With the volatility returning to global markets in 2020 there has never been a better time to learn how to day trade and take advantage of the world’s best day trading opportunity in US stock futures!
The US stock futures encompass equities such as the S&P 500, Nasdaq, Dow Jones and the Russell 2000. The best part of these assets is that they are so widely traded you have an opportunity throughout each of them through most hours of the day. The S&P 500 futures market is the most traded equity market, averaging 1.5 million contracts on a daily basis. The opportunity in these markets is better now than ever. With a recent downturn in the economy futures traders have the ability to trade at home to earn an income. It’s not an easy endeavor to learn how to trade successfully but it’s very rewarding. The main components of learning how to trade successfully are mastering the market basics and mastering your psychology.
Why is the US futures market the most opportunistic market to trade?
- Multiple assets to choose from
- Deep liquidity and virtually no bid and ask spread
- Extremely low margins & large leverage (compared to stocks)
- Flexibility in execution and strategy
- Central clearing eliminates counterparty risk
- Nearly 24-hours of market movement
- Trade a global equity portfolio using one asset
- Capital gains preferred treatment
- Bypasses US pattern day trading rule
There are so many positives to the US stock market futures that it is drawing such a diverse crowd of traders. In fact, there are many Forex traders and European traders that are making the leap over due to the new Micro equities contracts. These futures contracts are 1/10th of the size of your average equities futures E-mini contract which allows traders to learn for much less and give them flexibility with positioning. The beauty of the futures market is that you can enter long positions (buy) or short positions (sell) with the same amount of margin, unlike stocks. The short-selling process is not complex whatsoever, it’s as easy as the buying process. You can take advantage of downward swinging markets easily in the futures market.
The US market futures are divided into three broad categories of asset classes. The equity market, the bond market, and the commodity market. Each of these holds assets that are extremely liquid and full of opportunity throughout the clock.
The equity market has:
- S&P 500 E-mini Futures (ES)
- Nasdaq E-mini Futures (NQ)
- Dow Jones E-mini Futures (YM)
- Russell 2000 E-mini Futures (RTY)
The Bond Market:
- 10-Year Notes (ZN)
- 30-Year Notes (ZB)
The Commodity Market:
- Gold Futures (GC)
- Crude Oil Futures (CL)
The above is not all of the futures in each category, rather a shortlist of the best assets to trade in each category. You can trade 1 S&P 500 futures contract with only $400 in your account as margin! While each point of the movement is worth $50. So technically with $400 you have the ability to make $200 off 4 points of S&P 500 movement!
The opportunity in these markets is plentiful, let’s examine the S&P 500, Crude Oil and Gold further since these are the main markets we trade.
First, we have to break down each contract spec and identify examples of market structure trading that presents high probability opportunities. The most movement and volatility you will get on average occurs throughout the US session for all of these assets. However, they have different start times. Gold being the earliest, with the pit open at 8:20 AM EST, then is Crude Oil 9:00 am EST and then S&P 500 9:30 am EST. We highly recommend risk management and using brackets with in place stops and taking profits when entering a trade. You’ll notice that some of the moves look like scalps or are just tiny increments, but with the worth of each contract, you will see it’s quite the sizable opportunity in the US stock futures market.
S&P 500 Futures
The S&P 500 futures market E-minis are the new traders starting point in the futures market for the most part. They are super liquid and are more forgiving. They move well but give you a lot of time to make decisions. There are a lot of market participants in this market.
One futures contract is worth $12.50 a tick or $50.00 a point. They move in tick increments and 4-ticks make up 1-point. So if you close out a position for negative 1 point, $50.00 is subtracted from your account balance. If you are up 2 points, that is an addition of $100 to your account. This can be done with $400 in your account at AMP futures with lower margins, naturally, we recommend wiggle room in the account and do not recommend trading a 1 lot account with $400, rather $2,000 and more to begin.
Take a look at the example below, look at the extent of the top to the bottom movement that is 40 points of potential opportunity. Not to say you’ll catch it all but there are points here and there that are the high opportunity. Even if you catch 5 points of that 40 point move it’s a $250 profit. Which can occur in minutes if not seconds?
Crude Oil Futures
The crude oil market is a big attraction for day traders, because of the extended moves and runs that the commodity experiences. It is a very liquid market but very unforgiving and it takes a high level of understanding (market structure) to trade. This market is driven by supply and demand, there are more than just speculators in this market. Hedgers and traders who actually take delivery of the physical product. One oil futures contract is denominated in $0.01 moves, each cent is worth $10.00. One tick is equal to one cent. So catching a $0.10 move is worth $100 per contract of oil. You need $1,000 of margin in your account to trade 1 contract on the oil market so that means you need a little more wiggle room, starting with $3,000 to $5,000 is a good area. Take a look at the example below. On this chart, the move from the bottom to the top is $1.20, which is a $1,200 move on 1 contract. Now naturally, catching the whole swing is improbable, catching a few dimes and quarters is not.
The final asset we trade that presents traders with a lot of opportunities, especially those that trade in the evening session is gold. Gold is slightly different in that each tick is denominated by $0.10, and each tick movement is worth $10 just like crude oil. The gold futures market is supply and demand-driven as well but watch out for the London session as most gold traders come from the UK. There may be some sporadic movement in those hours from 2:00 am EST to 4:00 am EST. Take a look at the chart below, that is a $40 move from top to bottom or potential for $4,000 on one contract catching that whole move. The purpose of pointing this out is to show you the opportunities in a day, they are plenty!
In conclusion, the futures market is the most opportunistic market in the world for day traders! You have so many positives and you can enter with little starting capital. The Micro equity futures are a gold mine for new traders. If you want to learn from the pros and become a master of basics such as market structure before you dive into order flow take a look at TRADEPRO!
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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.