Guide Trading Futures For Dummies

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Futures Basics

Trading in options and futures is risky business, and regulations governing those trades are stringent, even with regard to allowing you to open an account. Before opening an account for you, a broker must provide you with a disclosure document that describes the risks involved in trading futures and options contracts. The document gives you the opportunity to determine whether you have the experience and financial resources necessary to engage in option trading and whether option trading is appropriate for meeting your goals and objectives.

Futures Market Explained

Topics that must be covered in the disclosure statement include the risks inherent in trading futures contracts or options and the effect that leveraging your account can have on potential losses or gains. The statement also must include warnings about trading futures in foreign markets because those types of trades carry additional risks from fluctuations in currency exchange rates and differences in regulatory protection.

Commodities options and futures also can be risky because many of the factors that affect their prices are totally unpredictable, such as the weather, labor strikes, inflation, foreign exchange rates, and governmental policies.

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Because positions in futures and options are so highly leveraged, even a small price movement against your position can result in at least the loss of your entire premium payment and possibly even much greater liability for additional losses. Any accruals on futures contracts are paid out daily.

Trading Futures For Dummies - Joe Duarte - Google книги

Day trading margins can vary by broker. If a trader seeks to trade other markets, they will need to check the required day trading margin for that contract and adjust their capital accordingly. While broker's day trading margins vary, NinjaTrader Brokerage provides a list of their current day trading margins.

The Bare Necessities

Margin requirements are subject to change. Just multiply the risk of trading one contract with your strategy by how many contracts you would like to trade.

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Doing so still keeps risk controlled and reduces the amount of capital required. By allowing risk to equal two percent of the account instead of one percent, the recommended day trading account minimum is reduced by half. Check with potential brokers for such limits. Then those figures can be cut in half.

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The tick value and day trading margin for other futures contracts will also affect the amount of capital you need. If trading a different contract, see what the day trading margin is, then determine what your stop loss will need to be to effectively day trade the contract. Then work through the steps above to determine the capital required to start day trading that futures contract. The Balance does not provide tax, investment, or financial services and advice. Past performance is not indicative of future results.