Day Trade Futures

What is Day Trading?

Day trading is the process of buying and selling a futures contract(s) within the same day. No open positions are held overnight. Day trades can last for a couple minutes or sometimes they are held for most of the trading session. I typically do not recommend day trading for new futures traders since it takes a lot of knowledge, experience and discipline to day trade futures successfully.

Advantages of Day Trading Futures

Theoretically, no positions are to be held overnight when day trading futures. This should allow the futures trader to sleep well at night knowing he has no open positions to worry about. Very often futures will open at a much different price than they closed the previous day. This means that you could have some very unexpected big losses while holding positions overnight if something crazy happens around the world.

I have to admit that you can learn a great deal about the futures markets in a short period of time from day trading. Day traders normally make a couple trades every day; compare that to position traders who might make one trade a week. In essence you are rapidly accelerating your trading experience and knowledge by day trading futures contracts.

Disadvantages of Day Trading Futures

You must be a very disciplined individual to be successful at day trading futures. The temptation to take marginal trades and to overtrade is tremendous.

Commissions can add up very quickly with day trading. I have seen many day traders who were about even at the end of the year, which is respectable. However, when they add their commission paid throughout the year, they are absolutely shocked. For example, someone with a $20,000 account who day trades one e-mini S&P contract, may have $5,000 — $10,000 in commissions at the end of the year.

To be blunt, most people who day trade futures do not last long. They are normally unprepared and undisciplined and make many bad decisions. It is a tough game, so make sure you are fully prepared with a good system and that you stick to it.

Best Markets for Day Trading Futures

The 10 Year T-Notes, soybeans. crude oil. Japanese yen, and Euro FX all have enough volume and daily volatility in their futures prices to be good markets to day trade. Each futures market has its own characteristics, so you should study the markets before you day trade in order to find the best trading techniques.