Day Trading Futures Margins

Futures Track · Mar 18, 2015

OK, I'll quit obsessing... Thank you.

InfoTech · Mar 18, 2015

Obsessing? Or feigning ignorance for some reason?

Do none of the trading materials you review on your site cover short selling?

www.futurestrack.com

Futures Track · Mar 19, 2015

Well sure, since trading futures can involve either buying or selling the contracts. Either can get you in trouble if the trade goes in the wrong direction.

AAAintheBeltway · Mar 19, 2015

Futures Track said:
AAAIntheBeltway,

My response to: "No offense, but if you don't understand, this you shoudn't be trading futures."

Of course I understand that the broker is going to close your positions before you get anywhere near this possibility, but imagine a hypothetical that the broker screws up, for whatever reason, and your position is not closed properly. Who is responsible then?

I've just indicated in a signed application that "I understand that I may be responsible for more than my total account value." This is obviously completely unlikely but then stranger things have happened.

It's a bit more than a rhetorical question for me. Why would they ask me if I understand that something might happen if it can't happen? Obviously, they think it might happen, or they wouldn't bother to tell me that it could.
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I'm sorry but you misinterpreted what I was saying. My fault, I'll try to be clearer.

If you don't understand that losses on a leveraged futures trade can exceed the value of your account equity and leave you responsible for any deficit, you shouldn't be trading futures.

Some brokers, like IB, have automatic liquidation systems to attempt to protect from this situation. They are not foolproof, and the broker is not liable for any failures to auto-liquidate. The problem is they will often kick in in some sort of market meltdown and sell you out at a terrible price, or they could be triggered by some sort of erroneous spike in prices.

Some brokers offer very low margins, which seem attractive to traders with small accounts. I advise avoiding them because you should never be trading with minimum margin. Plus, those brokers are taking on a lot of risk that could end up hurting their customers if a large number of their customers go bust.

Futures Track · Mar 19, 2015

Hi AAA,

OK, I got ya now. I'm assuming for sure that any broker (IB or other) would liquidate you long before you got to that point in a normal situation. Seems like the broker would try to liquidate you and the clearing firm would try as well. So we're only talking about a situation in which all of that fails. Has that ever happened? 9/11?

Thanks again.

AAAintheBeltway · Mar 19, 2015

It used to happen all the time in the old days. Now with everything computerized, I'd guess it is rare but certainly not out of the realm of possibility. It happened to FX traders who were short Swissie when they abandoned the euro peg.

You have to realize that when something catastrophic happens, the market can drop in an air shaft and even drop so far that circuit breakers halt trading. So even if your broker wants to liquidate you, they might not be able to. They call that limit lock, and markets can go limit lock for days in a row.

ScalperJoe · Mar 19, 2015

Money Trust said:
Which brokers are you guys' using if you are in fact using intraday futures margins? I'm in the process of going to a day trading system and would like a few recommendations from actual users. Of course, I'll do my own due diligence.

Thanks for any assistance.
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Take a look at AMP. $1k per lot for crude, $400 for ES, etc.

http://www.ampfutures.com/trading-info/margins/