Investors who want to engage in futures trading must have an account with a registered commodity futures broker. Some stock brokerage firms are also registered futures brokers, but the majority of commodity futures brokers are exclusive to futures trading. The amount of money needed to trade futures may be significantly different than the amount needed to open an account.
Futures Account Minimums
The minimum deposit to open a futures account varies based on the broker. Most commodity futures broker minimums fall in a range of $2,000 to $10,000. Many brokers allow a prospective customer to open a free, practice trading account before opening a real money account. A practice account uses simulated trading money and allows you to try out the broker's trading systems and develop your own trading strategy.
Futures Trading Considerations
Futures trading uses standardized contracts for each commodity or financial instrument on which the futures markets trade. A trader opens a trade with a long or short order for one or more contracts of the selected futures product. When a trade is opened, the futures broker will collect a margin deposit for each open contract. The margin deposit amount is set by the futures exchanges. A trader must have enough money in the account to cover the initial margin deposits. If the futures trade goes against the trader, the broker may require additional money to be deposited into the account to keep a trade open.
Typical Margin Deposits
The margin deposits required range from a few thousand dollars per contract to well over $10,000. For example, the margin deposit for the standard crude oil contract is currently $8,400, the standard gold contract requires a deposit of $7,400 and the S&P 500 futures contract a $25,000 margin deposit. To trade just one of these contracts a trader must have the margin deposit amount is an account plus some cushion if the investment goes down.
E-minis and Day Trading
For individual traders, the commodity exchanges have developed e-mini futures contracts with smaller contract sizes and required margin deposits. A trader using the e-mini contracts would require a smaller account balance to trade. For example, the popular e-mini S&P 500 contract requires a margin deposit of $5,000. For traders limiting themselves to day trading, most commodity brokers have even lower margin requirements. The day trading margin deposit on popular futures contracts can be as low as $500 per contract.
Futures Trading Potential
The value of futures contracts can be very volatile, and a trader can make or lose a significant amount of money in a short period of time. A trader who funds a trading account with the broker minimum, or just enough to cover the margin deposit for one or two contracts, will be out of the trading business as soon as one trade turns into a loser. All traders have an occasional loser, so starting with a minimum balance is a path the a very short stint as a futures trader.
- CME Group: Performance Bonds | Margins Requirements for CME Group Products
- E-Trade: Futures Trading Account
- Corporate Finance Institute. "Dow Jones Industrial Average (DJIA)." Accessed April 15, 2020.
- CME Group. "E-mini Dow ($5) Volume." Accessed April 15, 2020.
- CME Group. "Micro E-mini Equity Futures." Accessed April 15, 2020.
- Charles Schwab. "What is a Micro E-Mini Future?" Accessed April 15, 2020.
- CME Group. "Dow Jones Industrial Average (DJIA) Futures and Options." Accessed April 15, 2020.
- TD Ameritrade. "Margin Handbook," Page 3. Accessed April 15, 2020.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.