establish and/or maintain a position of one contract INTRADAY. The "margin" has NOTHING to do with "skating very very close to the edge" LOL. If the account is 500 or 5 billion you can lose 500, 5 billion, or more, regardless of the amount of margin per contract. The amount of margin only determines the amount of unencumbered money that must be available (unencumbered) across all open positions simultaneously.

As for your question, any brokerage worth doing business with has risk management through a compliance and/or risk department. Generally speaking, they will not let an account go negative, but each brokerage and each client is different. On a professional level you are notified IN ADVANCE of issues so you (the trader) may take corrective actions. On a non-pro level, you are auto-liquidated with minimal if any notification. In all cases, IT IS THE TRADERS RESPONSIBILITY TO UNDERSTAND HIS/HER OPEN POSITIONS AND OUTCOMES.

I trade futures and I know how it works. So much for your smart comments.

Take it in context of what was said by others. People are telling him to trade a few (four) contracts at a time with 6K account. Margin required even intraday at $500 means he can sustian 27.5 S&P point move against him. To me, this is skating close to the edge. The S&P moved 20 points yesterday. More on some other days. If I can't sustain a 5% drawdown, I have no business trading it. But I am more conservative. I'm not high rollers and ballers like you guys.

As for having a larger margin cushion, and why other well reputed brokers require people to put up more margin, and why the CME requires large overnight margin, is because futures are at risk of gap moves. Gap moves can easily move past your miniscule $500 margin. Gap moves can happen during normal trading hours also.

Also, futures carry liqudiity risk, which is something you don't normally consider and is irrelavent in a normal market. But if there are black swans, liquidity can dry up and you can sustain unforseen risks associated with those futures positions. Since all futures are cash settled to pay the difference between the contract price and the S&P at expiration, if you can't exit a futures position you are forced to hold until expiration and held accountable to pay or be paid at expiration according to the terms of the futures contract. And since such situations likely only happen during a selloff and huge moves, you are potentially liable for massive losses well well beyond even the $4K CME wants you to put up initially. Perhaps you didn't learn your risk management properly.

 

[dbphoenix]

OP didnt. OP said he didn't even want to use margin (presumably meaning borrowing that incurs interest costs), but is willing to leverage via futures.

But I'm actually talking about others here such as busta21 who suggests OP goto some futures broker that allows $500 intraday margining and betting big, and then belittle everyone who cautions such approach with a small account by calling them bad traders.

Actually he never mentioned leverage.

In any case, this has been as usual an excuse for ET hobbyists to argue subjects about which they know little.

Does one have to trade multiple contracts? No.

Does one have to trade the ES? No.

Does one need to have 100K in his account? No.

Does one have to hang on while his instrument moves 30pts against him? No.

Have fun everybody.

 

[blakpacman]

I have been using IB for few years for stocks only and I am just flat (though market is up).

How should I venture into futures/emini trading? Like mentors, daily bulletins, newsgroups.

My capital is $6K (and I would not go on margin).
Every suggestion helps..

$6k, then $5k, then another $6k... repeat losing in that manner for many years

 

[tiddlywinks]

I trade futures and I know how it works. So much for your smart comments.

Take it in context of what was said by others. People are telling him to trade a few (four) contracts at a time with 6K account. Margin required even intraday at $500 means he can sustian 27.5 S&P point move against him. To me, this is skating close to the edge. The S&P moved 20 points yesterday. More on some other days. If I can't sustain a 5% drawdown, I have no business trading it. But I am more conservative. I'm not high rollers and ballers like you guys.

As for having a larger margin cushion, and why other well reputed brokers require people to put up more margin, and why the CME requires large overnight margin, is because futures are at risk of gap moves. Gap moves can easily move past your miniscule $500 margin. Gap moves can happen during normal trading hours also.

Also, futures carry liqudiity risk, which is something you don't normally consider and is irrelavent in a normal market. But if there are black swans, liquidity can dry up and you can sustain unforseen risks associated with those futures positions. Since all futures are cash settled to pay the difference between the contract price and the S&P at expiration, if you can't exit a futures position you are forced to hold until expiration and held accountable to pay or be paid at expiration according to the terms of the futures contract. And since such situations likely only happen during a selloff and huge moves, you are potentially liable for massive losses well well beyond even the $4K CME wants you to put up initially. Perhaps you didn't learn your risk management properly.

And you are swing "trader" or possibly an investor. That's fine.
Intraday traders (at least those of my ilk) would not even consider maintaining an ES position (or whatever) of 27.5 points against and I am 100% certain there is a point prior to reaching 27.5 points against indicating the position is wrong. Sure, anything can happen at any time, but that can be said for any style of trading or type of business. Occupational hazard. Embrace it!