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Newbie to Futures: Margin relative to account size
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Newbie to Futures: Margin relative to account size

  #1 (permalink)
Sienna
Melbourne, Australia
 
Futures Experience: Beginner
Platform: Ninja Trader
Broker/Data: Ninjatrader Brokerage
Favorite Futures: Transiting to ES,CL, YM
 
Posts: 41 since May 2012
Thanks: 22 given, 9 received

Newbie to Futures: Margin relative to account size

Hi All

Been trading Spot FX, but I am new to Futures, hence this super basic question on margins relative to account size. Thanks to anyone with the patience to give feedback at such basic level.

Lets say I have 15k (Example only) and want to trade ES. How do I calculate the margin relative to 15k? I should add that I am not wanting to see how little I need to have in my account. Rather, I need to know the risk dependant on predefined stops etc and then add a 'mature' buffer to avoid stress and account blow out.

I will NOT hold trades overnight. ES on Ninjatrader is Initial Margin 5060/ Maintenance margin 4600/ Intraday margin 500,- Bearing in mind that I will provide an extra buffer of a few thousand, is my calculation correct?

If I buy TWO contracts of ES should I should allow for:
1) Minimum funding of (Initial Margin) 5060 x 2 = 10120,- (??)
2) Minimum funding of 500,- x 2 = 1000,-
3) Total funds needed: 11120,- PLUS buffer of a few thousand depending on where I place my stops.

Correct? I will be incur a margin call if my account falls to maintenance 4600 x 2 = 9600,- (??).

Now if I was to hold positions overnight. How would the above change.

Thanks a bunch
Sienna

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  #2 (permalink)
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  #3 (permalink)
Market Wizard
Boca Raton
 
Futures Experience: Advanced
Platform: Variety
Broker/Data: Optimus Futures, LLC
Favorite Futures: Futures
 
mattz's Avatar
 
Posts: 2,059 since Sep 2010
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sienna View Post
Hi All

Been trading Spot FX, but I am new to Futures, hence this super basic question on margins relative to account size. Thanks to anyone with the patience to give feedback at such basic level.

Lets say I have 15k (Example only) and want to trade ES. How do I calculate the margin relative to 15k? I should add that I am not wanting to see how little I need to have in my account. Rather, I need to know the risk dependant on predefined stops etc and then add a 'mature' buffer to avoid stress and account blow out.

I will NOT hold trades overnight. ES on Ninjatrader is Initial Margin 5060/ Maintenance margin 4600/ Intraday margin 500,- Bearing in mind that I will provide an extra buffer of a few thousand, is my calculation correct?

If I buy TWO contracts of ES should I should allow for:
1) Minimum funding of (Initial Margin) 5060 x 2 = 10120,- (??)
2) Minimum funding of 500,- x 2 = 1000,-
3) Total funds needed: 11120,- PLUS buffer of a few thousand depending on where I place my stops.

Correct? I will be incur a margin call if my account falls to maintenance 4600 x 2 = 9600,- (??).

Now if I was to hold positions overnight. How would the above change.

Thanks a bunch
Sienna

If you do not have the intention of holding positions over night, then you should not worry about the overnight margins.
This is the initial margin. They only apply to those who hold over night.

In your case, concern yourself with the number of contracts you trade per intraday margins, and the risk management that is associated with that. Margin calls occur only if you do not have sufficient capital to hold over night. You need to find out what your broker considers day trading hours. For example, some of our FCMs consider day trading margin end at 3:55 EST and some let you keep until 5.00 PM EST.

I hope this helps.

Thanks,
Matt
Optimus Futures

There is a risk of loss in futures trading. Past performance is not indicative of future results.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #4 (permalink)
Sienna
Melbourne, Australia
 
Futures Experience: Beginner
Platform: Ninja Trader
Broker/Data: Ninjatrader Brokerage
Favorite Futures: Transiting to ES,CL, YM
 
Posts: 41 since May 2012
Thanks: 22 given, 9 received


mattz View Post
If you do not have the intention of holding positions over night, then you should not worry about the overnight margins.
This is the initial margin. They only apply to those who hold over night.

In your case, concern yourself with the number of contracts you trade per intraday margins, and the risk management that is associated with that. Margin calls occur only if you do not have sufficient capital to hold over night. You need to find out what your broker considers day trading hours. For example, some of our FCMs consider day trading margin end at 3:55 EST and some let you keep until 5.00 PM EST.

I hope this helps.

Thanks,
Matt
Optimus Futures

There is a risk of loss in futures trading. Past performance is not indicative of future results.


Thanks Matt,

But would you simplify it further for me? Just confused on a basic point.

If I buy TWO contracts of ES and do not hold overnight, which is a correct assumption on costs, A or B?
I a fully aware of the need to factor in additional funds in case of being stopped out, a few times in a row, based on pre-determined stops and associated % loss to overall account.

So, which is a correct assumption on costs, A or B?
A) I should allow for:
1) Minimum funding of (Initial Margin) 5060 x 2 = 10120,- (??)
2) Minimum funding of 500,- x 2 (as I'm using 2 contracts) = 1000,-
3) Total funds needed: 11120,- PLUS buffer of a few thousand depending on where I place my stops.

B) I should allow for:
1) Minimum funding of (Initial Margin) 5060 ?
2) Plus Minimum funding of 500,- x 2 contracts of ES= 1000,-
3) Total funds needed: 6060,- PLUS buffer of a few thousand depending on where I place my stops.

Thanks for your patience
Sienna

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  #5 (permalink)
Elite Member
Denver Colorado USA
 
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: forex
 
fibtrader1618's Avatar
 
Posts: 3 since Aug 2010
Thanks: 72 given, 1 received


sienna View Post
Thanks Matt,

But would you simplify it further for me? Just confused on a basic point.

