How Much Money Do You Need To Trade Futures? (And Make it Count!)

Futures may strike you as a great trading opportunity with low capital requirements. But how much money do you need to trade futures? Do you have enough to make it count?

Futures trading draws a lot of people without giant accounts, for a few reasons:

• There's no pattern day-trading rule. You can day trade to your heart's content, 23 hours a day.
• You get a lot of leverage, so you can make (or lose) more with less capital
• Minimum deposits are low for most futures brokers

If you're reading this, you know you can't jump in blindly. To do it right, you have to manage risk. And to do that, you have to right-size your account and your position size.

You don't want to be risking the whole account every trade.

What is the Minimum Amount to Trade Futures?

The minimum amount to trade futures depends on what you want to get out of it. Do you just want to learn, while risking as little as possible? Do you want to supplement your income? Do you want to trade for a living?

Let's look at the possibilities:

1. Trade futures with your own money.
2. Trade futures using other people's money.
3. Learn to trade futures, without risking any money.

Trade Futures With Your Own Money

The bare minimum to trade futures with your own money, is whatever your broker specifies as minimum day trading margin.

For some futures brokers, this number is low - like $50 or less, depending on the contract. Unless you're the luckiest man on the planet, though, that probably won't get you very far. 

So, technically, you can trade futures (micro contracts) with as little as $50. But should you? It will be an uphill battle, but that's up to you. One small move against you, and you're out. Not exactly risk management.

How much can you afford to lose?

It sucks to think about losing, but it's part of trading. Accept that now. You will have losing trades, and you will have red days.

But the answer to this question determines how much most people are willing to put into a futures account. You should never risk more than you can afford to lose.

Also, be honest with yourself about how much you can afford to lose. Unfortunately, a lot of people think "that won't happen to me, no way I'll lose it all, I'm smarter than that." 

That, my friend, is a mental trap. Sure, you may be smarter than average. You may be brilliant. And that still doesn't mean you won't lose your shirt.

Thousands of 'brilliant' people get humbled by the markets every day. It sucks them in and spits them right back out.

So don't decide you can afford to lose $100,000 and slap it in an account thinking you'll only lose 10k at worst. If you have that thought, it probably means you can only afford to lose 10k.

How do you know what you can afford? What amount would...

• Not at all affect your ability to keep your financial obligations - mortgage, rent, food, bills, child support, whatever?
• Not cause you to be depressed if you lost it all in a day, with nothing at all to show for it?
• Not upset your spouse or significant other if you lost it all in a week?
• Be OK, in the eyes of anyone who depends on you financially?

Now that you've probably decreased the amount that you're willing to deposit, we can continue.

How does that number look in the context of your goals?

If you want to trade with real money, I'm assuming you want to do it to make money. I also assume you plan to trade every day, or most days.

Decide what your monthly trading goal might be, and divide it by 20 (average trading days each month). That's how much you need to average every day.

For example, $4,000/mo means you need to average $200 a day in profits.

For simplicity, let's assume you risk 1:1 each day. So you're risking $200 to make $200. In reality, you'd likely choose something like 1:2 or 1.5:2, but 1:1 works well for this example.

Take the number you're willing to lose and divide it by that number. Let's say you're willing to lose a total of $10,000.

$10,000 / 200 = 50. 50 days. That's your runway if you lose every day - which is possible, don't think it isn't.

Does that work for you? Does 50 days of trading seem like enough room to give yourself? Maybe it does, maybe it doesn't. That's up to you.

This chart shows how daily risk amounts affect how many days of risk you have:

Now, you may be thinking, "Hold on, I'm not planning to lose, so why are you acting like I'm going to?" You might be thinking this, and I get it.

I don't plan to lose, either. But as you know, trading is the exchange of risk for reward. And our best laid plans don't necessarily work out.

Although trading isn't war, it can be a battle. New traders often feel like green infantry grunts after their first few days of trading real money. 

You have no way to know:

• How your trades will play out, win or lose
• How long your losing streaks will be
• How many losing streaks you'll have
• How you'll react to those (hopefully with discipline)

Trades don't always go according to plan. You have to be able to focus on the process, not your P&L. So, you need room in your account for some drawdowns (losing streaks). 

Do you need to adjust your goals? It's unlikely you can immediately increase how much money you're willing to risk. You can earn more and stuff money into savings, and that takes time. You may chose to do that.

