Thanks for you reply GAT.
1) You just need one bullet to kill someone.
2) You will not be able to help me, cause obviously you don't seem to know anything about the futures market. So there is no point of debating what you have just wrote.
Looking for new futures broker
- Thread starter rb7
- Start date
1) You just need one bullet to kill someone.
2) You will not be able to help me, cause obviously you don't seem to know anything about the futures market. So there is no point of debating what you have just wrote.
But it's only the extra risk of the first night that matters, after that variation margin takes you back to the same position as a day trader who closed the day before. Overnight moves are smaller than moves during the day. So at worse, a trader who holds overnight is only a slightly worse risk for the exchange than one who ends every day flat.
Exchanges and brokers don't set margins based on skill (beyond some minimum requirement to prove you are worthy of a margin account). They set them on risk.
You might be right about your wives driving, but you are much more likely to die if you crash at 100mph than at 50mph, even if it's the case that you are much less likely to crash than your wife is. So over a lifetime of driving your chance of dying from a car accident is close to 100%.
Also, I'd wager that there is an inverse correlation between leverage and skill - the least capable traders generally use the most leverage. And there are more idiots day trading than doing longer term trading. So there is an adverse selection problem which means it's probably sensible to offer worse margins to day traders rather than to better ones.
GAT
pushing you to close risk positions daily, that means you would pay more in commissions.
AFAIK every U.S. based futures broker offers day trading margin and found the risk acceptable - and has for 20+ years that I've trade - but someone thinks they are wrong to do that.
Unless I'm misreading this table, not every broker it seems:
https://www.interactivebrokers.com/en/index.php?f=26662
GAT
Daytrading initial - daytrading maint. - overnight initial - overnight maint.
$16,175.99 - $14,705.45 - $23,108.56 - $21,007.79
so it isn't reduced down by 75% - more like 30%.
Unless you sling 10's or more likely 100's of cars at a time.
There is somewhere on ET a link to a study that showed that trading the ETH makes 2/3 of the total profits, which means that the RTH only makes 1/3. So that means that the overnight moves should be much bigger than the moves during the day. So risk overnight is much bigger because of that. Daytraders monitor their positions from start to finish and can intervene if needed. Traders that go overnight, are only watching their positions about 8 hours a day, so missing 16 hours.
I trade part of the ETH and the RTH I trade complete. I make more points (trading the ES) in ETH than in RTH. So that contradicts your statement. I do however trade bigger size in the RTH as volume is bigger.
I agree that brokers set margins on risk. I never have problems with margins as I do not trade these insane margins that are used to catch clients. But I also do not use the insane 16K margins.
My wife hit already a few times obstacles at speeds that can be deadly. 50mph can be deadly, depending on circumstances. I never crashed into anything. Crashing at 50mph is more deadly than not crashing while doing 100mph.
So each person has close to 100% chance to die in a car accident????? Is that a typo, or are you serious? In the article below they mention 1 on 103. If I calculate well that should be less than 1% instead of almost 100%. What you say is that almost all people die in a car crash. I have already been on several funerals and I think none of them was involved in a car crash.
ARTICLE:
The chances of dying in a car crash
While the chance of a car accident is relatively high, the chances of dying in a car crash are thankfully, comparatively lower.
According to the National Safety Council, the chances of dying from a motor vehicle crash is 1 in 103.
Car crash deaths compared to other causes of death
The chances of being in a car crash and dying ranks among the top ten in the National Safety Council list. Five causes that have even higher odds include:
- Heart disease (1 in 6)
- Cancer (1 in 7)
- Chronic Lower Respiratory Disease (1 in 27)
- Suicide (1 in 88)
- Opioid Overdose (1 in 96)
- Motor Vehicle Crash (1 in 103)
- Suicide (1 in 88)
- Opioid overdose (1 in 96)
- Motor Vehicle Crash (1 in 103)
- Fall (1 in 114)
- Gun Assault (1 in 285)
- Pedestrian Incident (1 in 556)
I agree with that. The good traders pay for the idiots. I will never trade these insane low margins, but also never these insane high margins, like 16K. It makes sense that brokers are careful. But traders should be careful too.
I was client at Refco went they went broke. So the higher the margin, the bigger the risk for the trader. And Refco was not the only one going down...
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In my opinion, the biggest risk with futures trading is the Friday to Sunday gap, or the 2pm close to 3pm open gap. During the day, when the market is open, you might see a move of 10 or lets even say 20 ES points in a couple of seconds, although this is most extreme. This means you're down instantly $1000. So if your margin requirements on ES are only $500, you could be taken out if you weren't already in profit somehow. So you lose your $500, and perhaps the broker has to cough up some money before they get the rest back from you.
But if IB requires 14k maintenance, this means for the 1 contract, price would have to drop more than 280 points before the 14k that you had in your account is completely wiped out. Has the ES ever moved 280 points in one day? Yes, but it took hours.
The overnight margin is 23k. So this means if you're gonna leave 1 contract open on Friday, price will have to open more than 460 points away before the broker is actually worried about their money. You would have to lose all 23k before the broker is in trouble. Can the market open 460 points down? Yes, but that did even 9/11 cause such a drop? I'm not sure.
Anyway, the day trading margin though doesn't need to be so high because the broker can easily close your position when you've exhausted your $500 cushion and get within a few ticks of the current price. If your margin is $500 or $2000, it just means you lose more before the broker acts but they will only be out a few dollars only is my estimation since the market order should only have a few ticks slippage. And I bet they probably act even before you're fully down the $500 or $2000.
But if IB requires 14k maintenance, this means for the 1 contract, price would have to drop more than 280 points before the 14k that you had in your account is completely wiped out. Has the ES ever moved 280 points in one day? Yes, but it took hours.
The overnight margin is 23k. So this means if you're gonna leave 1 contract open on Friday, price will have to open more than 460 points away before the broker is actually worried about their money. You would have to lose all 23k before the broker is in trouble. Can the market open 460 points down? Yes, but that did even 9/11 cause such a drop? I'm not sure.
Anyway, the day trading margin though doesn't need to be so high because the broker can easily close your position when you've exhausted your $500 cushion and get within a few ticks of the current price. If your margin is $500 or $2000, it just means you lose more before the broker acts but they will only be out a few dollars only is my estimation since the market order should only have a few ticks slippage. And I bet they probably act even before you're fully down the $500 or $2000.