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Question about margin requirements and drawdown

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    Question about margin requirements and drawdown

    I'm getting set up on NT to trade the E-mini S&P 500. This has a margin requirement of $500/ contract. But, were I to trade it with just $500 in my account, I would be fully leveraged, and subject to a margin call if it moved against me by just one tick. Most people I've talked to suggest having at least $2000 in your account per contract. If I do have $2000 per contract in my account, how many points (or ticks) could the market move against me before I was fully leveraged and at risk for a margin call?

    #2
    Hi EnveousColnago,
    When looking at the margin you quoted, I would assume, you want to trade the Micro e-Mini S&P 500 (MES), not the e-Mini S&P 500 (ES), correct?
    How fast you will receive a margin call depends on quite a lot of factors (e.g. residency, where you trade, what you trade, how you trade [intraday vs. overnight]).
    Follow the link to take a deeper dive into the topic: https://www.interactivebrokers.co.uk...#margin-matrix
    The below reflects current margin ES/MEs requirements. Please note that these can/do change frequently.
    https://contract.ibkr.info/v3.10/ind...onid=371749798
    https://contract.ibkr.info/v3.10/ind...onid=371749771

    NT-Roland

    Comment


      #3
      This page https://ninjatrader.com/blog/futures...ay-margin-1-2/ says that there is a $500 margin requirement per /ES contract?

      Comment


        #4
        Hi,
        Really?
        https://www.cmegroup.com/trading/equ...E&pageNumber=1
        https://www.tradestation.com/pricing...-requirements/
        NT-Roland

        Comment


          #5
          Originally posted by EnveousColnago View Post
          I'm getting set up on NT to trade the E-mini S&P 500. This has a margin requirement of $500/ contract. But, were I to trade it with just $500 in my account, I would be fully leveraged, and subject to a margin call if it moved against me by just one tick. Most people I've talked to suggest having at least $2000 in your account per contract. If I do have $2000 per contract in my account, how many points (or ticks) could the market move against me before I was fully leveraged and at risk for a margin call?
          If you want to survive you should not focus on these margins, but define your risk. $500 margin for 1 contract ES is insane and will surely wipe out your account.

          Lets say you trade 1 ES with a 3 points stop, 1 tick slippage IN and 1 tick slippage OUT, $4 commission per roundturn.
          If you get stopped out, you lose 3 points stop ($150), 2 times slippage (2* $12.5) and $4 commission. Equals a loss of $179 or almost 9% of your account.
          If you get stopped out a second time, almost 20% of your account is gone.
          Remember it is only trading ONE contract! So a margin of $2000 instead of $500.

          If you trade 2 contracts, so margin $1000 per contract and you get stopped 2 times, almost half your account is lost.
          Over leverage is the main cause of account wipe outs. Don't make that mistake.

          Just my 2 cents and experience after daytrading a few decades.

          Start trading very small and proof first that you are a professional trader.
          If you are it will take a few months more than planned in becoming a millionaire.
          If you are not, you just saved yourself a lot of money.

          If you make 1 point net every day with a $2,000 margin and no compoundign, you make $12,000 a year. That's 6 fold of your capital.
          Last edited by marcus2300; 01-25-2020, 09:22 AM.

          Comment


            #6
            Originally posted by marcus2300 View Post

            Start trading very small and proof first that you are a professional trader.
            If you are it will take a few months more than planned in becoming a millionaire.
            If you are not, you just saved yourself a lot of money.

            If you make 1 point net every day with a $2,000 margin and no compoundign, you make $12,000 a year. That's 6 fold of your capital.
            Thanks for the response, and this is exactly what I'm doing. I'm still only papertrading until I have doubled a sim account twice and proven that I won't lose everything. I'm just trying to understand how all this works so that when the time comes I'll know how to determine how many contracts I can safely trade with my capital.

            It sounds like you are saying that trading one contract for every $2000 in you account is reasonable?

            Comment


              #7
              All depends of how many consecutive losses do you have and how big is your drawdown from these consecutive losses. Papertrading should give you an idea about the margin you can use. Art least if your papertrading is realistic (including slippage and commissions).

              Comment


                #8
                EC, the margin requirements applicable to your account depend on your broker. Broker margin requirements are not all the same. Assuming your broker will be NinjaTrader Brokerage, the margin requirements are here.

                More on margin from NT:
                Futures Day Trading Margins: Exchange Margins
                Margins Policy & Positions Management

                A further explanation of when the three margin conditions apply:

                (Example times applicable to CME products with markets closed between 4:00 PM and 5:00 PM Central Time, excluding holidays. All times are Central Time.)

                Intraday Margin
                The broker Intraday Margin requirement applies to open positions during the current intraday session, between the 5:00 PM session start and the Intraday Margin end at 3:45 PM on the next day. Intraday Margin applies during this time period to new positions opened during the current session, and to existing open positions carried forward from a prior session.

                Initial Margin
                The exchange Initial Margin requirement is effective between the 3:45 PM Intraday Margin end time and the CME session end fifteen minutes later at 4:00 PM, and is applicable to an open position if there is a trade during the current session in the same futures product as the open position.

                When the open position during this time period is an existing position carried forward from a prior session, and there was no trade in the same futures product during the current session, then Initial Margin does not apply. Instead, Maintenance Margin applies.

                Maintenance Margin
                The exchange Maintenance Margin requirement is effective between the 3:45 PM Intraday Margin end time and the CME session end fifteen minutes later at 4:00 PM, and is applicable only to an existing open position carried forward from a prior session, and only if there is no trade in that same futures product during the current session.

                When the open position during this time period is an existing position carried forward from a prior session, and there was a trade in the same futures product during the current session, then Maintenance Margin does not apply. Instead, Initial Margin applies.


                And to help you do the math to answer your original question, here are the tick and point values for ES and some other popular futures products:
                Point Tick Tick Ticks
                Futures Contract Symbol Value ($) Value Size Per Point
                WTI Crude Oil CL $1,000 $10 0.01 100
                Natural Gas NG $10,000 $10 0.001 1,000
                Gold - COMEX GC $100 $10 0.10 10
                Silver (5000 oz) - COMEX SI $5,000 $25 0.005 200
                E-mini S&P 500 ES $50 $12.50 0.25 4
                E-mini Nasdaq 100 NQ $20 $5 0.25 4
                E-mini Russell 2000 RTY $50 $5 0.10 10
                E-mini Dow 30 YM $5 $5 1.0 1
                30-Yr US Treasury Bond ZB $1,000 $31.25 1/32 32

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