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Capitalize on Market Volatility by Day Trading Futures

January 2, 2020 by Daniels Trading| Tips & Strategies

By definition, volatility is the variance of price action from a mean value over a specific period of time. Although many traders hesitate to engage the markets during especially active cycles, day trading futures can be a great way to secure profits. In fact, the enhanced liquidity and robust depth-of-market make active periods some of the best times to trade futures.

Of course, fully accounting for volatility is an essential part of profiting from the seemingly chaotic price action. If you ignore the potential for extraordinary swings in P&L, losses can mount quickly from an unfortunate turn in the market. Rapidly developing short-term trends are relatively common and may be extremely lucrative in futures, but it’s best to respect their downside at all times.

The Three Fundamental Drivers of Profitability

When it comes to producing strong returns when day trading futures, you need three components to ensure gains: leverage, liquidity, and volatility. Here’s a quick overview of how each of these elements plays a key role in fostering profits:

  • Leverage: The opportunity to generate large gains from a relatively small amount of risk capital attracts many people to the discipline of day trading futures each year. With margin requirements typically falling between 3-12 percent per futures contract, active traders are able to fully customize position sizing. This is an especially important characteristic during periods of heavy participation and action. Applying properly sized positions is a vital part of weathering hyperactive price action. If your positions are too large, premature liquidations and margin calls become possibilities.
  • Volatility: Much like the application of financial leverage, pricing volatility can be a double-edged sword. Although a timely spike or plunge in asset values may boost the trading account’s balance, it may also create abnormal losses. Being aware of key events on the economic calendar, applying technical tools, and consulting experienced market participants can help you place volatility into a manageable context.
  • Liquidity: One of the key calling cards of the futures markets is consistent liquidity. Having adequate market participation ensures that there’s an abundance of orders ready to be filled at each price point. Accordingly, a majority of the most popular futures markets feature considerable depth. This attribute promotes trade-related efficiency via constant order flow, minimal slippage, and tight bid/ask spreads.

Given the availability of leverage, consistent pricing volatility, and regular liquidity, day trading futures can be a profitable undertaking during turbulent financial times. From engaging the global energy complex to the world’s leading equities indices, many short-term opportunities are available on a session-by-session basis.

However, to fully capitalize on the potential of volatility, adhering to a comprehensive trading plan is an absolute necessity. Fully understanding the consequences of extreme volatility and heightened leverage is an integral part of successfully navigating chaotic periods in the markets.

Getting Started Day Trading Futures

If you’re interested in becoming an active futures trader, an ideal first step is to talk with a market professional. Having a detailed understanding of your goals, resources, and skills is a key part of getting off on the right foot in the marketplace. A veteran of the futures industry can help you align your trade-related objectives to your resources in a fashion that promotes success.

To learn more about how you can begin day trading futures, schedule your free one-on-one consultation with the team at Daniels Trading today. With more than two decades of experience in the futures industry, our staff is ready to help make your experience in the marketplace a positive one.

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Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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