How much money to start with is one of the most common questions by beginner futures traders.
While it seems like an easy answer, there is actually a lot of depth and considerations when creating a budget for your new trading business.
To fund your futures trading account, you can start with as little as $100 USD. But this is not your entire expense.
Let’s unpack this topic in detail.
Types of Expenses in Futures Trading
We’ll go through this section briefly and quickly. But this part is not often shared online and traders learn the hard way. So I want to make sure you have the full picture.
Platform Expense – this is the software you will use to look at charts and execute trades. There is a variety of fee structures, from free to monthly, to outright license purchases for life.
Data / Connectivity Fees – futures are different from stocks, in that you have to pay to get streaming data to even see the price charts of the assets you‘ll be trading. The CME bundle is $30 USD a month and is everything you need. If you are trading in a corporate account, you are deemed a professional and those fees increase to $120 USD per month, per exchange.
Technology – you can start with what you have right now. One thing to consider is to check the system requirements of your trading platform and make sure your computer can handle it. If you have to upgrade, that could mean a significant additional cost.
Trading Education / Community – not a single professional trader ever works in isolation. Look at professional desks around the world, they have multiple people and it is a team environment.
This is the area most new traders skimp on, and end up losing money fast and not being able to afford a proper education afterward. Budget this as part of your investment in yourself and your new trading career. It will make a huge difference and accelerate your journey.
These areas are often overlooked, and stress traders out very early on in their journey when they pop up as a surprise. This is why I wanted to start with this list.
Next we are going to look at the actual costs associated with executing the trades. How much money do you really need?
Funding Your Trading Account
The minimum amount of money you will need is dependent on which company you choose to open your brokerage account with.
Margins are set by the Chicago Mercantile Exchange for futures contracts. The margins are quite high. You can read more about margin requirements here.
There are two types of margin, initial margin, and maintenance margin. The blog above will explain each in detail.
Depending on the broker you choose, they will offer you a reduced day trading margin. This will ultimately determine how much money you will need to have in your account for each contract you trade.
The range varies from as little as $500 to $5,000 USD per contract for the mini products. But if you are brand new, you can start trading micro futures for as little as $50 to $400 per contract. Again this depends on the broker you choose.
You can read up on the benefit of micro futures in our micro futures introduction blog here.
I highly recommend everyone start with micros these days, it will save you a lot of time, money and most importantly help you build your strategy without risking too much money.
It is extremely important that you take the time to research and choose the right broker for you. This is the part new traders rush, to and almost always regret.
To read more about futures brokers, click here.
At this point, you realize that it can require between $200 to over $5,000 USD to get started. It really depends on HOW you want to start, and where you already are in your trading journey.
In the next section, I will recommend a sample plan for a brand new trader and how they should start.
The Most Important First Expense as a Beginner Futures Trader
Believe it or not, one of the problems with beginner traders is starting with too much money.
At the beginning, you are particularly vulnerable, and more money is more liability. Why risk capital in your learning stage, when you don’t have to?
I recommend beginner futures traders start by investing in a high-quality education. We all want the most educated doctor to look after our health. Why wouldn’t you want a highly educated and well-trained person to be your money manager? Especially since it’s you!
The beginner trader journey takes a few months of learning and practicing before you ever get to use real money. As you are going through the trading course and getting ready for live trading, you can be actively saving more money to fund your account with.
Working with hundreds of thousands of traders in my trading career over the last 20 years, I can tell you that most often the traders that succeed the quickest are the ones that started by investing in their education.
Now it is also important to mention you don’t want to spend $50,000 USD on a course. Why?
Truth is, the most important lessons you will learn from the market directly. An education is just a bridge and a guide of sorts.
How Much Money Should a New Futures Trader Start With?
And now finally, we can get to the original question. How much money do you need to start trading futures?
You can start with as little as $100 USD if you start trading the micro futures. Which is where you should start.
But that leaves no margin for error, pardon the pun.
I would recommend trading micros, but funding your brokerage account with at least $1,000 USD. This will leave you some room, and you won’t be a few losses away from blowing your very first trading account.
At the beginning, you want to start small. Your trading losses will be small, and your education will be cheap.
I have never seen anyone regret starting small. In fact, the most profitable traders I know, some of which started as millionaires from other lines of work, have started small.
As you grow your experience and confidence, you can always add more money.
I would love to hear from you, how much do you plan to start your futures trading journey with?
Thank you for reading, and I wish you an amazing journey in your new business venture.
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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO AcademyTM is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.
