Futures Trading Education

How to Day Trade Futures

Before we get into how to day trade futures, we first need to discuss what day trading is. By its definition, day trading is the purchase and sale of a security/stock/bond within a single trading day. A lot of day trades are based on short-term market moves like something that happens in the news, or a breaking development. Day trading has grown more popular over the years and as more trading is done electronically, more viable day trading options become available to anybody with an internet connection.

How Do Day Traders Make Money?

Much like any normal trader or investor, a day trader makes money by selling a security for a higher price than they bought it, however it goes much deeper than that. To make money day trading futures you must have a sufficient amount of liquid capital that you are okay with losing. Day traders are often buying large numbers of shares and waiting for a small move before they sell. In order to do that, you must have enough capital to buy the large number of shares, and you must be okay if the shares take a loss, there is a lot of risk in day trading. This is especially true when you are day trading futures because futures contracts are large by nature and you need to have enough capital to cover all your margins. In addition to capital, having an effective strategy and paying close attention to market trends is key to making money as a day trader. You need to have discipline and stay in tune with all current events that may impact the futures markets.

How Do You Start Day Trading Futures?

How to Day Trade FuturesDeciding to start day trading futures can be a life changing decision and you need to make sure you are ready. In order to start day trading futures, you need to create or learn a strategy. The easiest way to begin is to start watching charts and with each movement ask yourself, “what would I do in this situation?”. Would you get into a trade? Get out of the trade? Stand pat? How much would you risk? Etc. These are the questions you need to be asking yourself. Let’s say you answered, “yes I would get into a trade here”. Next you need to follow how that hypothetical trade would go. Learn from each movement, good or bad. Practice makes perfect. Just like a sport, musical instrument, or anything else, you won’t get good unless you practice. So, before you get into day trading futures, practice.

Try a Futures Demo Account

One way to practice without any risk is to open a demo account. A futures demo account allows you to make trades and track how they would pan out without the risk of losing (or gaining) any real money. It’s all practice. Once you have decided you are ready, it’s time to open an account. You need to find a brokerage with a day trading platform that is right for you, often it will be the same brokerage you opened a demo account with. RJO Futures offers a demo account and regular trading accounts that suit the needs of any level of futures day trader.

How to Day Trade for a Living

There are two types of people that day trade for a living. Those who work for a large brokerage firm, such as RJO, and those who day trade on their own from their house. Whether you are day trading from a large firm, or on your own, there are several things you will need.

  • A big one is access to a trade desk, which can be difficult for those trading on their own. Access to a trade desk allows for instant order actions from the moment the trade is placed, there is no delay.
  • You will also need some sort of analytical software to day trade for a living. Analytical software can help you identify key indicators and give you clues on what moves to make.
  • Finally, access to a variety of news outlets is also key. Because day trading futures are so volatile, and prices move by the second, you need to be able to stay on top, or even ahead of any news that may affect your market.

Day trading is not for everybody and as with any type of trading, there is a lot of inherent risk. If you are thinking of becoming a day trader or want more information, feel free to contact one of our qualified brokers and they will help you the best they can