Why I Trade Emini Futures And Not Stocks
Today’s blogpost is an answer to one of the many survey questions I received from you all. Why do you not day trade stocks, why futures? It’s a question I am frequently asked. Well, first know that I did trade stocks for quite some time. I started my day trading career by learning how to day trade equities. I traded stocks when the only S&P we had was the pit-traded contract!
About the year 2000 (or back then – Y2K) I switched my focus to the Emini Futures Market(s), primarily the S&P 500 Emini Market. When I was day trading stocks, my heart was always pushing me to the S&P 500. Well, back then the margin to trade was so much more, but the advent of the Emini Markets really cleared that up! The S&P Emini Market began somewhere around 1997-1998. It was not until the year 2000 that I really got in to it.
I certainly have nothing against day trading stocks. Some equities are very liquid and experience large swings which make it fantastic for the day trader, but this was part of the problem. I had to have a “basket” of stocks that I watched AND traded. At the time, most of these, of course, were tech-stocks as those were the high flying days of technology!
So, why do I trade futures markets over equity markets? Well, the main reason is I only need to watch ONE market and as I watch S&P 500 Emini Market everyday, I know it fairly well. The Emini Markets (not just the S&P) have very good volume as well. Compare this to stock day trading where you have to “know” many different stocks and keep an eye on a multitude of charts – just not my cup of tea anymore!
Another good reason: There is no 25 thousand dollar day trading rule in the futures markets! You can begin day trading futures with an account size of only 5 thousand dollars and the margins for emini futures differ from those for stocks. With stocks the margin is 50 % of the position. With futures trading, you can see intraday margin rates as low as $500 per contract! So the extra leverage is more bang for the buck, but be careful with margin. If you stretch the rubber band too thin, it breaks really easily!
Important to note: Although, as mentioned above, many futures brokers will give you $500 margin rates, I personally use a $3500 minimum margin level when day trading futures.
As an “income trader” I do not need a big move to make my daily income goals with the futures markets. A 4 tick profit for the day is a pretty healthy living when trading 10+ contracts. Not a bad deal in my opinion.
Day trading stocks is certainly not a bad thing. I mean, I certainly have no problems with it. If you like watching different stocks and have larger capital, go for it! It is a matter of preference and available capital. If you are like me and like the idea of simply watching one market, a very liquid market, then day trading the emini markets may be just the way to go. I love day trading futures and honestly do not think I would ever day trade stocks again. The futures market gives me all I need!
Hope this answers the question! Shoot me an email if you have any more regarding this topic.
Cheers!
