potential loss on es trading

Discussion in 'Index Futures' started by ktrich, Dec 29, 2008.

  1. ktrich


    I have historically traded stock cash- no margin,some options
    I have been looking into trading es but am wondering about the potential risk likelihood (which may well mean that I should stay away). I would probably limit myself to one contract on a $5k margin. (I have set up a paper trade account and a sim account which I would plan on staying with for several months. )
    If trading with real money I wonder if the potential maximum loss
    varies from brokerage to brokerage.
  2. Handle123


    Most good brokerages will ask you if you want to place a daily stop loss on your account, say if you lose a $1000, no more trades can take place for that day. And many brokerages have trade to trade checking to see if your account has enough min. day trading margin to cover every trade you place.

    Now what many inexperienced traders don't think about are the "what ifs," they open an account on a shoestring say $2,000 and broker giving them $500 margin, extremely chancy for both parties. When 9-11 happened, the exchanges gave a fifteen minute notice they were shutting down, but if you had a crappy brokerage that didn't send out emails or cause of your inexperience of not listening to CNBC and you were Long ES with a two lot and the exchange closed, one week later when exchanges reopened ES had hugely gapped down 86? points, I don't remember exact number, but undercapitalized traders would be in deep and brokers would be worried as well.

    So yes, you can lose much more than you started.
  3. Your maximum loss can exceed your equity but most brokers have electronic fail safe mechanisms to close you out before they are at risk.

    The sad truth is you are highly likely to lose it all (especially in a pipsqueak $5K account) unless you stop trading and withdraw the balance before it evaporates.
  4. DmanX

    DmanX Guest

    Just one thing I'd like to correct.

    The exchanges closed on 9/11 before day traders had a real chance to place trades. Day trade margin come into effect @ 9:30. Most exchanges closed between 9:30 - 9:32Am on 9/11.

    In any event, always trade with real stops.
  5. Why do you think a 5k account is more likely to lose than a 50k account trading 10x the size.

    Oh, you must think a 50k account trading 1 contract is a real account. They will lose or gain at the exact same rate, but don't tell anyone .