never traded, curiosity!

[eddiea6987]

ok well just to let you all know i have never traded in my life right now im 19 work at a retaurant i dont have the money or knowledge to trade but i do have some questions that just keep roaming in m head,
ok this is a day trading question, lets say i buy an E-mini contract (S&P5) for example
and ok lets say it doesnt do so good or whatever and drops a bunch of points.
cant you just hold on to it and wait to see if it goes up? maybe the next day or two?
or does your firm just like take away your losses from your account each day?
i mean i know if your a day trader then you shouldnt be holding on to anthing over night but why not? ok well i can figure that one out just to reduce your losses, but i have heard you can loose alot of money trading futures, but is it possible to get in debt trading the minis?

the way i understand it is like this and PLEASE correct me if im wrong thats what i want knowledge
ok so i see it like this, i buy a contract at 5 bucks (nice huh)
it drops down to 2 bucks then i sell it and my loss is 3 bucks..so theres no possible way i can be in debt right? unless i use borrowed money from the firm or whatever, but if i use my money all i can loose is my money but never anything more right?
or what if i let the contract expire then do i have to pay the actual amount because as i understand it the price for an emini contract is just a fraction of its real cost? im not sure how correct that might be.
Again please correct me if im wrong which im sure i am and i dont normally post questions but ive done research and no one ever explains exactly how you can loose money they just talk about how to make money but im trying to understand what ways i can loose money and for me i think even worst is owing money so thats why i was wondering if theres a wy you can into debt trading the minis or any other market for that matter.
-eddie

 

[Splitlink]

Let's get the "three bucks" clearer.

An American trader would have to buy, at least, one contract which would cost $10 per point. The movement of these indices is paid for in decimals of a dollar---not a dollar itself, so a blasé trader is open to lose a lot of money before he decides to close.

He will be required to place margin money at the brokerage to cover possible losses. As soon as more margin is required, the trade is liable to be closed.

There are lots on here who will explain more fully and better. My object is to stop you in your tracks before tomorrow, just in case no one answers today, and to clarify the point about losing a few bucks!

Brits can use spread betting. IMO that is a definite advantage, although many do not believe so.

 

[eddiea6987]

Let's get the "three bucks" clearer.

An American trader would have to buy, at least, one contract which would cost $10 per point. The movement of these indices is paid for in decimals of a dollar---not a dollar itself, so a blasé trader is open to lose a lot of money before he decides to close.

He will be required to place margin money at the brokerage to cover possible losses. As soon as more margin is required, the trade is liable to be closed.

There are lots on here who will explain more fully and better. My object is to stop you in your tracks before tomorrow, just in case no one answers today, and to clarify the point about losing a few bucks!

Brits can use spread betting. IMO that is a definite advantage, although many do not believe so.

interesting thank you for your reply, so sort of understood what you said and as far as the margin money goes thanks for clearing that up and it does make sense that the firm would do that.

 

[Bolimomo]

o
ok so i see it like this, i buy a contract at 5 bucks (nice huh)
it drops down to 2 bucks then i sell it and my loss is 3 bucks..so theres no possible way i can be in debt right? unless i use borrowed money from the firm or whatever, but if i use my money all i can loose is my money but never anything more right?

With trading futures (e.g. index futures), you mainly trade with margin money. In USA, day trading equities(for >US$25,000), the margin is 4:1. If you have US$25000, you can buy up to $100,000 worth of stock. With index futures, many brokers offer a margin of 100:1. With US$25000, you can buy up to $2,500,000 worth of contract value.

With the E-mini S&P, each S&P point worths US$50. So if the S&P is 1,000 today, the face value is $50,000 for each e-mini contract. Typically, the broker will let you trade one contract with only $1,000 of margin money so you don't need to put in $50,000 to buy/sell one contract. But with only $1,000 in your account, if the S&P drops 20 points, you are dead! Anything more, you owe money. But... usually the futures brokers will close out your position before your margin money is up. This is just a simplistic example. The actual margin requirements differ from brokers to brokers. And overnight holding margin is different from day-trading only margin.

 

[eddiea6987]

With trading futures (e.g. index futures), you mainly trade with margin money. In USA, day trading equities(for >US$25,000), the margin is 4:1. If you have US$25000, you can buy up to $100,000 worth of stock. With index futures, many brokers offer a margin of 100:1. With US$25000, you can buy up to $2,500,000 worth of contract value.

