Can You Really Make a Living Day Trading Futures?

Futures traders are notorious for spectacular gains -- and losses.

Futures traders are notorious for spectacular gains -- and losses.

It’s too risky! You can make millions! It's a zero-sum game! You need to have a lot of capital! If you're not careful, you could end up with thousands of bushels of corn! This is only some of the hype you may have heard surrounding trading the futures markets. Futures are contracts to buy or sell specified quantities of a commodity or financial instrument by a given date and price. Day trading futures for a living involves snagging these contracts on a futures exchange and completing your trades before the day is out. While grains of truth lurk amidst the hubbub, separating the fantasy from the reality is critical if you're serious about futures as a career.

Reality Check

It is a truth generally acknowledged that 95 percent of futures traders fail, so with the odds stacked against you, why would anyone choose this path? Educators at the Daytrader's Bulletin note many a well-intentioned person who has approached day trading futures as a career, only to retreat into the mists after being given the reality report: Trading at home means that when the Internet is down, you'll be unable to undo your trade; there will be times when the market hems and haws, producing minimal gains; losses will occur, which could deal a blow to your morale. With this, the rosy picture of unlimited profits fades away.


Although times are changing, allowing for amounts as low as $500 to start day trading futures, low amounts are not the holy grail for traders looking to make a living. Trader resource Trader Kingdom warns that enticing as it might be to spring into action for a small amount of cash, you don't want to be stuck with an underfunded account that can lose more than what you initially invested. Because futures are highly leveraged, a small amount can bag you much larger amounts than you put in. By the same token, losses can also be much greater.


One of the key things to grasp about day trading futures is that the winnings you make, if any, are part of the give and take of the markets and not something regular like a salary. There will be times of profit and of loss, or drawdown, and your psychology must be prepared to deal with both eventualities, without emotion. Writing in Daytrader’s Bulletin, Ralph Russell describes how he made money for several clients, and how ephemeral those gains were. He made $1,000 for one client without fail for weeks, only to lose almost half the account in one day; for another, he made $16,000 in six weeks, never to repeat the results until the following year.


If your nerves are easily rattled, don't even think about day trading futures -- for a living, or otherwise. Whether someone else has made a living doing so doesn't matter if it just doesn't suit you. Envision a life of making instantaneous decisions, with no opportunity to mull it over until a more convenient time. That will be your life as a day trader. Should you decide you have the mettle for it, grapple with the ever-present risks. Short-term trading means being at the mercy of news events, and the improvidence of system failures. For small accounts, these glitches can easily wipe out your entire account.


About the Author

Timothea Xi has been writing business and finance articles since 2013. She has worked as an alternative investment adviser in Miami, specializing in managed futures. Xi has also worked as a stockbroker in New York City.

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