Futures trading leverage NT7

#1

Hello , im a little confused on exactly what leverage is and how it works. ive read the posts about leverage on the forum but it makes no sense to me from the perspective of me trading with the money i have and not borrowed money, as in ,would leverage apply to me if im trading one contract for example. thank you.

#2

Darrell provides an excellent explanation on leverage in this post:

I hope you find it helpful in answering your question.

Peter.

#3

@timelord914 i guess what im asking is if its optional to use leverage, i read the post but i cant seem to find my answer.

#4

Yes leverage still applies if even trading one contract. You do not have the option of using it or not. Your margins are set by your broker based on your broker and what you are trading.

#5

Not sure why anyone would not use leverage. It should be used wisely. I guess you could make sure the entire value of the contract is in your account and not trade more than one per the total value of your account.

#6

For futures (NQ ) the margin for day trading is $500 ,that means I need to have $500 per contract I trade if I’m not mistaken , where does it say anything about leverage or how much leverage they provide? If I wanna trade one contract for example , can I trade with $1000? (I know technically that’s enough for two contracts) where does leverage play into that?

#7

NQ is worth $20 a point (4 ticks to a point valued at $5.00)

So you take the current price of NQ and multiply it x $20 and that is the value of a NQ future, So at 4200 a NQ future is worth $84,000

They don’t require you put up 84k to trade it. They allow a day trading margin of $500 be put up for each contract you enter. In addition if you have losses while open that will be deducted from your account. the margin will rise if you hold it past the close at 4:15 PM ET (most brokers you must close it 2-5 minutes before the close) or they will auto close your account and charge you a fee if you do not have sufficient funds to keep the contract open. If you do have funds they will leave it open and the regular margin will apply. of $3,600.

The margin is a safety guard for the broker so if you lose so much that you only have that “margin” left they can and may attempt to close your trade automatically as they do not want you to end up owing them money. This is called a margin call.

If you question is can you trade if you only have 1k in your account. Theoretically yes. You only need $500 but realistically your account is not large enough and you should focus on something like Nadex Spreads using NTM contracts. Your trading something worth way more than the money you have in your account and this will lead to bad risk management and trading decisions.

#9

I tried nadex spread I got them down but i find that applying the same system to futures I am much more profitable and consistent. If I know where to put my stops and I have a good system both physically and mentally , I don’t see why It would be unwise to trade futures with 1000$ ,that is if I follow the 5% rule and do what I mentioned above. Is simulation futures trading different than live trading?

#10

Your more profitable becuase they are worth more $ per tick. Equalize the tick value ie do 2 nadex US tech 100 spreads so it will equal 1 NQ future or 5 US 500 spreads to equal one ES future.

You can’t follow the 5% rule the 5% rule is 5%/6 max risk on account size. You can’t do that on a futures account without a lot more money in it. Its not 5% a trade.

Yes sim trading is different from live trading in the following ways: sim data is just that it always assumes your filled its simulated data its not taking liquidity from the market and its not putting you in the que order like you are put in when trading live. Its REAL money so your mind and emotions change. My suggestion is to trade with proper risk management and account size in demo for 20 days following all rules. if you break any rules or risk management then you have to start over. Trade with the same size as you will be trading live with. If you can trade that same size, with proper risk and profit management, and be disciplined then step into live. Not doing this is very very very expensive.