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And AMP, while they do agree with CME with the Maintenance Margin definition, they have no mention of the Initial Margin here
However, on NinjaTrader we can see that the initial margin for MNQ is US$1760, here.
So I wonder, how come NinjaTrader and other brokers like Optimus can open accounts with minimum funding as low as $400 or $500? Tradovate says they don't even have minimum funding!
Does this mean that after the first day I will get a margin call to get the account up to the initial margin of $1760? Even if I don't have any open position after 15:45?
Or would i get a margin call if my funding falls bellow the minimum $400/$500?
Thank you.
Can you help answer these questions from other members on NexusFi?
The various types of margin apply when you have an open position.
During the regular trading day (as defined by your broker) the "day trading" (aka intraday) margin will apply. If you have an open position and your balance doesn't drop below the total day trading margin required before closing the positions you'll be fine.
However, outside of the "day trading" hours, the margin set by the exchange will apply. This us often much higher than the day trading hours. If you carry a position outside of the day trading hours, you'll have to meet the higher requirements.
Most day traders or scalpers will only have open positions during the day, so they'll never have to meet the higher requirements.
The brokers can set the intraday margins. Some brokers encourage day trading and will have much lower day trading margins. Others will give you a smaller break (say 50% off maintenance margin).
Separately, a broker may have a minimum account balance that would apply even if you don't have any positions open. Often the brokers that encourage day trading with very low day trading margins won't have a minimum account balance.
Thank you for the clarification, but why does CME says that the initial margin is the minimum required to "initiate" a position? Should it be just clarified to say "initiate a position outside of trading hours"?
Good question! There are some folks here who know the mechanics between the broker and exchange very well; maybe someone will explain. All I know is that the day trade margins apply if you confine your trading to those magical hours.
Positions opened and closed before the exchange-defined close of trading for the day are not subject to CME margin rules at all. Brokers can set margins wherever they like. Many set margins at around $500 or even $400 for contracts like the ES. What matters is when the exchange sets the close and open of the trading day.
Trading in ES is halted, for example, at 1600 (4:00 PM) Chicago time (US Central Time). ES opens for a "new" day, after 1700 (5:00 PM) Chicago time, Sunday through Thursday (it is open from Thursday at 5:00 PM and all day Friday but does not reopen Friday evening.) The "regular trading hours" are not part of the equation, by the way -- they are simply the old pit hours, when there were manual trading pits, before electronic trading that went on at night. (In fact, the ES pit hours also began at the same time as the NYSE hours in New York, and ended 15 minutes after the NY close. So these hours are still relevant to trading because they have the highest volume. But they are not how the CME defines a trading day today.)
This is odd-sounding in terms of the calendar, because Monday's trade date begins Sunday night at 17:00 CT, for instance, and each "day's" trading actually starts at 17:00 CT on the afternoon of the previous day, paying no attention to the usual change of date at midnight. But this is how they do it.
Positions held after the exchange-defined close are subject to CME margin rules. So, if your broker requires, say $500 margin for day trades, then you will need to either be out of your position before the close, or you will need to have margin sufficient to meet the CME requirements. Brokers will generally require you to do one or the other at times that are before the deadline, which is also up to them. If you are going to hold "overnight," (which is kind of funny terminology today with around-the clock hours), that is, if you open before the close and are still open past the close, you are in CME territory. Otherwise, you are in unregulated broker-land. If you are in CME territory, then your initial margin requirement to have the position is the exchange-determined initial margin; subsequently, you will need CME maintenance margin. If you are only day trading and get out when the broker requires, you never need any CME-mandated margin, just what the broker sets.
You can look up the CME hours at its website, and you can find the brokers' rules at theirs.
(Please note: brokers do not have your best interests in mind, and using such low margin for day trades can be suicidal for the trader. But brokers get more small traders to sign up that way. The supply of new day traders willing to take such risks is apparently inexhaustible, so brokers don't mind that many of these accounts will be blown up from not having enough cushion to take losses. There are more where they came from, basically.)
But this is how the margin situation works out. Not actually confusing when you unwind it.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
Apologies. I didn't realize that "regular trading hours" was strictly defined with a universally accepted definition to mean "old pit hours." I've seen it used a bit more loosely so I didn't know.
I was trying to convey the idea of "day trading hours" as defined by a specific broker, which as far as I can tell, is not the same thing as "other than CME hours" because each broker seems to have a slightly different definition that doesn't align perfectly with the CME boundaries.
You're right about the brokers, since there's no actual requirement, other than that the trader has to be either out entirely, or to have CME margin, at the CME close. So they can have their different rules, which are up to them.
It is actually made more confusing than it needs to be because of the brokers' differences. So it's important to know what your broker is going to require.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I think $500 can be much better for the micros, because it translates to the equivalent of $5,000 for the e-minis. In general, it would probably be a good idea to have more, especially if a trader is starting out and isn't sure what level of risk they can work with and be profitable.
But it is in a more realistic ballpark at least. The thing is, if you've not traded futures live (meaning, with actual money), you will have no idea in the world how you will react to the sudden changes in profit and loss with a highly leveraged position. The best idea is to do whatever you can to insulate yourself from these swings, including strong loss control and having sufficient margin.
It's going to be an individual thing -- but being undercapitalized is a dangerous thing. So be guided by that.
(Also, NQ/MNQ is a very fast-moving, quick-changing beast. Be guided by the inherent risk in the instrument you are trading also.)
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
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Nobody cares about your account, as far as a margin call, if you don't have a position on.
Brokers like you mentioned open accounts with such ridiculously small funding requirements to suck in folks with a wanting for knowledge of this business.
This business is about getting the probabilities in your favor. Getting an edge. The more the better.