Looking for new futures broker

[NoahA]

You have to stay at and above the maintenance margin level.

Broker's software won't (or shouldn't if it doing due diligence) let someone's account balance get anywhere near zero.

Oh shit, you're totally right. I completely forget about the initial vs maintenance. So the risk to the broker with even a 1k maintenance is nothing. If it hits the 1k bottom mark, there would need to be more than 20 ES points slippage to use up all the 1k in funds.

 

[virtusa]

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.

You are missing essential elements in your logic.

• As starting point you have to take your trading system.
  
• Watch the signals that are generated, and watch the stops that are used.
• Check how much your trading system has as open loss, so how far does the market go against your position. Check how often you get stopped out and if you don't reduce profits because of bad positioning of the stops.
• Watch for each big move if it moves in the right direction of your position or not.

10, 20 or bigger moves are not by definition bad. They are only bad if they go against your position. If they go in the direction of your position they are wonderful.
So just saying "if the moves of 10, 20 or more points go in seconds it can wipe you out.", that is only correct if the move goes against your position.
And in a good trading system these big moves go in the direction of your position, so they are a good thing.

 

[Overnight]

...
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?

At current price level, there is zero chance of the ES/SP opening 460 points down, thanks to circuit breakers.

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.

IB is a bad example, because they level far and above all exchange minimums upon their clients. But I think the reason IB has no day-trading margin below exchange minimums is simply because they have SO MANY CLIENTS! They have SOOOO many people trading through them, that they need that extra buffer against those who would blow out.

 

[NoahA]

As starting point you have to take your trading system.

I was only looking at this from the perspective of the broker. The day trading margin is supposed to reflect the risk they take my letting you trade knowing that they will be responsible for any shortfall. So they look at how much can you potentially lose and when do they need to cut you off before they risk having losses themselves.

 

[mervyn]

one vote for amp

I was only looking at this from the perspective of the broker. The day trading margin is supposed to reflect the risk they take my letting you trade knowing that they will be responsible for any shortfall. So they look at how much can you potentially lose and when do they need to cut you off before they risk having losses themselves.

CQG will liquidate the account with 80% loss, so you have $500, CQG will close out you positions when you are at $100 mark. Brokers may vary perhaps higher than lower than 80% to protect their firms.

 

[SunTrader]

...
IB is a bad example, because they level far and above all exchange minimums upon their clients.....

Except they do -30% less than exchange rack rate. It's just not as "generous" as many others.

 

[Overnight]

Except they do -30% less than exchange rack rate. It's just not as "generous" as many others.

What is an exchange rack rate?

 

[SunTrader]

What is an exchange rack rate?

stoopid lingo I just threw out there. Typically used as hotel advertised price. But in this case in other words the published exchange margin rate.

I posted the IB reduced margin rate on previous page (30% lower as opposed to many others that are 75% lower - for daytrading).

 

[virtusa]

I was only looking at this from the perspective of the broker. The day trading margin is supposed to reflect the risk they take my letting you trade knowing that they will be responsible for any shortfall. So they look at how much can you potentially lose and when do they need to cut you off before they risk having losses themselves.

To know the risk they take (the brokers) they should know the trader. And as they cannot try to understand each trader, they just put a limit where they think they are safe.
Their real risk is smaller as every big move is in favor of a part of their clients. So in every big move some of their clients win and some lose.

 

[virtusa]

one vote for amp


CQG will liquidate the account with 80% loss, so you have $500, CQG will close out you positions when you are at $100 mark. Brokers may vary perhaps higher than lower than 80% to protect their firms.

One of my brokers will cut off at $500 too, while another one will cut you off when I have less than 5% of the initial full margin, which is in general above the $500 level already.