Minimum it takes to start trading Gold Futures?

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FuturesNoob

Hi guys,

I am new to the futures market and have been lurking on this site for quite a while.

What is the minimum it would take to start trading 5-10 future contracts of gold. 1 contract = the spot correct ?
($ 1230-1240 on 5/13)

I am a bit confused with the initial deposit/ margin.

Much appreciated and thank you.
 
Quote from FuturesNoob:

Hi guys,

I am new to the futures market and have been lurking on this site for quite a while.

What is the minimum it would take to start trading 5-10 future contracts of gold. 1 contract = the spot correct ?
($ 1230-1240 on 5/13)

I am a bit confused with the initial deposit/ margin.

Much appreciated and thank you.
More...

I think I can help clarify this a little bit for you. The full size Gold futures contract represents 100 ounces of Gold. So if you're trying to understand contract value, take the price of one ounce (the contract is quoted in $ per ounce) and multiply that by 100. Using today's price of Gold, one Gold contract is worth about $122,500 ($1225 x 100). The overnight initial margin required by the exchange is about $5,800 per contract. Right there you can get an idea of the tremendous leverage that futures markets provide. If you are day trading I think most firms would want about 50% of that overnight margin. If you are new to futures please be careful with margins. Low margins=playing with fire. As a new trader you should think about trying to work with much more than the minimum margin requirement. The mini Gold contract is 1/3 the size of the full contract (33.3 oz) so the margins would be about a third less as well.
 
IMO the minimum margins in most futures are sufficiently small that you're well below the Kelly bet size for anything but a psychic strategy. So you'll actually be hurting your long run returns trading that leveraged. You will also give yourself an ulcer.

The 5Kish overnight margin is WAY too low. A $50/ounce overnight move in gold is completely possible. I'm guessing it happens maybe every year or two but I haven't checked.

Small gold has hideous liquidity. IMO it is untradable on a short horizon. It can be used for longer term positions though.

Personally, I would want about 15K per big contract interday, and about 30-40K per big contract overnight.

Edit: also, this is obvious, but OP should try trading in a simulator to get a feeling for what price moves will be like.
 
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