Futures Trading and Initial Capital

Discussion in 'Commodity Futures' started by shazam75, May 30, 2011.

  1. shazam75


    Hi All

    I am thinking of trading the futures maket and was wondering what type of initial capital would be required in ones account? For example, if I wanted to trade Cotton and Cocoa, would $40,000 to start with be OK? I only want to trade 1 contact each.

  2. the1


    I would suggest picking a broker with low margin requirements. I trade with Global Futures. I find their customer service to be excellent. Margin Req's for Cocoa is $950 day, $2520 overnight. Cotton is $1050 day, $2100 overnight. If you're holding overnight I would suggest using no more than 10-20% of account size. Intra-day could be a little more. If you have 40k and holding overnight you'd be looking at $2100 and $2520, which puts you at 11.55% so you'd be good.
  3. bone

    bone ET Sponsor

    Generally speaking, overnight margin requirements are set by the exchange and not the broker. Some brokers will offer greater buying power for day traders who offset and close their positions on an intraday basis, but they will invariably get their 'haircut' fluffed up for the courtesy.

    The other consideration is to make sure that your clearing firm is an exhange member and not an introducing broker with a 'give-up' agreement to an FCM.

    IMO, the bigger consideration is to have a system that is consistent - if your trading system is a crapshoot, then starting off with marginal capitalization will make your experience short-lived.
  4. shazam75


    OK thanks! I should have mentioned I am with IB.
  5. I highly recommend not holding futures overnight as a newbie to futures, it is highly leveraged and volatile compared to shares of major listed companies.
  6. especially commodity scalping
  7. bone

    bone ET Sponsor

    Most correctly hedged futures spreads with exchange SPAN intra and intercommodity performance bond margin credits offer the lowest vol and least capitalization cost of any futures trading strategy. In fact, I could point to about 100 futures spreads combinations that have less risk than many flat price outright directional stock prices on a currency-equalized basis. And SPAN margin credit offsets for futures spreads are typically between 65-95% of the flat price futures performance bond margin requirement.
  8. bone i don't know how you have less than 2k posts- i feel like i always see posts of your pointing out reasonable (and yet seemingly unknown to newbies) information and you've been around for almost 10 years.

    i will invite you all to my playground- come trade treasury futures it's so "easy"!
  9. bone

    bone ET Sponsor

    I spread trade interest rates all the time. Love 'em.
  10. Too vague of a question. What is your risk percent? Will you set a stop-loss? What kind of a drawdown do you expect?

    40K may not be nearly enough depending on what you will be doing.

    I'm trying to locate a paper for you that gives details. I know of a book but it is out of print.
    #10     Jun 6, 2011