Or you may choose to adjust your trading goals, and risk less each day. If you drop your max loss to $100 a day, that gives you 100 days. 

Do whatever you need to arrive at a runway you're comfortable with.

Now, about daily goals...The above example is nice and round. It doesn't consider how your daily P&L may look in real life. A week of trading, for a winning trader, might look like:

• Day 1: $200 profit
• Day 2: $200 profit
• Day 3: $200 profit
• Day 4: -$200 loss
• Day 5: $0 breakeven

Add that up, and you get $400. So you made $200 a day on your winning days. You only had one red day and lost $200. But you are not on track to make $4,000 in a month. You're on track to make $1600/mo. 

You will have better weeks, you will have worse weeks. the fact is, very few traders make money every single day.

If you have a winning streak, be careful about expecting it to continue. That expectation can lead you to lose money and have outsized down days. Those can blow up accounts and derail your mental game for extended periods. I know professional traders who have succumbed to it.

Adjust your goal again. 

I know, I'm a drag! I keep slapping you with reality. That's because I want you to succeed. I want you to become a trader that has potential to grow into making real money, a trader who can have regular $40,000 months, not $4,000 months. 

And if I have to talk you down to earth to do that, I'll swallow that pill. Can you?

Trade Futures Using Other People's Money

If you're thinking about risking your own money trading futures, you should at least consider the option of using someone else's capital. And no, I'm not talking about borrowing money to trade, or asking friends and family to "invest" with you. Don't do that.

Who will give you money? There are plenty of Trader Funding Firms helping traders get capital. This new evolution in prop trading provides funds to traders who pass a trading evaluation. Think of it like a sports tryout, but with trading.

You can enter an evaluation for a monthly or one-time fee, and for that you get to trade with a certain amount of risk. That risk defines how much you can lose per day, and overall, during your evaluation.

For example, you might pay $100 or less for an evaluation that allows you a $2500 drawdown. You get to risk $2500, for $100.

You'll have some risk management rules to follow, and those vary with each program. You'll have a profit target, which also varies.

Hit your profit target without breaking a rule to qualify for a real account. Most of them have similar rules and risk parameters to the evaluation. But the profits from that account can be withdrawn!

Starting out, most of these firms aren't going to give you a big chunk of risk. You'll have to earn that. Some will give you more risk but collect a much larger evaluation fee. Either way, you get to bypass the difficult process of getting hired by a traditional Proprietary Trading firm.

Once you get into a real account, stick to your process and make gradual progress. You can withdraw profits and spend them, or you can reinvest them into getting bigger prop accounts or multiple funded trading accounts. In that way, you can grow to a substantial amount of trading capital with a very small initial outlay.

Of course, all this depends on you trading profitably in the evaluation and then in the real account. If instead, you hit your max drawdown or break a rule, you have to start over. You can pay to reset your account then. Or with some firms you get a free reset when you renew your monthly subscription.

You're still taking a risk. You can still lose the fee you're paying and get nothing back. But getting to trade with far more than you're putting in makes it a valuable option - if you're confident you can pass. All this and more is covered in my article on proprietary trading jobs.

Learn to Trade Futures, Without Risking any Money

If you want to learn to trade futures without risking any money at all, you can use a simulation account. Also called "paper trading" or "sim", this means you trade fake money with real market data. You open, manage, and close positions as if they were real.

I may receive compensation from some companies on this site. I'm a trader and mentor first. I write from my experience and only give high marks where they're due.

If you've never traded before, you should start this way. Treat it like it's real, and you can learn and grow valuable trading skills before putting real money on the line:

• Learn to spot patterns that have measurable and repeatable setups, and test them out risk-free.
• Hone your ability to focus on the futures markets, process the information and take disciplined action.
• Build confidence in your process and the profitability of your setups.
• Develop consistency and build good habits.

All without putting a dime on the line!

Get Started With Sim Trading

• Quantower software sim trading is 100% free. They offer free live data for sim trading, and their free software has a lot of great features. 
• Tradingview does the same, although I like their software less. 
• Several brokerages include a simulation account for free. TD Ameritrade allows sim trading on ThinkOrSwim, which is also popular.

How Much Does it Cost to Trade Futures?

How much it costs to trade futures depends on a few factors. Which contracts you trade, what brokerage you use, and what software you employ all contribute to the cost.

Main costs:

• The capital you invest
• Commissions on each trade. They're small but they add up.

