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I must have clarified that those low margins are for micros, but I do get your point. However I want to start tipping the toe with micros (MES, MNQ, MYM), and then move over the minis, if I survive
I think @bobwestcovered it well. I used to explain it to traders simply like this: If you want to hold a position thru the close (4:00 pm Chicago time) for that one hour until market reopens for next business day trading, then you will need the full margin. Otherwise you're flat going into the close, like most traders, and when market reopens you can then initiate a new position at the daytrade margins.
Brokers do not treat customers as an "inexhaustible" inventory. To say we don't mind when customers blow up is a mischaracterization. Those blowing up their accounts are a loss to the industry and a personal loss to themselves. In other words, they did not give themselves a fair chance.
The demand for the low margin is coming from the customer side, not the other way around.
It's the demand that created competition for commissions and leverage. Beginners want max leverage, low commissions because they think the combination of both will lead them to success.
Even some customers that are sufficiently capitalized still ask how many they can carry. You present them with the fact that they don't need this leverage, and they always come back with "just in case."
I suggest that you ask some members of this forum whether the broker pushed the margins or whether a question they brought up during the interview process.
Also, please consider that the micro has opened an opportunity for smaller traders to trade in a reasonable size. Still, at the same time, not everyone has the risk capital to put full margins, even for micros. Lower margins for day trading allow them to operate within that risk capital.
There are zero benefits to any broker that lost his or her customers. I put an enormous amount of education into helping traders. Simultaneously, the low margins we offer are because we are still in a competitive marketplace, and we must comply with the demand of that market. We hope giving a lower margin would allow some to participate and learn. Still, we do not advocate that they overleverage and treat trading as gambling with the "all-in" approach.
Thank you,
Matt Z
Optimus Futures
THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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Matt, I'm sure you're right about where the desire for high leverage and low capitalization comes from. It's the gambler's dreams of infinite riches with no effort to get them. (A very human impulse, by the way, which everyone probably has at first.)
So, I accept the fact that brokers may not be pushing foolishly risky behavior on their customers, and that the demand is there on the customer side.
Still, the first time I opened a futures account, I remember that the broker told me, "Yes, you only need $500 to open the account." A direct quote, shich I still remember. Not your firm, but not unheard-of in the industry, either.
I was not and am not trying to bash brokers, or not all brokers at least, and my point in the post you quoted was not anti-broker so much as anti new people making foolish and uninformed decisions about risk, so I could have phrased it better. My point was, do not make this mistake -- be careful and be realistic about the risk you undertake, that's all. Still, brokers who cater to this demand for high risk are part of the equation as well. For every buyer, there's a seller.
But what I mean to suggest to new traders is that they be realistic about their chances of striking it rich, and to go slow.
I agree that the micros are great tools for a new trader to operate with reasonable risk levels and learn how to trade with much less chance of losing their account, which is a painful way to learn the lesson. Although sometimes it's the way that it's learned, unfortunately.
My point in a subsequent post:
Micros are a good way to get into real trading with more sustainable risk, although you can lose there, too. Ultimately, the trader is responsible for his/her risk. They just need to be aware of it, and to be careful as they start out, which is my actual point.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
