Why do the Pros Daytrade Futures? If your answer is “yes” and you are day trade stocks or forex exchange in daytrading this is definitely an article you should take a minute to read. 50,000, that comes out to .
Depending on the stock or currency pair you are trading the bid-ask spread may be much wider. Also, since Forex firms “create” the market and therefore, the bid-ask spread, they can widen it to whatever they see fit. Even when Forex firms advertise a fixed spread, they typically reserve the right to widen when they see fit. All trades are made available to the public on a first come, first served basis and trades must follow the CME Clearing rules, along with the strict CFTC and NFA rules. Traders with different firms can experience different fills even when trades are executed simultaneously.
Even more alarming is that in some cases the Forex brokerage firm you have an account with takes the other side of your trade and is therefore “betting” against you. This low transaction cost allows daytraders to get in and out of the market without commissions significantly cutting into their profits, but of course the more trading you do the more this will impact your bottom line. 5-10 per trade, which can really eat into your potential daytrading profits. This transparency of the market’s orders allows ES traders to see where and how many orders have been placed ahead of them. For short term daytraders this information may be very valuable and may be used as an indication of future market movements. Most Forex platforms do not offer Level II type pricing and for the few that do, since there is no centralized market, it is only the orders that that firm has access to and not the entire market.
This allows you to enter, exit or have orders working to protect your positions almost 24 hours a day, even while you sleep. Even with pre and post market trading, the stock market is open less than 12 hours per day, and the liquidity during these sessions are not always good. While most Forex firms offer electronic trading, some manually approve each order at a trading desk because they are market makers against your orders. US regulated Forex firms are not allowed to offer more than 50:1 leverage on the major currency pairs and 20:1 on the other currencies. This high margin requirement may be very limiting to daytraders who are only looking for small market movements. 500 posted for daytraders is a performance bond and traders do not pay interest on the remaining value of the ES futures contract. No special type of futures trading account is required to be able to take advantage of the daytrade margins.
Forex has a cost of carry associated with its trading which means interest may be charged or paid on positions taken, but in the end this interest is seen as a revenue stream for Forex brokers and works to their advantage. 3,000 and do not have any Pattern Daytrader Rules associated with them. Of course only risk capital should be used no matter what the amount is that you choose to start with. The SEC describes a stock trader who executes 4 or more daytrades in 5 business days, provided the number of daytrades are more than six percent of the customer’s total trading activity for that same five-day period, as a Pattern Daytrader. 25,000 starting capital and cannot fall below this amount. P futures trade about an average of 2 million times a day which allows for great price action, volatility and speedy execution. 100 billion changing hands every trading day.
Not all stocks and Forex markets are as liquid which means movements can be shaky and erratic, making daytrading more difficult. Forex firms like to make the claim that the over the counter foreign exchange market trades more than one trillion Dollars in volume per day, but most people don’t realize is that in most cases you just traded against your broker’s dealing desk rather than the true interbank market. Of course everyone’s tax situation is different and should consult a licensed accountant for their specific situation. P futures your “news risk” is spread out over the entire market.
Should a report or rumor come out on an individual stock it should have very little impact on the whole index you are trading. When you take a position in an individual stock you are susceptible to stock specific risk which can occur without warning and with violent consequences. Even with regulated US Forex firms, funds are not considered segregated, so if a regulated firm goes bankrupt clients funds are not offered the same protections as they are in the futures market. Focus Many ES futures traders only track the ES market and find it is the only chart they need to follow. There are always opportunities and great volume throughout the trading day. When large institutions or traders want to take a position in the market or hedge a portfolio they usually turn to the futures markets to get this done quickly and efficiently. Therefore, why not trade the market the “Big Boys” trade?