Your total commissions will depend on how much you trade. Those can be as little as a dollar a day to several thousand dollars a month. Fortunately, they scale with your volume. If you're paying $3,000/mo in commissions, you should also be making several thousand dollars a month in profits after commissions.

You may also have other costs:

• Realtime data feeds - $0-30/mo
• Trading software license fees - $0-100/mo
• Computer costs (a high-performance desktop computer, ideally) $1,500-$3,000
• VPS (Virtual Private Server) $70-300
• Internet costs (you may need to upgrade) $50-200/mo
• Educational materials - $0-500/mo

As you can see, these can really add up. But, they don't have to. A few ways to save:

1. Use free or low-cost data feeds. Most individual data feeds are not that expensive. When you're just starting out, there's less benefit to paying more.
2. Use free or low-cost software to trade. Quantower is a great option.
3. Computer costs - You might be able to use your current computer until you are making money from trading. Don't spend on a big trading PC until you need it.
4. A VPS can help if you want to trade on a low-powered PC or laptop (or even your phone). The monthly cost can be high, but for some people that's easier than spending several thousand up-front on a computer. 
5. Internet costs are hard to skimp on, but there are ways to save. Cut bandwidth needs by disconnecting other devices while trading. Shop around for the best deal in your area.
6. Educational materials are readily available for free, just be careful who you listen to. 

Bottom line, be thoughtful on where you spend your money. Don't sign up for big monthly obligations thinking you "have to spend money to make money." That's not how it works.

Do You Need 25k to Trade Futures?

There's no requirement that you need $25K to trade futures. The $25,000 requirement, A.K.A. Pattern Day Trading Rule, doesn't apply to futures - only stocks and options.

Whether you need $25,000 to trade futures in order to meet your goals and manage your risk is up to you.

Depositing $25,000 and giving yourself 50 days worth of risk allows you to risk $500 each day. Or, you can give yourself 100 days worth of risk at $250/day. The mix of capital and daily risk can be tailored to suit your needs.

Can Anybody Trade Futures?

Not just anyone can trade futures, but most adults can trade futures. A few requirements:

• You have to be over 18
• You have to be legally able to trade financial instruments. For example, you don't have convictions that prohibit you.
• Most brokerages won't accept you if you have a bankruptcy in the last 7 years, since futures trade on margin. Some prop firms might, since they will have risk controls in place in your account.
• Citizens of some countries may not be able to open accounts with some brokerages. This can be due to any variety of geopolitical factors.

So, most adults in most countries won't have restrictions preventing them from opening a futures account and trading.

What is the Minimum Lot Size in Futures?

The minimum lot size is one contract, regardless of what futures you're trading.

How Much Money Do I Need to Trade 1 Lot Size?

How much money you need to trade one lot size (one contract) is the day trading margin requirement. That margin requirement will determine how much money you need to deposit. One futures contract will have different day trading margins from another. Variables that affect the capital required are:

• The specific instrument, i.e. Gold futures vs Nasdaq 100 futures
• The margin requirements of the broker
• The current pricing (and notional value) of that contract

As mentioned above, some brokerages will allow you to trade Micro S&P futures for as little as $50. Other brokerages may require more capital for that instrument. Other instruments may require more capital.

When you trade futures, you get to hold the notional value of a contract for just the margin requirement. Notional value is calculated by multiplying the contract unit by the contract price. For example, with the S&P 500 e-mini contract:

• The contract unit is 50 - this doesn't change
• The contract price is, let's say $4,000 at this instant - this changes constantly

Therefore, the notional value at this moment is 50 x 4,000 = $200,000

You can learn more about notional value here.

Micro Futures Contracts

Micro futures contracts work the same way, but in 1/10 proportion to the e-mini contracts. Using our example above, that would mean:

• The contract unit is 5 - this doesn't change
• The contract price is $4,000 - this changes throughout the trading session.

Notional value for the micro e-mini S&P 500 contract is 5 x 4,000 = $20,000

So, the amount you have to have on deposit for this contract will be much less (usually 90% less) than what you'd need to trade the e-mini.

Can You Live Off Futures Trading?

As a profitable trader, you can live off futures trading. But, you have to dedicate the resources and time necessary, and it's not an easy way to make a living.

Trading for a living is challenging and risky, so you shouldn't get into it without serious thought. Read more about this in Day Trader Salary

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