Day Trading Futures

Day Trading Futures for Beginners

9 min read

Day trading futures are a very popular and lucrative trading strategy. Have you ever been locked out of your trading account due to a day trading violation? Or better yet, have you missed an opportunity due to short-selling restrictions? Both situations you will want to avoid, like the plague. There can be restrictions on day-trading stocks and options that are very frustrating, but day-trading futures help overcome these hurdles. There are also fewer charts; you can trade the major indexes and the most popular commodities. Watch our video on how to day trade futures.

Imagine being in a position where you’re trying to sell a tanking stock. Unfortunately for you, you’ve reached trade number five of the week, and to your surprise, your account is locked. Missed opportunities can be costly, so today, we will look at why day trading futures might be one option to consider. 

Day trading futures is a great way to make money. However, Futures is a different beast than stocks and options. It’s open pretty much 24/7. So you can make money at night or before 9:30 am. So, if you work a 9-5 job, then day trading Futures is for you. 

Sometimes, an opportunity sits before us, but we’re too busy looking elsewhere to notice.

Case in point: those automatically think of the stock market when they hear “day trader.” But lingering in the background like the unpopular kid who will someday become president is the futures markets

To summarize, futures are an agreement between a buyer and a seller to buy/sell a specific amount of an underlying asset at a future date and price.

Regardless of the current market price at expiration, the buyer must buy, or the seller must sell at the set price. You’re probably wondering what exactly this underlying asset is, let me tell you.

Futures contracts can be on physical commodities like oil, corn, or soybeans. Alternatively, they can be on financial instruments like the S&P. Day traders can make money. But day trading Futures gives you more opportunity to make money.

Day Trading the Futures Market

In a nutshell, day trading futures is buying and selling a futures contract(s) within the same day. You do not hold any long or short positions overnight. 

Like any instrument that is day traded, the time can vary from a few minutes to hours. Day trades vary in duration; they can last for a couple of minutes or, at times, for most of a trading session.

Futures day traders make money by capitalizing on the price fluctuations between a contract’s buy/sell price and the close of the position.

Day Trading Futures Market

Advantages of Day Trading Futures

  • No PDT Rule
  • In many cases, no minimum account size
  • Margin
  • No shorting restrictions
  • Trading outside stock market hours
  • A good night’s sleep or trade all night – it’s up to you. 

Breakouts occur from many different types of patterns, not just one. We see breakouts of ranges and patterns – head and shoulders, flags, etc. 

Breakouts can provide an excellent opportunity to profit if you catch them on time. 

1. No Pattern Day Trader Rule

Are you thinking of trading four or more times in one week? What’s the state of your finances? You can’t day trade stocks if you don’t have at least $25,000.

Thank the PDT rule for that. Many new-day traders are sorely disappointed when they realize they must have a minimum of $25,000 in their account to make this happen.

But don’t despair just yet; the PDT rule does not apply to day trading futures. You can trade as often as your heart desires as long as you maintain your minimum margin requirements for your positions.

2. No Minimum Account Size

If you can barely scrape together the funds for a vacation, saving 25,000 is a pipe dream. Unless you’re banking on inheriting a chunk of change from your wealthy uncle, wouldn’t you be so lucky?

I have good news, though. You can start trading futures with much less capital than stocks. Case in point: $3500 to $5000 will get you started day trading the Emini S&P (one of the best futures contracts for day trading). 

Another thing to consider is the trading platform you are going to use. Many of them have minimum capital requirements to trade futures and options.

Typically, the minimum account balance hovers around the $2,000 mark, which is still not huge compared to $25,000.

3. Margin

As an equity trader, you can only trade up to four times your maintenance margin intra-day. So, if you have $20,000 maintenance excess available, you can only trade up to $80,000.

Exceeding this amount and margin calls may further limit buying power and trading frequency. However, that margin may allow you to trade a larger notional value with futures.

I have to put a plug in here about margin and risk. Under no circumstance should new traders ever trade on margin. Please take the time to learn in a simulator; otherwise, you’ll throw your money out the window.

Day Trading Course Options Trading Course Futures Trading Course
DESCRIPTION Learn how to read penny stock charts, premarket preparation, target buy and sell zones, scan for stocks to trade, and get ready for live day trading action
Learn how to buy and sell options, assignment options, implement vertical spreads, and the most popular strategies, and prepare for live options trading How to read futures charts, margin requirements, learn the COT report, indicators, and the most popular trading strategies, and prepare for live futures trading

4. No Short Sale Restrictions

A common struggle for equity day traders who like to short is the availability of shares. And there are many reasons why these shares may not be available from your broker; think of short sale restriction.

Alternatively, a futures trader does not have the same short sale restrictions. You can sigh in relief and take a short position just as easily as a long one.

5. Sleep Well at Night

Please show me one person who does not want to sleep well at night! Personally, there have been times in my life when I would have donated an organ to get a good night’s sleep.

Ok, well, that’s a bit of an exaggeration, but you get my point. With futures, all positions must be closed by the end of the day. And no positions mean no risk, which means a night of good sleep. Sign. Me. Up. 

Best Markets for Day Trading Futures

Undoubtedly, the market of choice for many day traders is the E-mini S&P 500. Because the E-mini S&P futures are traded electronically, trade executions are very fast and liquid. What’s more, futures traders can control around $75,000 worth of stock for about $3,500 in the margin. If you have a penchant for the stock market, the Dow futures, E-mini Nasdaq futures, and E-mini Russell futures are popular among future day traders.

Other good candidates for day trading include soybean, crude oil, the Japanese yen, and Euro FX. All of these have daily volumes and volatility in their future prices.

Each futures market has different characteristics, so one needs to study the markets before day trading to uncover and optimize techniques and develop a plan.

All you need is an easy day trading system indicator. And you’ll have an edge over other traders.

Day Trading Futures Example

Key Take-Aways

If you’re thinking of day trading futures, here are a few things you should remember.

  • Starting, it is recommended that you trade the S&P Emini (ES).
  • The recommended starting capital for ES is $3500 to $5000
  • Market hours are from 9:30 AM to 4 PM EST for ES. However, you can place trades an hour before the opening. 
  • The ideal time for trading ES futures is between 8:30 and 10:30 AM and 3 to 4 PM. 
  • As a new trader, focus on becoming an expert in one futures market. Trying to learn everything is pointless, so stick with one and perfect it. Please keep it simple.
  • Check the CBOE for a full, detailed list of future times.

Disadvantages of Day Trading Futures

One must be strictly disciplined to be a successful day trader of any security. Sadly, the temptation to overtrade will always be present in the markets – futures or otherwise. At the root of this are emotions and an inability to control them.

Furthermore, commissions will add up quickly and burn a hole in your account. Look at a trader with a $20,000 account, for example.

She trades one e-mini S&P contract, and by the end of the year, she may owe $5,000 – $10,000 in commissions. To break even, she would need to make a 25-50% return, ouch. 

Final Thoughts: Day Trading Futures

Most people who are day trading futures struggle to make money. I think it’s a lack of both preparation and discipline that is their downfall.

Mainly because day trading can be an unforgiving game, regardless of the market traded. However, it can be a profitable venture for those willing to do homework, develop a plan, and stick to it with discipline.

As a futures trader, you can go long or short multiple times a day, and you do not have to worry about day trading restrictions.

So why miss out on another opportunity because of restrictions? Move into futures today; we will show you how with our futures trading course. 

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