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Learn the Basics of How to Trade Within the Small Exchange

February 18, 2021 by Daniels Trading| Futures 101

For active traders, each market presents a wide range of unique functionalities. Margin requirements, expiration dates, business hours, and applied leverage are a few attributes that differ from product to product. If you’re not up to speed on the nuances of your particular market, then costly mistakes are inevitable.

Fortunately, you can streamline your approach to the contemporary marketplace. One user-friendly option is learning how to trade derivatives on the Small Exchange. In this blog post, we’ll introduce you to the basics of how to trade the Smalls.

The Small Exchange 101: Form and Function

For traders of all sizes and experience levels, the Small Exchange offers an array of speculative and risk management opportunities. And becoming active in the market is straightforward. To get started, all you need is an internet connection, computing power, risk capital, and an affiliated broker. After a few quick tutorials, you’re on your way!

Reduced-size trading provides traders with a multitude of trade management options, and the ability to diversify holdings. Learn more about how bigger isn’t always better in our guide >>

One area in which the Smalls excel is in their simplicity. Uniform construction ensures that there’s no guesswork about contract expiration, trading hours, tick sizes, or pricing. If you’ve ever traded futures, forex, or ETFs, then you’re aware that these factors can vary greatly. With the Smalls, the trading process is vastly simplified:

  • Contracts: There are six Small products to choose from, facing the equity, commodity, debt, and currency sectors. Two contracts are offered for each Small: the front-month (current) and the back-month (deferred). As an additional benefit, the Smalls provide traders with pure exposure to the underlying assets.
  • Pricing: All Small contracts feature a minimum tick size of 0.01 and a per tick value of $1.00.
  • Expiration: All Small contracts expire on the third Friday of the month.
  • Trading hours: All Small contracts are traded Monday through Friday, 7 a.m.-4 p.m. CST.

By design, the Smalls combine the capital efficiency of futures with the pricing of stocks. The result is an all-in-one vehicle ideal for the pursuit of nearly any trading or investing goal.

Margin Trading with the Smalls

Anytime you trade derivatives, you must satisfy margin requirements before a broker will facilitate any transaction. This is a major concern for forex and futures traders because margins vary wildly per market. With the Smalls, these concerns are largely eliminated.

Although each Small contract features distinct margin requirements, they are vastly reduced over their futures, forex, ETF, or stock market counterpart. The lower margin rates promote optimal capital efficiency and fully customizable granularity―two items vital to successful traders. When trading a product on the Small Exchange, capital outlays are minimal:

Product Margins Initial Maintenance
Small Technology 60 (STIX) 5-15% $484.00 $440.00
Small Stocks 75 (SM75) 5-15% $523.00 $475.00
Small US Dollar (SFX) 1-2% $165.00 $150.00
Small Precious Metals (SPRE) 2-10% $462.00 $420.00
Small 10YR US Treasury (S10Y) 5-25% $180.00 $165.00
Small Global Oil Index (GOSME) 5-30% Coming Soon!

Note: Margins are subject to change per current market conditions

As you can see, modest capital requirements make engaging the Smalls attractive to retail market participants. Traders also face very few barriers to buying or selling a Small contract. To illustrate, let’s say that Carey the currency trader is interested in going long the U.S. dollar. Instead of buying or selling a basket of forex pairs, Carey does the following:

  1. Opens a Smalls-supported software platform like dt Pro
  2. Checks the updated trading account balance for adequate margin money
  3. Selects the Small U.S. Dollar (SFX) contract
  4. Places a buy market order for one lot of SFX

Carey’s order is then filled at the best available price, opening the new position. Once the SFX long goes live, Carey’s trading account is credited or debited $1.00 for every tick that price moves up or down. As long as the margin requirements are being met, the position may be held until contract expiration. Placing a trade on the Small Exchange is as simple as that.

Are You Ready to Trade the Smalls?

The Small Exchange offers traders of all types countless speculative and hedging opportunities. If you’re interested in making the Smalls a part of your trading plan, download our ebook today to learn more.

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Filed Under: Futures 101

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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