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How Risky is it to Trade Futures?
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How Risky is it to Trade Futures?

  #1 (permalink)
Trading Apprentice
San Francisco California
 
Futures Experience: Intermediate
Platform: MT4
Favorite Futures: Forex
 
Posts: 13 since Aug 2014
Thanks: 0 given, 1 received

How Risky is it to Trade Futures?

I am new to Futures trading although I have been trading Forex on and off for about 5 years.

I am interested in trading the Emini S & P 500.

During the application process at the end I had to read and sign multiple agreements.

What stood out the most to me is all the info in the agreements they emphasized over and over that when trading Futures there is no guarantee your positions or stop losses or profit levels will be filled where you want them, and that you can end up losing more money then you have in your account which you will have to pay back to the brokerage etc., etc., etc.....

Can trading only 1 contract of the Emini S & P 500 on a 15k or 25k account still have risks involved of blowing the account from crazy market activity, and needing to pay back the broker?

Or is it one thing to trade 1 or 2 ES contracts max in $15k - $25K account, but another thing to try to trade perhaps 10 ES contracts in a 25K account when the required day margin is very low. I can see how the latter might blow the account, but not the former...unless I am missing something

I also read this online pertaining to the same subject:

"With $500 margins covering $60,000+ contracts like ES, if something crazy happens and the broker fails to liquidate before the account goes under balance, the FCM wants to be able to get their money back, either freely or by suing the customer. If the customer has no assets or income then it becomes a problem. ......Futures traders get into deficit too often in spite of account policing efforts. The firm has to initially make your losses good with the other side, then try to collect from you. Likely they feel it's not in their best interest to deal with someone whom they perceive as "pockets are not deep enough".

Now in the above quote are they implying someone opening perhaps multiple contracts during the day time when the contracts are cheap, but perhaps they maxed out and could not close the trades before night maintenance came....and then ran out of margin, but the trades kept running, then they wake up with a huge bill to pay the broker?

I hope this all make sense....just trying to figure out if Futures is safe to trade on not.

Any advice will be great if you have time.


Last edited by hifromeddie; August 25th, 2015 at 02:29 AM.
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  #2 (permalink)
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  #3 (permalink)
Elite Member
hollywood
 
Futures Experience: Intermediate
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lsubeano's Avatar
 
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anything can be risky and anything can happen...

it doesn't take a genius to understand that risking .5% is less 'risky' than risking 10% or 20%...

giving your money to a broker is a risk (mf global)

at least having multiple accounts reduces your risk of 'one bad egg'

trading without knowing what you're doing is risky

trading right before a major economic report is risky

over 90% of traders blow up their account and many are still unprofitable

trading is risky and foolish trading is very risky!

trading is not safe! if you want safety, you're looking for the wrong thing.

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  #4 (permalink)
Energy futures Superfreak
charlotte nc
 
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hifromeddie View Post
Or is it one thing to trade 1 or 2 ES contracts max in $15k - $25K account, but another thing to try to trade perhaps 10 ES contracts in a 25K account when the required day margin is very low. I can see how the latter might blow the account, but not the former...unless I am missing something

If you don't take positions over the weekend, there is 99.999% chance you will be exit a 1 car ES position for no more than 200-500$ of haircut, regardless of what crazy thing may happen. ES is the most liquid futures market in the world. even when we dipped 120$ yesterday, there were traders on both sides all the way down. The ones that smack you in the face are the gap open by 100$ moves over the weekend.

if you have 25k of speculative capital in a 200k portfolio, thats very different than i have 25k that i finally saved up and i want to make EZ$$$$$. futures scalping/trading is difficult and most people are net losers at it for a long time. id much rather see you trading 100-200 shares of SPY for .50-1.50 with nice big stops than using 2$ stops on /es. you will make a lot more money.

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  #5 (permalink)
Elite Member
Chicago, IL USA
 
Futures Experience: Intermediate
Platform: MultiCharts + CTS T4
Broker/Data: Advantage Futures, IQFeed.net
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furytrader's Avatar
 
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Trading 1 e-mini contract with $15K shouldn't be too bad as long as you are disciplined to always have protective stops in the market when you have an open position, even if that stop is very far away (what I like to call an "oh sh*t" stop).

The biggest risk from the market is "something unexpected" happening that throws the market into turmoil at the least convenient time for you: terrorists blow up a building, the Fed makes an unscheduled move, a coup brings chaos to the middle east, etc. You have to have stops in place ALL THE TIME you have an open position.

As someone above mentioned, the risks for opening gaps are greatest in the weekend, so if you close out your positions before Friday's close, you will have mitigated some of that risk.

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  #6 (permalink)
Trading Apprentice
Jakarta, Indonesia
 
Futures Experience: Beginner
Platform: SierraChart
Broker/Data: IB
Favorite Futures: ES
 
BataviaTrader's Avatar
 
Posts: 23 since Feb 2012
Thanks: 6 given, 8 received

Never take more than 2% risk per trade of your capital. So say you have 15k to trade, with 1 contract you shouldnt be over 300 US. or 6 ES points.

And trade with money you don't bother losing all. Because you would not be the 1st one. See it as a tuition fee (at least if you learned from your mistake). DO not put your life saving on the line at any time.



hifromeddie View Post
I am new to Futures trading although I have been trading Forex on and off for about 5 years.

