What If ES drops -100 points,

[J_Smith]

Here is something for you to think about - I have made nearly $5k in the last week, but I was also down over $5k at one stage - it didn't really bother me if I lost the $5k, as I had already made it!

Some were good trades, other terrible trades, and most was bad trading - but I still made money, and could have lost if the market really plummeted - but that was my decision, which I took, and payed off this time.

Scared money never wins, but reckless trading can catch you out - unless you are willing and able to lose - don't take the risk!

Hope this helps you.

J_S

 

[J_Smith]

Just in case you think I am kidding - easy make up the numbers if you can add!

Pressure is off now, which is how it should be when trading.

J_S

 

[volente_00]

Not sure how other brokers handle this, but you'd be sold out at IB.

One contract, 5K in the account and down 100 points equals 5K. With a futures contract they are marked to market continuously and the cash reflects the movement. At 100 down, the cash and value would be zero. I'm not sure what the margin is for a single ES contract at IB, but auto liquidation would occur at 80% of that number on the way down.

Other brokers may approach this differently.

If they offer day trading margins then I would not bet on auto liquidate getting you out until you breach the day trade margin.

 

[volente_00]

Do some of the brokers have automated liquidation if possible?

I think when margins return to normal, $5,000 should be max a beginner should have in account and trade ones for long time till account is $15k, keep $10k in reserve checking account back home. It far better not to use real time account till your well back tested and sim trade 18 of 20 profitable day, cause if you have developed a system that can be profitable and still can't be profitable, you have mental issues that have to be worked out before losing ton of cash. Have seen a score of newbies wipe out $10k accounts plus as they didn't spend the time to be able to learn to read charts, or learn how far is too far, or how about WHEN NOT TO TAKE A SIGNAL, just cause you have a signal-does not mean all signals are equal, like buying into cluster of highs or continually buying even though market is making lower lows.

Oh, and you can count on one day when price will make few limit down moves in a row, and no one will be able to get out. So those who think $300 margins are a good deal, when you have to declare bankruptcy, won't be chirping.

I'd rather trade $500 margin and settle it from my bank account then have the broker control all the money. If it's strictly a trading account then to me its better to use margin and put your excess reserve into other avenues to diversify. I have no problem trading ES at 100:1 or even 200:1 but I always run automated server based stops and have enough buffer to back the loss on the trade. If I want to risk $200 per contract then I will put it on with $700 per contract to cover day trade margin and the risk. For someone starting out I would say $10,000 per contract minimum until you learn how to control risk and grow the account.

 

[Handle123]

I'd rather trade $500 margin and settle it from my bank account then have the broker control all the money. If it's strictly a trading account then to me its better to use margin and put your excess reserve into other avenues to diversify. I have no problem trading ES at 100:1 or even 200:1 but I always run automated server based stops and have enough buffer to back the loss on the trade. If I want to risk $200 per contract then I will put it on with $700 per contract to cover day trade margin and the risk. For someone starting out I would say $10,000 per contract minimum until you learn how to control risk and grow the account.

I co-owned a Futures brokerage in mid 90's, we used $25k to trade one Big S&P500, I got out cause stress was too much. Let's say you own a brokerage and you have 1,000 clients, 750 are trading 1-2 contracts at $500, and if their protect stops get hit and there simply isn't any fills for 50 or 100 points, all your clients think were doing a two lot and had $1,000 in their account, what you think are the chances those 750 are going to send you $4,000/$8,000 plus fees to cover the losses? Oh, that comes to $3,000,000/$6,000,000 plus fees. You think most small brokerages can cover this? A ton of small commissions not going to cover all those losses if clients don't wire monies.

Have you ever been in a situation where there was simply no orders? Were you trading 1987, I placed a sell order and got filled 10 points lower, $5k, margins jumped to $50k, guys had dropped few million including the government FBI String traders had lost million. Forgot what trader cleaned up in T-Bond pit.

 

[volente_00]

I co-owned a Futures brokerage in mid 90's, we used $25k to trade one Big S&P500, I got out cause stress was too much. Let's say you own a brokerage and you have 1,000 clients, 750 are trading 1-2 contracts at $500, and if their protect stops get hit and there simply isn't any fills for 50 or 100 points, all your clients think were doing a two lot and had $1,000 in their account, what you think are the chances those 750 are going to send you $4,000/$8,000 plus fees to cover the losses? Oh, that comes to $3,000,000/$6,000,000 plus fees. You think most small brokerages can cover this? A ton of small commissions not going to cover all those losses if clients don't wire monies.

Have you ever been in a situation where there was simply no orders? Were you trading 1987, I placed a sell order and got filled 10 points lower, $5k, margins jumped to $50k, guys had dropped few million including the government FBI String traders had lost million. Forgot what trader cleaned up in T-Bond pit.

That's the primary reason to keep as little as possible in an account and to maximize leverage since funds are uninsured. I wasn't trading in 1987 but I traded on April 4, 2000, the morning of 9/11, the flash crash of 2010 and numerous fed surprise rate cuts from 2000 on. I'm a contrarian so I am always entering at extreme moves. This alone will usually keep you from taking a lot of heat because you are never chasing price at extreme moves. I think a 100 point max ES draw is a good worst case number to base your risk off of but I can't recall anytime in the past 17 years when ES opened gapped down -100. Even 9/11 was only 60-70 if memory serves me correct.

 

[JackRab]

I've seen a 'no offers' situation in the FTI futures in 2003 or 2004. I think NFP was way better than expected and the market took off.... MM's pulled their quotes and no offers left in the orderbook for a good 10-20 seconds... It was like a pinball machine, up down 2% lots of times in those 20 secs....

 

[Handle123]

That's the primary reason to keep as little as possible in an account and to maximize leverage since funds are uninsured. I wasn't trading in 1987 but I traded on April 4, 2000, the morning of 9/11, the flash crash of 2010 and numerous fed surprise rate cuts from 2000 on. I'm a contrarian so I am always entering at extreme moves. This alone will usually keep you from taking a lot of heat because you are never chasing price at extreme moves. I think a 100 point max ES draw is a good worst case number to base your risk off of but I can't recall anytime in the past 17 years when ES opened gapped down -100. Even 9/11 was only 60-70 if memory serves me correct.

I am a contrarian as well, but most are not. It is the weak hands, the under funded that brokerages can close down, so even if you on right side of the market, and brokerage shuts down, you can't get out, hope you have a back up brokers. I hope it never happens again, but we dropped two A bombs on Japan, can you imagine this happening here?

I think it is getting harder and harder to safe guard money period, better to spread it around to other countries or currencies.

 

[recession2016]

if you're lucky your broker will liquidate you as soon as you get a margin call

i've seen brokers ignore margin calls especially in overnight sessions, so if you get unlucky like that you will end up owing the broker money

 

[HeSaidSheSaid]

Thanks everyone for inputs.
with my TD stock account, they allow a few days for wiring the money in. this was long time ago, I don't know if they still allow this.