Novedades24 May 2023
How Much Money Do I Need to Trade Futures?

The money to trade futures you have at disposal is definitely something you want to have in mind before getting started. It is important to have an initial capital that allows you to participate in the market of your choice, while following the strategy you prefer, and at the same time it shouldn’t be part of the budget you need to sustain yourself for your day to day living.

Futures trading is an activity that can help to increase your income, which is one of the reasons why so many people are interested in getting started with this type of investment. However, it is also an activity that you want to make sure you fully understand and will have a considerable level of difficulty, so it should not be made without prior deliberation and a lot of studying.

In order to start off on the right foot, one of the things you want to understand is how much should be taken into account to have the proper amount of money to trade futures. Knowing cost, alone, is going to allow you to make the right decision for yourself when it comes to choosing the right market for you to trade. For example, it will cost a lot less for a trader to get started with micro-futures contracts than it would to start with the standard futures contracts.

Each market, broker, strategy and trading objective requires different amounts of money, so you can find what fits best in your budget. Thanks to this, you can start trading with a smaller account and grow both in the capital obtained for yourself and in the capital that you have available for further investments.

Below, we will share with you some of the most important factors to consider when defining how much money to trade futures you will need.

Type of Market

Among the financial markets you can choose to invest in, there are some that require more money to start trading. Particularly, this divide is very evident between regulated and unregulated markets.

Regulated financial markets are those that are subject to supervision and regulation by the financial authorities of the country in which they operate. These authorities establish rules and requirements that market participants must comply with, in order to protect investors and guarantee market stability.

The stock market and the futures market are two well-known examples of these types of markets. To trade stocks, the amount required to get started can be very high; generally around $25,000. But in futures, the requirements are much lower; as low as $500.

As can be seen, within the regulated markets, the amount of money to trade futures is much lower than that required by other financial markets. This is possible thanks to the leverage, which allows to have a high profitability with a low investment.

However, this characteristic of the futures market also increases the risk to which traders are exposed. For this reason, although starting money to trade futures is not that much, it is important for traders to have a cushion that allows them to cover expenses in case a trade does not go as planned.

In this sense, leverage does give the possibility of higher profits with a smaller investment, but it also opens the possibility of larger losses, which you will really need to make sure you are prepared for.

Now, another type of existing financial markets is the unregulated one. In these types of markets, as in Forex, there is no supervision or regulation by financial authorities. This can make them more flexible and less costly for traders, but they can also be riskier and less transparent.

In relation to the latter, we can see that the quantity of money to trade futures can really be lower or higher and sometimes the risk is more, while other times the risk is less. Everything will depend on the decisions you make when investing, for which you should be well informed beforehand.

Your Trading Education and Strategy

As you probably know, futures trading is an activity that requires prior knowledge and understanding of the market you’re trading.. The vast majority of traders emphasize this point, since starting to invest without the proper knowledge can lead to frustration and giving up on the dream of trading.

When trying to decipher the necessary amount of money to trade futures that you should set aside, don’t forget to include the learning phase. Whether you learn through courses, books or self-taught, it will take time and money. Nowadays, it is very viable to make a self-taught path in this area, as long as you have spent the time to learn from your journey in order to make profitable trades.

Just keep in mind that, with a good education, you will be able to start trading with a previously defined strategy. This will guide you not only to choose the best market and the most suitable asset, but also to align your actions to certain objectives, which can put you on the path to success.

The choice of a strategy will also determine the amount of money to trade futures you will need. Roughly speaking, in long-term strategies you can invest little by little, but you will not see profits for a long period of time. For this reason, you may spend quite a bit of time in expenses that will accumulate before you see a profit.

In contrast, a strategy such as day trading can give you short-term profits with investments that do not have to be anywhere near as significant. It all depends on the size of the contracts and which markets you decide to trade.

Contract Size

If you are a beginner trader, you probably don't want to risk lots of money on a single trade in the futures market. E-Mini and Micro E-Mini contracts are good alternatives for trading, with an exponentially lower economic pressure.

Mini and Micro futures are handled in the same way as standard futures, with the difference that traders can gain access to the markets with a much smaller amount of money to trade futures.

Microfutures are futures contracts in a smaller version, which allow trading for a fraction of the capital required. Like any other contract within the futures market, microfutures agree to trade an asset on a specific date and at a specific price.

The required amount of money to trade futures is much less with this type of contract than with standard contracts, but there are still certain expenses that are part of any futures trading operation, such as the margins.

Types of Margin

Margin in futures trading is a method used by brokers to hedge against losses they may incur from owning a particular asset. To open and maintain a position in the futures market, a trader must pay this margin.

The initial margin price for opening a position can vary widely depending on the market and the size of the contract you are trading. Generally, it represents 5% of the total value of the contract, but it can vary.

In addition, your designated money to trade futures should not only contemplate the initial margin, but also the maintenance margin. It is necessary to pay the maintenance margin to keep the position open, and its price may vary according to the market situation.

As you will see, within futures trading, many values depend on your particular decisions as a trader, so we cannot give you concrete numbers without knowing your profile beforehand. However, knowing about these factors can help you to study them thoroughly before deciding to make an investment.

It is important that you always have at least a slightly larger amount of money to trade futures than is strictly necessary. This way, you can be prepared for any unforeseen event.

A key factor in calculating the budget you will need for trading is the short and long term goals you set for yourself.

Your Goals and Your Money to Trade Futures

When you start trading, it is important that you define goals that fit your strategy and that you can achieve. Many people expect to make large sums of money as soon as they start trading, and that, for the most part, is not the case.

For that reason, it is essential that you do not spend all your capital trying to make the market behave to your convenience. You should be guided by the knowledge you have acquired before you start, be consistent with the trading plan you have designed and understand that your goals will be adjusted to your level of available money to trade futures.

It is true that some traders make huge sums of money with just one move, but it is also true that those same traders probably have a huge amount of capital available for trades and extensive trading experience to know how and when to open or close a position in the market.

In their beginnings, those same traders surely did not make those same investments. Everyone must go at their own pace and with their own method, and it is very valuable to be able to do so without risking all your capital at once. For that reason, we recommend that you begin your journey as a trader with a funding test.

At Uprofit, we have evaluation programs for you to test your trading capabilities without risking your own capital. This way, your amount of money to trade futures will not be a limiting factor for your potential as a trader.