If I buy TWO contracts of ES and do not hold overnight, which is a correct assumption on costs, A or B?
I a fully aware of the need to factor in additional funds in case of being stopped out, a few times in a row, based on pre-determined stops and associated % loss to overall account.

So, which is a correct assumption on costs, A or B?
A) I should allow for:
1) Minimum funding of (Initial Margin) 5060 x 2 = 10120,- (??)
2) Minimum funding of 500,- x 2 (as I'm using 2 contracts) = 1000,-
3) Total funds needed: 11120,- PLUS buffer of a few thousand depending on where I place my stops.

B) I should allow for:
1) Minimum funding of (Initial Margin) 5060 ?
2) Plus Minimum funding of 500,- x 2 contracts of ES= 1000,-
3) Total funds needed: 6060,- PLUS buffer of a few thousand depending on where I place my stops.

Thanks for your patience
Sienna

It's one or the other, not both added together. If you are day trading 2 ES contracts, minimum margin is $1,000. Generally not considered a good idea. Rough rule of thumb is risk 2%, so if your average stop loss is $100 than you would need $5,000 per contract. "Trade Your Way to Financial Freedom" by Van K. Tharp (ignore the funky title) is a good start to risk control through position size. Best of luck - Lou

PS: check out the CME web site for info trading the ES contract.

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  #6 (permalink)
Market Wizard
Boca Raton
 
Futures Experience: Advanced
Platform: Variety
Broker/Data: Optimus Futures, LLC
Favorite Futures: Futures
 
mattz's Avatar
 
Posts: 2,059 since Sep 2010
Thanks: 1,933 given, 2,786 received
Forum Reputation: Legendary

@sienna
You should separate the idea of margins and the risk you are taking on trades.
They are not related. If you use $500 as a day trading margin, it does mean you should use that as a deposit.
Day trading margins are a broker invention, while the risk management and the risk you take is your own.
Your initial deposit should reflected the risk you take, while counting that you may be stopped out a number of times.
Matt
Optimus Futures

There is a risk of loss in futures trading. Past performance is not indicative of future results.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #7 (permalink)
Sienna
Melbourne, Australia
 
Futures Experience: Beginner
Platform: Ninja Trader
Broker/Data: Ninjatrader Brokerage
Favorite Futures: Transiting to ES,CL, YM
 
Posts: 41 since May 2012
Thanks: 22 given, 9 received

Thanks everyone (Fibtrader and Mattz); appreciate it. I think the best way is to open a demo acc and get a feel for the instrument.
Cheers

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  #8 (permalink)
Membership Temporarily Revoked
Pahang Malaysia
 
Futures Experience: Intermediate
Platform: None
Favorite Futures: ES
 
Posts: 33 since Jul 2015
Thanks: 6 given, 12 received

Why are you switching/expanding from fx to futures?

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  #9 (permalink)
Elite Member
Wiltshire, United Kingdom
 
Futures Experience: Beginner
Platform: daytradr
Broker/Data: Working on a TST combine
Favorite Futures: ES
 
matthew28's Avatar
 
Posts: 382 since Sep 2013
Thanks: 363 given, 444 received

Hi Sienna,
Also remember how much an ES contract is worth. The ES is currently at a value of about 2,000, with a big point value of $50 ($12.50 per tick). Therefore one contract of the ES is worth about $100,000. The same as a full size 100K forex contract ($10 per pip), or ten mini 10K contracts ($1 per pip), or 100 micro 1K contracts ($0.10 per pip). Think about how many contracts, or the value, you traded in your forex account. Sometimes people forget how large a futures contract is and trade far too much size. Apologies if stating the obvious.

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  #10 (permalink)
Elite Member
Chicago, IL
 
Futures Experience: None
Platform: NT8,NT7,TWS,FOREX.COM app
Broker/Data: InteractiveBrokers, NinjaTrader Brokerage FOREX.COM, IQFeed
Favorite Futures: The one I'm creating in the present....ES, ZF, ZN, ZB, FX pairs
 
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sienna View Post
Thanks Matt,



But would you simplify it further for me? Just confused on a basic point.



If I buy TWO contracts of ES and do not hold overnight, which is a correct assumption on costs, A or B?

I a fully aware of the need to factor in additional funds in case of being stopped out, a few times in a row, based on pre-determined stops and associated % loss to overall account.



So, which is a correct assumption on costs, A or B?

A) I should allow for:

1) Minimum funding of (Initial Margin) 5060 x 2 = 10120,- (??)

2) Minimum funding of 500,- x 2 (as I'm using 2 contracts) = 1000,-

3) Total funds needed: 11120,- PLUS buffer of a few thousand depending on where I place my stops.



B) I should allow for:

1) Minimum funding of (Initial Margin) 5060 ?

2) Plus Minimum funding of 500,- x 2 contracts of ES= 1000,-

3) Total funds needed: 6060,- PLUS buffer of a few thousand depending on where I place my stops.



Thanks for your patience

Sienna


Here is what I have done in the past to find out how many contracts my broker(IB) will let me trade. During the time frame you want to be trading, for example RTH, as "normal price action" is happening and in your live acct place a buy limit far below the current price or a sell limit far above the current price. On ES for example 30 points away. And see what your broker will let you get away with. Increasing the contract size one at a time until your order is rejected by your broker. End of story. Now you know. Now you just worry about RISK and position sizing. Which is the name of this business.
What percent of you acct will you being risking per trade? How will you manage a losing streak as far as position sizing? How will you manage a winning streak as far as position sizing? How will you manage risk during a losing streak? How will you manage risk during a winning streak? Will you slightly increase position sizing during a winning streak? Will you slightly decrease position sizing during a losing streak? etc etc

Ron


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