Futures Market Blog

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Should I Day Trade Futures?

These days, it’s common for someone to tell you that trading futures is one of the most lucrative financial investment instruments. The idea that futures trading became popular and is not as complicated as it was in the past is why many are attracted to it. There are thousands and thousands of stocks out there, which can easily scare away the vast majority. In the futures markets, a speculator has only a few stock indices to choose to day trade from. The most popular contract to trade is the Emini S&P futures contract.  There is tremendous flexibility in trading it because of the factors that I would specified below.

Technicality

There are many platforms out there to make day trading as simple as possible. Each platform offers different functions and unique capabilities to make the process run as smoothly. They are also all feature rich, and include trailing stops, depth of markets, trading from the chart capabilities, etc.

Ability to Buy or Sell (Long or Short)

When dealing with futures trading, you have the ability to either long or short the market. Regardless of the actual market price, the opportunity to trade in both direction always requires the same margin.  And there are no shorting restrictions either.

Small Commission Charges

Compared to other investments, the commission charges for futures trading are relatively small, and paid only half in and half when the position closed. The commission charges may vary, depending on the service level of the broker. Commissions involving online brokers may be as low as $3.

High Leverage / Small Margin

The fact that futures contracts are highly leveraged financial instruments means that an investor can go into the market with a relatively small investment - called margin - and potentially come out reaping large profits. The concept of investors having to pay the ‘margin’ is comparable to a security bond, whereby should the trader make a loss on his trade, he may lose some, all, or even more than what he put up. However if his market predictions turn out to be correct, he gets back his margin and whatever profit he might have made, the profit usually being ten-fold on a 10% margin. In comparison to other investments, futures trading offers an excellent return, and this is why it is one of the best advantages of futures trading.