I am interested in trading the Emini S & P 500.

During the application process at the end I had to read and sign multiple agreements.

What stood out the most to me is all the info in the agreements they emphasized over and over that when trading Futures there is no guarantee your positions or stop losses or profit levels will be filled where you want them, and that you can end up losing more money then you have in your account which you will have to pay back to the brokerage etc., etc., etc.....

Can trading only 1 contract of the Emini S & P 500 on a 15k or 25k account still have risks involved of blowing the account from crazy market activity, and needing to pay back the broker?

Or is it one thing to trade 1 or 2 ES contracts max in $15k - $25K account, but another thing to try to trade perhaps 10 ES contracts in a 25K account when the required day margin is very low. I can see how the latter might blow the account, but not the former...unless I am missing something

I also read this online pertaining to the same subject:

"With $500 margins covering $60,000+ contracts like ES, if something crazy happens and the broker fails to liquidate before the account goes under balance, the FCM wants to be able to get their money back, either freely or by suing the customer. If the customer has no assets or income then it becomes a problem. ......Futures traders get into deficit too often in spite of account policing efforts. The firm has to initially make your losses good with the other side, then try to collect from you. Likely they feel it's not in their best interest to deal with someone whom they perceive as "pockets are not deep enough".

Now in the above quote are they implying someone opening perhaps multiple contracts during the day time when the contracts are cheap, but perhaps they maxed out and could not close the trades before night maintenance came....and then ran out of margin, but the trades kept running, then they wake up with a huge bill to pay the broker?

I hope this all make sense....just trying to figure out if Futures is safe to trade on not.

Any advice will be great if you have time.


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  #7 (permalink)
Trading Apprentice
Ashburn, VA United States
 
Futures Experience: Intermediate
Platform: Tradestation
Favorite Futures: ES
 
Posts: 20 since Jul 2015
Thanks: 4 given, 6 received


hifromeddie View Post
I am new to Futures trading although I have been trading Forex on and off for about 5 years.

I am interested in trading the Emini S & P 500.

During the application process at the end I had to read and sign multiple agreements.

What stood out the most to me is all the info in the agreements they emphasized over and over that when trading Futures there is no guarantee your positions or stop losses or profit levels will be filled where you want them, and that you can end up losing more money then you have in your account which you will have to pay back to the brokerage etc., etc., etc.....

Can trading only 1 contract of the Emini S & P 500 on a 15k or 25k account still have risks involved of blowing the account from crazy market activity, and needing to pay back the broker?

Or is it one thing to trade 1 or 2 ES contracts max in $15k - $25K account, but another thing to try to trade perhaps 10 ES contracts in a 25K account when the required day margin is very low. I can see how the latter might blow the account, but not the former...unless I am missing something

I also read this online pertaining to the same subject:

"With $500 margins covering $60,000+ contracts like ES, if something crazy happens and the broker fails to liquidate before the account goes under balance, the FCM wants to be able to get their money back, either freely or by suing the customer. If the customer has no assets or income then it becomes a problem. ......Futures traders get into deficit too often in spite of account policing efforts. The firm has to initially make your losses good with the other side, then try to collect from you. Likely they feel it's not in their best interest to deal with someone whom they perceive as "pockets are not deep enough".

Now in the above quote are they implying someone opening perhaps multiple contracts during the day time when the contracts are cheap, but perhaps they maxed out and could not close the trades before night maintenance came....and then ran out of margin, but the trades kept running, then they wake up with a huge bill to pay the broker?

I hope this all make sense....just trying to figure out if Futures is safe to trade on not.

Any advice will be great if you have time.


I'm not sure if futures trading in general can be categorized as "safe." Risk is something that can be managed, not controlled or eliminated. A black swan is bound to happen when you least expect it. If you're concerned about the risk makes me think you might trade scared which is the kiss of death. Trade with money you can afford to lose, and assume you will lose all your initial investment. If you can't live with that assumption, then don't trade. Find a CD or money market account to put your capitol in instead... My 2 cents...

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  #8 (permalink)
Trading Apprentice
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Futures Experience: Intermediate
Platform: MT4
Favorite Futures: Forex
 
Posts: 13 since Aug 2014
Thanks: 0 given, 1 received

Thank you for sharing all this info.

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  #9 (permalink)
Trading Apprentice
Rome
 
Futures Experience: None
Platform: NinjaTrader
 
Posts: 10 since Feb 2010
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furytrader View Post
Trading 1 e-mini contract with $15K shouldn't be too bad as long as you are disciplined to always have protective stops in the market when you have an open position, even if that stop is very far away (what I like to call an "oh sh*t" stop).

The biggest risk from the market is "something unexpected" happening

Unfortunatelly the black swan events rate seems have been increased lately, i'm afraid that 15K would not be enough anymore

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  #10 (permalink)
Elite Member
Chicago, IL USA
 
Futures Experience: Intermediate
Platform: MultiCharts + CTS T4
Broker/Data: Advantage Futures, IQFeed.net
Favorite Futures: YM, ES, EU, US, S
 
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Posts: 153 since Jun 2011
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In Michael Harris' new book "Fooled By Technical Analysis", he actually runs a simulation whereby the minimum amount for an e-Mini S&P account comes in more like $30,000, based upon random entries and exits.

You learn something new everyday.

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