Futures Trading
Why I trade futures, and why you might want to too.
I trade index futures, specifically ES (S&P 500), NQ (Nasdaq 100), RTY (Russell 2000), and YM (Dow Jones). This guide explains what futures are, why they're ideal for day traders, and exactly how to get started.
What Are Futures?
A futures contract is an agreement to buy or sell something at a specific price on a future date. For day traders, we don't care about delivery. We trade the price movement and close before expiration.
The Simple Version
Think of ES futures as a way to trade the S&P 500 index directly. When the S&P goes up 10 points, your ES contract gains value. When it drops, you lose. It's that simple.
Why Futures for Day Trading?
- No PDT Rule. Stocks require $25,000 minimum to day trade. Futures have no such restriction. You can start with $2,000-5,000.
- Leverage Available. Control large positions with smaller capital. This is a double-edged sword: great with discipline, dangerous without.
- Nearly 24-Hour Trading. Markets open Sunday evening and trade almost continuously until Friday. React to global news anytime.
- Extreme Liquidity. ES is one of the most liquid instruments in the world. Tight spreads, instant fills, no slippage on normal size.
- Tax Advantages. 60/40 tax treatment in the US: 60% long-term gains, 40% short-term, regardless of hold time.
- Pure Price Action. No earnings surprises, no CEO tweets, no single-stock risk. Just trade the index.
The Index Futures Contracts
These are the main index futures I trade and teach:
My Recommendation for Beginners
Start with MES (Micro E-mini S&P 500). At $1.25 per tick, a 10-point loss costs you $50. You can learn execution and psychology without risking your account.
Once consistently profitable on MES, move to ES. Same contract, 10x the size.
Trading Hours
Best Times to Trade
First 2 hours of RTH (9:30-11:30 AM). Most volume, cleanest moves, best setups. This is when I do 80% of my trading.
Avoid lunch hour (12:00-2:00 PM). Choppy, low volume, lots of false moves.
Margin & Costs
| Contract | Day Margin | Overnight Margin | Commission (RT) |
|---|---|---|---|
| ES | $500 - $1,000 | $12,000+ | $4 - $5 |
| MES | $50 - $100 | $1,200+ | $0.50 - $1 |
| NQ | $1,000 - $2,000 | $17,000+ | $4 - $5 |
| MNQ | $100 - $200 | $1,700+ | $0.50 - $1 |
Margins vary by broker and market conditions. Day margins apply when positions are closed before market close.
Leverage Warning
One ES contract controls ~$300,000 worth of S&P 500. With $500 day margin, you're using 600:1 leverage. This is why risk management is non-negotiable in futures.
How to Get Started
Open a Futures Account
Choose a broker that offers futures. Popular options: NinjaTrader, AMP Futures, Tradovate, Interactive Brokers.
Look for: Low commissions, good platform, reliable execution.
Fund with What You Can Lose
$2,000-5,000 is enough to start with micro contracts. This is learning capital, not investing capital.
Only use money you can afford to lose completely.
Learn Your Platform
Practice placing orders, setting stops, understanding the DOM (Depth of Market). Most brokers offer simulation mode.
Spend at least 1-2 weeks in simulation before risking real money.
Start with 1 Micro Contract
Trade MES or MNQ. One contract only. Focus on execution and risk management, not profits.
If you can't make money with 1 contract, adding more won't help.
Scale Slowly
After 2-3 months of consistent profitability, add a second contract. Then slowly move to ES when ready.
There's no rush. The markets will be here tomorrow.
Futures Trading Mistakes
Trading Full-Size Contracts Too Early
ES moves $50/point. A 20-point move = $1,000. If that scares you, you're too big. Start micro.
Ignoring the Leverage
Futures can move 2-3% in a day. On 100:1 leverage, that's 200-300% on your margin. Size accordingly.
Holding Through Major News
FOMC, jobs reports, CPI can move markets 50+ points in seconds. Know the calendar.
Trading Low-Liquidity Hours
Overnight and lunch sessions have wider spreads and choppier action. Most beginners should stick to RTH.
Ready to learn futures trading with proper guidance?
Book Your Intro Session ($20)Continue learning: Risk Management • Day Trading Guide • Pre-Market Checklist