Futures are one of the most popular instruments for day traders. They offer significant leverage, nearly 24-hour trading, and no pattern day trader rule. This guide explains everything you need to know to start day trading futures, from understanding contracts to managing risk.
What Are Futures?
A futures contract is an agreement to buy or sell an asset at a predetermined price at a specific date in the future. Unlike stocks, futures are derivatives that track underlying assets like stock indexes, commodities, or currencies.
Key advantage: Futures day traders never actually take delivery of the underlying asset. They simply profit from price movements and close positions before expiration.
Why Day Traders Choose Futures
No Pattern Day Trader Rule
Unlike stocks, futures have no $25,000 minimum requirement for day trading. You can day trade futures with much smaller accounts, making them accessible to more traders.
Extended Trading Hours
Futures trade nearly 24 hours a day, Sunday evening through Friday afternoon. This allows traders to react to overnight news and find opportunities outside regular market hours.
High Leverage
Futures offer significant leverage. A single ES (S&P 500) futures contract controls roughly $250,000 worth of the index but requires only about $500-1,000 in day trading margin.
Tax Advantages
In the United States, futures profits receive favorable tax treatment under the 60/40 rule: 60% of gains are taxed as long-term capital gains and 40% as short-term, regardless of holding period.
Popular Futures Contracts for Day Trading
E-mini S&P 500 (ES)
The most popular futures contract for day trading. Each point of movement equals $50. Known for smooth price action and high liquidity.
ES Contract Specifications
- Tick size: 0.25 points ($12.50 per tick)
- Point value: $50 per point
- Day trading margin: Approximately $500-1,000
- Trading hours: Sunday 6pm - Friday 5pm ET (with daily break)
E-mini Nasdaq 100 (NQ)
Tracks the Nasdaq 100 index. More volatile than ES, offering larger moves but higher risk. Each point equals $20.
Micro E-mini Futures
Smaller versions of the E-mini contracts at 1/10th the size. Perfect for beginners or those with smaller accounts:
- Micro ES (MES): $5 per point
- Micro NQ (MNQ): $2 per point
- Micro Russell (M2K): $5 per point
- Micro Dow (MYM): $0.50 per point
Other Popular Futures
- Crude Oil (CL): Volatile commodity with $10 per tick movement
- Gold (GC): Safe haven that moves on economic news
- Russell 2000 (RTY): Small-cap index with good volatility
- Treasury Bonds (ZB): Responds to interest rate expectations
Understanding Futures Margin
Initial Margin vs Day Trading Margin
Futures have two types of margin:
- Initial margin: Required to hold positions overnight (higher)
- Day trading margin: Required for intraday positions only (lower)
Day trading margin is typically 25-50% of initial margin, allowing you to control larger positions during market hours.
Warning: Lower margin requirements mean higher leverage, which amplifies both gains and losses. A single ES contract moving 10 points represents a $500 gain or loss on a position that required only $500-1,000 in margin.
Margin Calls
If your account falls below the maintenance margin requirement, you will receive a margin call. Close positions or add funds immediately to avoid forced liquidation.
Futures Day Trading Strategies
1. Opening Range Breakout
Trade the breakout from the first 15-30 minutes of the regular session:
- Mark the high and low of the first 15-30 minutes after the 9:30 AM open
- Go long if price breaks above the range with volume
- Go short if price breaks below the range with volume
- Place stop loss on the opposite side of the range
- Target 1:1 or 2:1 reward to risk ratio
2. VWAP Mean Reversion
Trade pullbacks to VWAP in trending markets:
- In an uptrend (price above VWAP), buy pullbacks to VWAP
- In a downtrend (price below VWAP), sell rallies to VWAP
- Use VWAP as your stop loss level
- Target the previous swing high or low
3. Support and Resistance Levels
Trade bounces and breakouts from key price levels:
- Identify significant support and resistance from daily charts
- Watch for price reaction at these levels on intraday timeframes
- Buy at support with stops below
- Sell at resistance with stops above
- Trade breakouts when levels fail
4. Trend Following
Trade in the direction of the dominant trend:
- Identify the trend using moving averages (20 EMA above 50 EMA = uptrend)
- Wait for pullbacks to moving averages
- Enter in the trend direction when pullback ends
- Trail stops using moving averages or swing points
Technical Analysis for Futures
Key Indicators
- Volume profile: Shows where most trading activity occurs, identifying support and resistance
- VWAP: Institutional benchmark that acts as dynamic support and resistance
- Moving averages: 9 EMA, 20 EMA, and 50 SMA are popular for futures
- Delta and cumulative delta: Shows buying vs selling pressure
Important Price Levels
- Previous day high and low: Major reference points for day traders
- Overnight high and low: Levels from after-hours trading
- Opening price: Reference point for opening range strategies
- Round numbers: Psychological levels like 5000, 5050, 5100 on ES
Risk Management for Futures
Position Sizing
Calculate your position size based on your account and risk tolerance:
Position Sizing Example
Account size: $10,000
Risk per trade: 1% = $100
Stop loss: 5 ES points = $250 per contract
This trade exceeds your risk limit, so you could not take it with ES.
With Micro ES (MES): 5 points = $25 per contract
You could trade 4 MES contracts ($100 / $25 = 4)
Stop Loss Placement
Always use stop losses when trading futures:
- Place stops at logical levels (below support, above resistance)
- Account for normal market noise to avoid premature stops
- Consider using time-based stops if price stalls
- Never move stops further away from entry
Daily Loss Limits
Set a maximum daily loss and stop trading if you hit it. Most professional traders use 2-3% of account equity as their daily limit.
Common Mistakes in Futures Trading
- Overleveraging: Using too much margin relative to account size
- Holding through news: Economic releases can cause violent moves
- Trading the overnight session: Lower liquidity leads to worse fills and erratic moves
- Ignoring contract rollover: Volume shifts to the next contract before expiration
- Not accounting for commissions: Round-trip commissions add up quickly for active traders
- Revenge trading: Trying to recover losses by increasing position size
Getting Started with Futures
Choose a Futures Broker
Look for these features:
- Low commissions (under $2 per contract round trip)
- Reliable execution platform
- Good charting and analysis tools
- Reasonable day trading margins
- 24-hour customer support
Start with Micro Contracts
Begin trading Micro E-mini contracts (MES, MNQ) before moving to full-size contracts. This allows you to learn with real money while limiting your risk.
Recommended Starting Capital
- Micro futures: $2,500-5,000 minimum
- E-mini futures: $10,000-25,000 minimum
Track Your Futures Trades
Pro Trader Dashboard helps you analyze your futures trading performance. Track your win rate, average trade, and identify which strategies and times of day work best for you.
Summary
Futures offer day traders leverage, extended hours, and no PDT rule, making them attractive for active traders. Start with micro contracts, focus on one or two markets, and always prioritize risk management. The leverage that makes futures attractive can also lead to rapid losses, so trade small until you develop a consistent edge.
Ready to learn more? Check out our guide on risk control for day traders or learn about position sizing strategies.