As far as I can tell, because of the built-in leverage I can make (or lose) money faster trading index futures than individual stocks. In addition to that, 60% of futures profits are taxed at the long term capital gains rate. Is there any reason I shouldn't switch to trading futures as my primary source of income and just use stocks for long-term holding? Am I missing something?
Its all based on preference and performance. There are just as many advantages and disadvantages to trading both. If you can day trade futures consistently and obtain the profit that makes you happy then go with that. Some people get killed in futures, but do good in day trading stocks. The best thing you can do is try it out and if it don't work then go back to what works for you.
No Advantages of Futures: Less commissions Less taxes Easier to enter a short position Extended trading hours Greater leverage Less capital required
It's simple. Backtest your strategy on both and do a comparison. Even better, trade futures with a small size (real money) and do a comparison with your real money stock trading. It's as simple as that. Mark
Index futures have the "benefit" of diversification. You're not at risk of a surprise takeover or bankruptcy announcement destroying a stock position compared to what that stock's weighting is in an index.
One additional benefit you forgot to list: tax reporting. With daytrading stocks, you have to list every trade individually on your tax filing (uggh!). With futures, all you report is your year-end net Profit/Loss - simple!
As the other posters have stated, trading futures have many advantages over stocks. In addition to everything listed here, I really enjoy the fact that I only need to watch 3-4 charts per day of the same thing every day. At first glance that may seem boring, but a good part of trading is knowing your market(s) inside and out and if you watch the same charts, every day, it's amazing at what you will learn.