Why Day Trade Futures Over Stocks?

Sponsored by What's this?

The popularity of futures trading continues to grow driven by products such as CME Group’s Micro E-mini Futures which allow traders to participate in the same markets as Wall Street at a fraction of the cost. When it comes to day trading specifically, futures markets offer several considerable advantages over trading individual stocks. With a level playing field for bullish and bearish traders & more meaningful volume data resulting from centralized exchanges, more day traders continue to choose futures.

Low Account Minimum to Day Trade

When day trading stocks, a minimum account value of $25,000 is required due to “Pattern Day Trader” rules. This can present a substantial financial limitation for day traders of individual stocks. Since futures trading relies on margin, or the use of borrowed capital, you can day trade with a significantly smaller account balance. Margin can be thought of as a down payment on the full value of a futures contract.

Futures intraday margins are determined by brokers & clearing FCMs and futures overnight margins are determined by the exchange. As long as you meet the margin requirements, you can trade as much as you want long or short.

Trade More with Less

As highly-leveraged investments*, futures provide the ability to control a large amount of notional value with a relatively small amount of capital. Leverage is the backbone of futures markets and all participants rely on borrowed capital to potentially increase returns while risking the minimum amount of money.

Compared with trading stocks or even leveraged ETFs, futures require much less capital up-front and provide the most leverage for the margin. This allows traders to control contracts much more valuable than their initial investment.

Since day traders may stay in a trade for just a few minutes or even seconds, highly-leveraged assets such as futures help make such short-term trading more financially feasible.

Enter & Exit Positions with Ease

For day traders, liquidity is of utmost importance as it ensures they will be able to buy and sell with ease. A liquid market provides the ability to time entries and exits within a market without the concern of whether enough trading volume will be available to execute the trade. Unlike futures markets where traders can expect high liquidity daily, volume in individual stocks can vary greatly from day to day and traders may have difficulty initiating and liquidating positions. 

Trade Futures Around the Clock

Compared to stocks & ETFs which have a regular trading session of only 6.5 hours, futures products trade nearly 24 hours a day, 6 days a week. For day traders, this allows for more trading opportunity and the ability to manage positions any time of day.  

For equity index futures traders, E-mini & Micro E-mini futures allow traders to participate in equity markets both before and after the stock market’s relatively short trading session. 

Get Started with NinjaTrader

You can start day trading with NinjaTrader with as little as $400 & prepare for the live markets with unlimited risk-free simulated trading. When you are ready for live trading, keep your trading costs low through deep discount commissions and $50 margins on Micro E-mini futures.  

NinjaTrader supports 60,000+ traders with an award-winning trading platform always free to use advanced charting, market analytics and trade simulation. Get started with a free demo account featuring 14 days of live futures market data.

* Financial leverage can result in losses greater than the initial margin and traders should be aware of the risks involved in trading futures. Although highly liquid, futures markets can experience rapid price fluctuations and only risk capital should be used for trading.

Risk Disclosure: Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. U.S. Securities and Exchange Commission. "Margin Rules for Day Trading." Accessed August 17, 2020.