Why futures trading is the best option for a day trader
by Kirti Meliwal
Futures day trading is the strategy used by active traders of the market to gain profit from sudden market movement.
Almost every Day trader must have to decide in which financial instrument to invest. There are numerous choices including forex, stocks, commodity and options. There are also many choices of your own, and number of advice you get from your friends. No doubt, it is a very difficult choice to select a suitable segment for a better return. To take the right decision, an investor can refer financial expert's best stock tips and market calls recommendations.
Let's keep all these options aside; Now I am going to tell you why futures trading is the best option for a day trader. Day trading in futures is the strategy used by active traders of the market to gain profit from sudden market movement. It is an act of buying and selling a future contract within the same day without holding a position overnight. In day trading a trader enters and exits all position in the same day. It takes lots of knowledge, more experience and discipline to do day trading in futures successfully.
Advantages of Day Trading Futures
1. Futures have zero restriction on short- selling
There are no restrictions on short selling in the futures market. A day traders job is to take only the best grades regardless of whether it is a long or short trade. With an ability to take long and short positions, a day trader can remain neutral and react according to his current market analysis.The stock market is different. Although day traders can short-sell stocks, they are still limited by the shortable stocks offered by their brokers because one need to first purchase a stock through his broker, before you can sell them to gain profit from a bearish move.
2. Day trader can make use of lower initial margin for future trading
To enter a futures position means to enter into a contract to buy or sell. You are not really buying or selling anything yet, so you do not have to pay anything. However, you need to submit an initial margin which is also known as the performance bond this is for as a guarantee of your ability to fulfil the contract. The amount of initial margin totally depends on the product and market volatility. The futures exchange set the amount of margin for Day trading, futures brokers are fully free to decide the initial margin for intraday trading. Your position size should still determine on the basis of your day trading strategy and risk capital.
3.There is central clearing for futures
As futures are contracts, there may be a possibility that contracting parties might refuse to act according to the contract terms. This risk is also known as counterparty risk. However, futures contracts are traded on the exchanges and there is exchange clearing house available to watch all matters of both sides of the contract. This is a benefit of doing trade in the futures contract.
Day trading futures is a good option for a trader to earn a profit and it also provides better earning opportunities to traders to develop their investment portfolio.
Article Tags: Futures Trading, Futures Contracts, Spot Trades