Best Futures Contracts for Day Trading

Based on a number of criteria, here's where to focus your efforts

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Futures are an attractive market for day traders. Today trade stocks you need at least $25,000, but today trade futures you can start with as little as $1,000...although starting with at least $3,500 is recommended. Another allure of futures trading is that big returns (and losses) are possible since you only need a small amount of capital to control positions which can produce big profits/losses in seconds. 

The amount of capital you require to day trade will depend on the futures contract you trade. Futures contracts have different "day trading margin" requirements, meaning you need to have varying amounts of money in your account to trade various contracts. If you have a small account, you're limited to futures contracts which have low day trading margins. If you have a large account, then you have more flexibility in what to day trade, and the guide below will help you decide. 

How to Pick a Futures Contract to Day Trade

To find the right day trading futures contract for you, consider volume, margins, and movement. 

In terms of volume, day trade contracts that typically trade more than 300,000 contracts in a day. It assures you can buy and sell at the levels you want and that there will be another trader there to sell/buy from you.

According to the CME Leading Products Q4 2015 report, the following are the most heavily traded futures contracts on the Chicago Mercantile Exchange (CME).

  • Eurodollar (GE) - 2,040,239 average daily volume
  • E-Mini S&P 500 (ES) - 1,690921 average daily volume
  • 10-Year Treasury Note - 1,121,290 average daily volume
  • Crude Oil WTI (CL) - 807,687 average daily volume

Based on volume, these are the top picks. Traders then need to look at margins and movement to determine which suits their finances and trading style. 

Day trading margins vary by broker. To provide an idea though, NinjaTrader brokerage offers the following day trading margins on these contracts. 

  • Eurodollar (GE) - $500-day trading margin per contract
  • E-Mini S&P 500 (ES) - $500 day trading margin per contract
  • 10-Year Treasury Note (ZN) - $500-day trading margin per contract
  • Crude Oil WTI (CL) - $1000 day trading margin per contract

Based on this, Crude Oil has higher margins than the other contracts. Therefore, it follows you need a larger account to trade it. Oil is also quite volatile. Therefore, price movement must also be considered.

To establish movement, two things must be considered: point value, and how many points the futures contract typically moves in a day. The follow list provides the contract, the point value and daily average movement in points. 

  • Eurodollar (GE) - 1 Point = $2,500. 0.02 point average daily range.
  • E-Mini S&P 500 (ES) - 1 Point = $50. 36 point average daily range.
  • 10-Year Treasury Note (ZN) - 1 Point = $1000. 0.74 point average daily range.
  • Crude Oil WTI (CL) - 1 Point = $1000. 2.1 point average daily range.

The above volatility is based on Average True Range (14) as of February 25, 2016. The daily range will fluctuate, with some days and weeks seeing higher volatility, and other days and weeks seeing lower volatility. But this provides a good estimate for comparison of volatility between futures contracts. 

Deciding Based On These Factors

E-Mini S&P 500 futures (ES) are an excellent middle ground and a good place for day traders to start. Margins are low at $500, and volume is also slightly higher than crude oil. Holding a single contract through a typical trading day could see your profit/loss take a $1,800 swing (36 points x $50/point). Not that you should buy-and-hold a contract all day; this is just an example to highlight volatility.

New traders will typically find the E-Mini S&P 500 futures produce enough action to create consistent income, and they can start trading this contracts with $3,500 or more in their trading account. Viewing a 1-minute chart will show there are lots of opportunities to get into and out of trades as the price fluctuates throughout the day.

Crude oil (CL) provides decent volume, but it also requires the most margin and is the most volatile. If you held one contract during an average day, your profit/loss could swing $2100 (2.1 points x $1000/point). It makes it an exciting market choice but isn't recommended for new traders or traders with small accounts (under $5,000). Viewing a 1-minute chart will show there are lots of opportunities to get into and out of trades as the price fluctuates throughout the day.

10-Year Treasury Note futures (ZN) are another option for day traders. Volume is decent but not as high as the S&P 500 futures. The 10-year is also less volatile in terms dollars at risk per contract. For example, if you held a 10-year contract through a typical trading session, you could see your profit/loss fluctuate up to $740 (0.74 points x $1000/point). Viewing a 1-minute chart will show there are lots of opportunities to get into and out of trades as the price fluctuates throughout the day.

Eurodollar futures (GE) can be ruled out as a day trading choice unless you like very slow movement. During a typical trading session, the price may only move once or twice, resulting in few opportunities for profit. It is a popular market for long-term traders and institutions, not day traders. View a 1-minute chart of this futures contract, and you will see that it doesn't move much, thus not favoring day trades.

Final Word on Best Futures Contract for Day Trading

Based on volume, margins, and movement you now have a few choices to consider. If you are starting out, trade the E-Mini S&P 500, or the 10-Year Treasury note. Both produce lots of movement and volume each day, as well as low day trading margins. As you progress, you may also consider Crude Oil futures. It has slightly lower volume than the prior two, is more volatile and has higher day trading margins. That means you should have a larger account to trade it. Eurodollar futures have high volume but are not a day trading market. 

Now that you know where to look pull up an intraday chart of each, and see which aligns with your strategies the best.