The Minimum Capital Needed For Trading Futures

Because you typically only require a lower amount of capital to start trading futures as compared to stocks, it is an attractive option for day traders. However, while futures can bring about above-average returns, you have to be prepared to take on an above-average level of risk as well. In this article, we share with you more about the minimum capital for trading futures.

Is There a Legal Minimum?

There’s no legal minimum required for trading futures, however, your broker may have a minimum sum they require of you before they will assist you in trading. One thing to keep in mind is that you do not need to have the full volume of your trade as your account balance. Instead, you will be required to leave a marginal sum in it, and the remaining sum will be classified as leverage. This leverage refers to money “borrowed” from the broker.

With leverage, most traders hope to profit from the transaction before they have to return the money to the broker, leaving them with a net profit overall. As futures move in ticks, in order to calculate the minimum sum you should have in your account will require taking a closer look at your futures contract and the exchange you are trading in.

How Much Must Be Left in My Account?

You already know that the margin refers to a percentage of the full value of the transaction. Although federal regulations set this value at 50%, your broker may require you to have a higher percentage of funds in your account. You may also be asked to top up this amount if the futures price starts moving in the opposite direction of your trade. As a general rule, you should ensure that you have enough in your account to cover any fluctuations and day trading margins your trade may experience.

Managing Risk

Before you put any money into your account, you need to take risk management into consideration. On a fundamental level, this means knowing how much you can afford to lose. As a day trader, you should not risk more than 1% of your account’s value in any single trade.

Turn to Bold Analysis, LLC, with Confidence for Futures Trading Resources

As you embark on your futures trading journey, you may be looking for support and resources from traders who have been there and done that. When that’s the case, Bold Analysis, LLC, is the right place to start your search. We are able to offer a wide range of services that include 1-on-1 coaching, digital mentorship, and an alert room where you can get access to notifications throughout the day. You will also benefit from 24/7 admin support and a members’ chat room. For more information about our products and services or if you have any questions, please do not hesitate to contact us and a member of staff will reach out to you.