Day Trading The Futures Markets Should Be Considered


Buying and selling the futures markets is similar from a chart point of view as trading the stock market. The principal discrepancy is the futures markets are inherently leveraged (little amount of money controls a relatively significant investment). Still if you use margin on stocks, you will not accomplish the leverage of the futures markets. This is what tends to make the futures markets attractive as a day trading vehicle, or as a swing trading vehicle. Seldom do people hold futures investments for the long term - at most the bet might be a couple of months.

If all you desire to do is day trading, then the futures markets should be on your list to consider. If you have the SEC required $25000 bare minimum to day trade stocks, then you can simply day trade some futures as well by opening a futures account. There is typically slightly more volatility day trading in the futures markets than in the stock market, and this can provide some great possibilities. Most futures brokers will ask that you put up approximately $5000 initially to open an account, some might be higher. Intra-day required margin to trade a contract or 2 are generally much less than the overnight margin. The reason being overnight there can be large gaps in price brought on by news events and you are required to hold enough capital in their account to handle that level of volatility. Furthermore, it is possible if you maintain futures overnight (or even intra-day if you don't use stops) to have your futures account go into a debit balance because of the leverage. Most brokers will never let this occur and will close out all your positions prior to this happening. This type of event is possible and the risks should be understood. Intra-day it is infrequent, but overnight it can happen with greater frequency.

While these risks should not be ignored, they should not keep you from thinking about trading futures either if you are a day trader. From a technical standpoint, trading the futures markets is much the same to day trading stocks, with the difference that there are not any "news events" on the futures such as analyst upgrades or downgrades to worry about. Financial events and news happen all the time, and these affect both index futures and stocks who trade off the futures, so this is nothing new. There are many sites now where you can get a free demo account to try out day trading the futures markets. If you discover that you enjoy doing it, consider adding the futures markets to your current trading.

The futures work especially well for trying out a day trading robot, because greater volatility. The futures markets are often a better selection for any form of automated trading robot because they tend to be more held in a range than stocks. While a stock can run from 10 to 200 in a few months of time, the futures markets do not have this big a push, although they do trend up and down over months of time.

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