Micro futures contracts became available to trade earlier this year (2019), and are a very interesting concept when thinking about trading and or beginning to trade in the stock market. I would argue that it may be the perfect starting point due to the low risk (this doesn’t mean easy), low capital requirement to begin trading them, and the fact that there is no Pattern Day Trading Rule in the Futures Market. That means that there will be no restricting your account if you decide to trade intraday and can trade as many times as there is an opportunity.
So lets look at some of the requirements for trading the Micro Futures: ( We will use the Micro E-mini S & P 500 as an example)
/MES – Micro E-mini S & P 500 Capital Requirement : $400 initial investment with NinjaTrader.
The commissions for trading the Micro’s are currently .09 cents per contract with a lifetime license at Ninja Trader (this is one of the lowest I’ve seen). Many other brokers also offer low commission trades for Micros as well.
Tick Value Per 1 Contract: $1.25 ( I suggest paper trading for a bit so that you understand this concept.) Basically in stocks you earn Cents per Share Owned so 1000 shares x $.03 cents equals $30 dollars profit or loss. In the Futures Market, The price action moves in a measurement called a “Tick”. (Click Here for more info).
The regular S & P future contract /ES, Requires $500 dollars initial capital to trade and will earn $12.50 per contract/per tick. Sounds good, but; you will have to accept a bigger risk when trading the /ES, unless you have abundant capital. You will want to place closer stop out parameters in order to protect your account, however; With the small $1.25 cent per tick on the Micro E-mini, you can afford to have your stop a bit further! Typically a stop limit too close means your accuracy on trend changes has to be very close. Most traders can spot when a trend will soon change but the exact point is a tough one to dial in. When you have an ability like risking only $20 dollars for the trade but have a huge gap between your entry and the stop, you can breathe a little while the price action works it’s way into the new trend!
With such low cost to start, lower risk/capital exposure, and ability to trade as much as you like (No PDT) this is something to really consider if you’ve decided you would like to trade!! There are other Contracts available to trade in the Micro form also like Gold, Oil, and other market indexes. To see a list of Micros, and there Margin Requirements check below
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