With the E-mini S&P, each S&P point worths US$50. So if the S&P is 1,000 today, the face value is $50,000 for each e-mini contract. Typically, the broker will let you trade one contract with only $1,000 of margin money so you don't need to put in $50,000 to buy/sell one contract. But with only $1,000 in your account, if the S&P drops 20 points, you are dead! Anything more, you owe money. But... usually the futures brokers will close out your position before your margin money is up. This is just a simplistic example. The actual margin requirements differ from brokers to brokers. And overnight holding margin is different from day-trading only margin.

ahhh i see thank you very much for clearing that up for me, makes sense now thanks again!!!

 

[Splitlink]

With trading futures (e.g. index futures), you mainly trade with margin money. In USA, day trading equities(for >US$25,000), the margin is 4:1. If you have US$25000, you can buy up to $100,000 worth of stock. With index futures, many brokers offer a margin of 100:1. With US$25000, you can buy up to $2,500,000 worth of contract value.

With the E-mini S&P, each S&P point worths US$50. So if the S&P is 1,000 today, the face value is $50,000 for each e-mini contract. Typically, the broker will let you trade one contract with only $1,000 of margin money so you don't need to put in $50,000 to buy/sell one contract. But with only $1,000 in your account, if the S&P drops 20 points, you are dead! Anything more, you owe money. But... usually the futures brokers will close out your position before your margin money is up. This is just a simplistic example. The actual margin requirements differ from brokers to brokers. And overnight holding margin is different from day-trading only margin.

Thanks for the detail. There are a lot of of readers who think that the risk is small in this business. I did not know that the minimum was $50 per point, which, practically, is a warning to small fry.

Split

 

[alphamaster22]

"Thanks for the detail. There are a lot of of readers who think that the risk is small in this business. I did not know that the minimum was $50 per point, which, practically, is a warning to small fry."
Split

Well, that is only for e-mini futures $50/point, all instruments traded can be worth different $/point, all depends on how much leverage you are using. I trade currencies and some brokers allow you to trade micro lots where 1 point is only worth 10 cents, but with the same broker on a standard100k lot each point is worth $10.

 

[Bolimomo]

Thanks for the detail. There are a lot of of readers who think that the risk is small in this business. I did not know that the minimum was $50 per point, which, practically, is a warning to small fry.

To clarify: the movement is $50 per S&P point for the e-mini S&P. But the minimum movement (PIP) is 0.25 point. Or USD$12.50.

 

[Bolimomo]

Well, that is only for e-mini futures $50/point, all instruments traded can be worth different $/point, all depends on how much leverage you are using. I trade currencies and some brokers allow you to trade micro lots where 1 point is only worth 10 cents, but with the same broker on a standard100k lot each point is worth $10.

If they let you trade where 1 point is 10 cents, how much are they charging for commission on these "micro" contracts?

 

[N Rothschild]

Let's get the "three bucks" clearer.

An American trader would have to buy, at least, one contract which would cost $10 per point. The movement of these indices is paid for in decimals of a dollar---not a dollar itself, so a blasé trader is open to lose a lot of money before he decides to close.

He will be required to place margin money at the brokerage to cover possible losses. As soon as more margin is required, the trade is liable to be closed.

There are lots on here who will explain more fully and better. My object is to stop you in your tracks before tomorrow, just in case no one answers today, and to clarify the point about losing a few bucks!

Brits can use spread betting. IMO that is a definite advantage, although many do not believe so.

5$

 

[jokepie]

ok well just to let you all know i have never traded in my life right now im 19 work at a retaurant i dont have the money or knowledge to trade but i do have some questions that just keep roaming in m head,
ok this is a day trading question, lets say i buy an E-mini contract (S&P5) for example
and ok lets say it doesnt do so good or whatever and drops a bunch of points.
cant you just hold on to it and wait to see if it goes up? maybe the next day or two?
or does your firm just like take away your losses from your account each day?
i mean i know if your a day trader then you shouldnt be holding on to anthing over night but why not? ok well i can figure that one out just to reduce your losses, but i have heard you can loose alot of money trading futures, but is it possible to get in debt trading the minis?

the way i understand it is like this and PLEASE correct me if im wrong thats what i want knowledge


ok so i see it like this, i buy a contract at 5 bucks (nice huh)
it drops down to 2 bucks then i sell it and my loss is 3 bucks..so theres no possible way i can be in debt right? unless i use borrowed money from the firm or whatever, but if i use my money all i can loose is my money but never anything more right?
or what if i let the contract expire then do i have to pay the actual amount because as i understand it the price for an emini contract is just a fraction of its real cost? im not sure how correct that might be.
Again please correct me if im wrong which im sure i am and i dont normally post questions but ive done research and no one ever explains exactly how you can loose money they just talk about how to make money but im trying to understand what ways i can loose money and for me i think even worst is owing money so thats why i was wondering if theres a wy you can into debt trading the minis or any other market for that matter.
-eddie

Oh dear..