How Much Money Can I Make Day Trading Futures?

See the profit a risk controlled futures day trading strategy can produce

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Learn how much you can make day trading futures from home. Getty Images

If you've wondered about the potential of day trading futures, then the following scenarios will show you what a risk controlled strategy could make. How much is made will vary by the market environment. During volatile times, when price moves are bigger, there's greater potential; when price moves are smaller there's typically less potential each day. Performance also varies by trader and is affected by the risk/reward of each trade, win rate and how many trades are taken.

Futures Day Trading Risk Management

Every successful futures day trader manages their risk; it's one of, if not the, most crucial elements of profitability.

Keep risk on each trade very small, 1% or less is typical. This means if you have a $30,000 account you shouldn't lose more than $300 on a single trade. Losses occur, and even a good day trading strategy will see strings of losses.

Risk is managed using a stop loss order, discussed in the Scenarios sections below.

Futures Day Trading Strategy

While a strategy has potentially many components and can be analyzed for profitability in various ways, it's often ranked based on its win-rate and reward/risk ratio.

Win-rate is how many trades are won out of a given number. If you win 55 out of 100 trades the win rate is 55%. While it isn't required, having a win rate above 50% is ideal for most day traders. 55% to 60% is acceptable and attainable.

Reward/risk determines how much is risked to attain a profit.

If a trader loses 5 ticks on a losing trade, but makes 8 ticks on their winning trades,even if they only win 50% of their trades they'll be profitable. Therefore, making more on winners is also a strategy component many futures day traders strive for.

A higher win-rate means more flexibility with your reward/risk, and a high reward/risk means your win-rate can be lower and you can still be profitable.

Scenario: How Much Money Can I Make Day Trading Futures?

Assume a trader has $7,000 in capital and a 55% win-rate. They risk only 1% of their capital ($70) per trade. This is accomplished by using a stop loss. For this scenario, a stop loss order is placed 5 ticks away from the entry price, and a target is placed 8 ticks away.

Trading one E-mini S&P 500 futures (ES), the risk on the trade is 5 x $12.5 = $62.5, which is less than our $70 max risk, and leaves some room for commission costs. A winning trade on one contract equals $100, or 8 x $12.50. Commissions will be dealt with later.

This means that the potential reward on each trade is 1.6 times great than the risk (8/5); we want winners to be bigger than losers. This is the reward/risk ratio taught to new students at the Day Trading Academy, and it works well.

Assume that volatility permits a trader to make five round turn trades per day (round turn includes an entry and exit) using the above parameters. If there are 20 trading days in a month, the trader is making 100 trades, on average, in a month.

Now, let's see how much a futures day trader can make in a month:

  • 55 trades were profitable: 55 x $100 = $5,500
  • 45 trades were losers: 45 x ($62.5) = ($2,812.5)

    Gross profit is $5,500 - $2,812.50 = $2,687.5 

    Assume commissions and fees of $4.12 per round-turn trade.

    Net profit is $2,687.50 - $412 = $2,275.50 

    Assuming a net profit of $2,275.50, the return on the account for the month is 32.5% ($2,275.50/$7,000). This may seem very high, and it is a very good return. See Refinements below to see how this return may be affected. Had you risked 2% per traded, which would allow you to trade two contracts per trade using the same $7000 account, the return would be double: 65% (assuming same trading stats). See How to Determine Proper Futures Position Size.

    Refinements

    It isn't always possible to find five good day trades a day, especially when the market is moving very slowly for extended periods of time. It's also possible that during low volatility times attaining the eight tick target isn't even possible, which means some trades will be exited for a smaller gain.

    The same is also true for losses, though; a trader exercising discretion over their trades may not always lose the full five ticks. 

    Slippage is an inevitable part of trading. It occurs when a larger loss than expected occurs, even when using a stop loss order. In liquid markets, such as the E-mini S&P 500, slippage isn't usually a major concern.

    Adjust this scenario accordingly based on your stop and target, capital, slippage, win rate, position sizes, and commissions. 

    How Much Money Can I Make Day Trading Futures? - Final Word

    This simple risk-controlled strategy indicates that with a 55% win rate, and making more on winners than is lost on losers, it's possible to attain returns north of 20% per month day trading futures. Most traders shouldn't expect to make this much; while it sounds easy, in reality, it's more difficult. Even so, with a decent win rate and reward/risk ratio a dedicated retail futures day trader with a decent strategy should be able to make more than 10% month. Not a lot of capital is needed to trade futures; in this scenario, $7,000 was used.