Risks of trading futures (long side) | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Long sailing - System to trade only the long side 60 replies

AMP Futures Offers MT5 For Futures Trading 2 replies

Trading just 'buy' side of the chart? 1 reply

Trading on the Right Side of the Market (Hopefully) 85 replies

Does Programmable Server-side Trading Platform Exist? 2 replies

Risks of trading futures (long side)

  • #1
  • First Post: Jan 22, 2010 6:39pm Jan 22, 2010 6:39pm
I read somewhere that trading futures (such as S&P 500, Dow, Nasdaq) has "unlimited" risk. Meaning, you can lose more than your initial capital. Is this possible even if you don't go short? I dont seem to understand how you can lose more than you started with! Will your broker even allow your account to go further down than your initial capital?

Someone please enlighten me on this.

Thanks
  • #2
  • Jan 22, 2010 6:45pm Jan 22, 2010 6:45pm
Quoting misterboy
I read somewhere that trading futures (such as S&P 500, Dow, Nasdaq) has "unlimited" risk. Meaning, you can lose more than your initial capital. Is this possible even if you don't go short? I dont seem to understand how you can lose more than you started with! Will your broker even allow your account to go further down than your initial capital?

Someone please enlighten me on this.

Thanks

Your broker will have a Margin Requirement, which is there safety net so you shouldn't be able to get your account to a Negative amount for there own safety.

Ofcourse if your fully Margined and you get a 200pip news move in 1 second then there is a chance you could go negative but it's rare.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #3
  • Jan 22, 2010 6:49pm Jan 22, 2010 6:49pm
Quoting Turveyd
Your broker will have a Margin Requirement, which is there safety net so you shouldn't be able to get your account to a Negative amount for there own safety.

Ofcourse if your fully Margined and you get a 200pip news move in 1 second then there is a chance you could go negative but it's rare.
O Good! But, if lets say the news spike continues against you, are you required to pay the broker the amount of your losses beyond your account? Just thinking about it is freaky.
  • #4
  • Jan 22, 2010 7:01pm Jan 22, 2010 7:01pm
Quoting misterboy
O Good! But, if lets say the news spike continues against you, are you required to pay the broker the amount of your losses beyond your account? Just thinking about it is freaky.

If you say 100pips beyond your Margin close which is possible then with my broker £50 Margin per 60p per pip ish, a 100pip move would cost me -£60 so it would put me at -£10 so not the end of the world.

If you did it with a £500 account you'd get to -£100 ofcourse.

Yes they'd want there money back, 7 years on Datek / TD something or other than took them over want there charges for account inactivity they've made back still LOL NEVER!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #5
  • Jan 22, 2010 7:03pm Jan 22, 2010 7:03pm
It wouldn't allow it to trigger against you, it would exit at the first Market Order Price they could get.


Saying that I had a 100pip move recently, blow through a SL, 3 orders closed BADLY and the 4th seized wouldn't do anything eventually closed down 150pips or something, BAD NIGHT!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #6
  • Jan 22, 2010 8:33pm Jan 22, 2010 8:33pm
Quoting Turveyd
It wouldn't allow it to trigger against you, it would exit at the first Market Order Price they could get.


Saying that I had a 100pip move recently, blow through a SL, 3 orders closed BADLY and the 4th seized wouldn't do anything eventually closed down 150pips or something, BAD NIGHT!!
That really sucks.

Thanks for the info
  • #7
  • Jan 25, 2010 5:58pm Jan 25, 2010 5:58pm
It depends on how much you have in your account. If you have $55,000 in your account and you go long one ES contract at it's current price, you would be holding a contract worth $55,000 (ES @ ~ 1100 as of this writing). Even if the index goes to 0 you would never get in trouble because you have enough money to cover the full value of the contract. This has significant implications for ETF traders. Why bother trading SPY with its higher tax rate (if you choose to liquidate in less than a year) when you could trade the ES, an IRC 1256 futures contract for a maximum federal tax rate of 23%, irrespective of the holding period.
  • #8
  • Last Post: Feb 22, 2010 11:58pm Feb 22, 2010 11:58pm
Quoting misterboy
I read somewhere that trading futures (such as S&P 500, Dow, Nasdaq) has "unlimited" risk. Meaning, you can lose more than your initial capital. Is this possible even if you don't go short? I dont seem to understand how you can lose more than you started with! Will your broker even allow your account to go further down than your initial capital?

Someone please enlighten me on this.

Thanks
Managing risk is EVERYTHING. If you are trading properly the above situation should NEVER happen.

Trading futures can be a relatively low risk activity, contrary to what many believe.
0 traders viewing now