Futures day trading is the strategy used by active traders of the market to gain profit from sudden market movement.
Almost every Day trader must have to decide in which financial instrument to invest. There are numerous choices including forex, stocks, commodity and options. There are also many choices of your own, and number of advice you get from your friends. No doubt, it is a very difficult choice to select a suitable segment for a better return. To take the right decision, an investor can refer financial expert's best stock tips and market calls recommendations.
Let's keep all these options aside; Now I am going to tell you why futures trading is the best option for a day trader. Day trading in futures is the strategy used by active traders of the market to gain profit from sudden market movement. It is an act of buying and selling a future contract within the same day without holding a position overnight. In day trading a trader enters and exits all position in the same day. It takes lots of knowledge, more experience and discipline to do day trading in futures successfully.
Advantages of Day Trading Futures
1. Futures have zero restriction on short- selling
There are no restrictions on short selling in the futures market. A day traders job is to take only the best grades regardless of whether it is a long or short trade. With an ability to take long and short positions, a day trader can remain neutral and react according to his current market analysis.The stock market is different. Although day traders can short-sell stocks, they are still limited by the shortable stocks offered by their brokers because one need to first purchase a stock through his broker, before you can sell them to gain profit from a bearish move.
2. Day trader can make use of lower initial margin for future trading
To enter a futures position means to enter into a contract to buy or sell. You are not really buying or selling anything yet, so you do not have to pay anything. However, you need to submit an initial margin which is also known as the performance bond this is for as a guarantee of your ability to fulfil the contract. The amount of initial margin totally depends on the product and market volatility. The futures exchange set the amount of margin for Day trading, futures brokers are fully free to decide the initial margin for intraday trading. Your position size should still determine on the basis of your day trading strategy and risk capital.
3.There is central clearing for futures
As futures are contracts, there may be a possibility that contracting parties might refuse to act according to the contract terms. This risk is also known as counterparty risk. However, futures contracts are traded on the exchanges and there is exchange clearing house availab
FAQs
This practice appeals to traders for several reasons, including: Liquidity: Futures markets offer high liquidity, ensuring ease of entry and exit. Volatility: Intraday price fluctuations create opportunities for quick profits. Diversification: Futures cover a wide range of assets, enabling more opportunities.
Are futures best for day trading? ›
The more volatile the market, the more it moves and more the more chances of making profits. The best futures to day trade should be contracts that are high in volatility. Some traders prefer volatility as it gives them a chance to make more profits for the same transactional costs.
Can day trading futures be profitable? ›
Day trading is a strategy that involves buying and selling financial instruments at least once within the same day, attempting to profit from small price fluctuations. This approach can be lucrative, but it can also be risky if undertaken without a thoughtful strategy.
Does trading futures count as day trading? ›
Day trading rules for futures
Pattern day trading rules do not apply to futures trading, so you can start trading without having the minimum equity of $25,000 in in your account. You can place as many trades as you like in a week without attracting pattern day trading restrictions.
Do you need $25,000 to day trade futures? ›
A pattern day trader who executes four or more round turns in a single security within a week is required to maintain a minimum equity of $25,000 in their brokerage account. But a futures trader is not required to meet this minimum account size.
What type of trading is best for day trading? ›
Stocks are among the most popular securities for day traders — the market is big and active, and commissions are relatively low or nonexistent. You can also day trade bonds, options, futures, commodities and currencies. Typically, the best day trading stocks have the following characteristics: Good volume.
Why trade futures instead of options? ›
The choice between futures and options depends on your investment goals and risk tolerance – Both instruments can be used for hedging, but options offer more flexibility and limited risk. Futures offer higher potential profits but also higher risk, while options provide limited profit potential with capped losses.
Can I trade futures with $100? ›
Technically, you can trade with a start capital of only $100 if your broker allows.
How do you successfully day trade futures? ›
Here are seven tips for how to proceed.
- Establish a trade plan. The first tip simply can't be emphasized enough: Plan your trades carefully before you establish a position. ...
- Protect your positions. ...
- Narrow your focus, but not too much. ...
- Pace your trading. ...
- Think long—and short. ...
- Learn from margin calls. ...
- Be patient.
As of Sep 10, 2024, the average annual pay for a Futures Trader in the United States is $101,533 a year. Just in case you need a simple salary calculator, that works out to be approximately $48.81 an hour. This is the equivalent of $1,952/week or $8,461/month.
The 3-5-7 rule is a simple approach to managing your trades. Here's how it works: as your trade gains value, you take profits at three different levels—3%, 5%, and 7%. This method helps you lock in profits gradually, instead of waiting and hoping for a bigger win that might never come.
Do futures options have a PDT rule? ›
PDT rules don't apply to futures trading, but futures have their own set of rules; they are regulated by the Commodity Futures Trading Commission (CFTC). Plus, futures contracts use leverage, which means they're traded in margin accounts that require special privileges.
What are the best hours to day trade futures? ›
The opening period (9:30 a.m. to 10:30 a.m. Eastern Time) is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time. A lot of professional day traders stop trading around 11:30 a.m. because that is when volatility and volume tend to taper off.
Can you make a living day trading futures? ›
Trading E-Mini Futures for a Living Is Possible
Being a professional futures trader can be a very rewarding experience, both personally and financially. To learn more about the many opportunities that trading futures offers, schedule your free one-on-one consultation with a member of the StoneX team today.
How to avoid PDT rule? ›
How to Avoid the Pattern Day Trading Rule
- Open a cash account. If a day trader wants to avoid pattern day trader status, they can open cash accounts. ...
- Use multiple brokerage accounts to avoid the PDT Rule. ...
- Have an offshore account. ...
- Trade Forex and Futures to avoid the PDT Rule. ...
- Options trading.
NinjaTrader offers clients competitive $50 intraday margins for Micro E-mini contracts and only $500 for popular futures markets including the E-mini S&P 500.
Is it better to trade stocks or futures? ›
While futures can pose unique risks for investors, there are several benefits to futures over trading straight stocks. These advantages include greater leverage, lower trading costs, and longer trading hours.
Can you trade futures with $100? ›
The short answer is yes. The long answer is that it depends on the strategy you plan to utilize and the broker you want to use. Technically, you can trade with a start capital of only $100 if your broker allows. However, it will never be successful if your strategy is not carefully calculated.
Do futures predict next day? ›
The prices you see in the index futures market do not necessarily indicate where the index or stock will open in the next trading session. Use the Dow futures, S&P futures and Nasdaq futures to get a feel for where the market may be headed, not for exact predictions of pricing.
