danielk

Hi BlueHorseshoe! Thanks for the feedback! From my research it seems that the requirement for the initial margin, is actually a mandatory requirement from the CME Exchange itself and fluctuates based on market conditions(volatility). Some good reads on the topic; Understanding Margin Changes | OpenMarkets http://www.cmegroup.com/clearing/files/cme-clearing-margins-quick-facts-2011.pdf And CME's overview of current margins aka "Performance Bonds" http://www.cmegroup.com/clearing/margins/#e=CME&a=EQUITY+INDEX&p=all So currently CME demands $4510 initial margin for every contract traded. This is CME's approach to helping out with risk management and ensuring the right type of volatility. Not to be confused with a traders own risk/money management policies, naturally If i understand it correctly, 1x ES contract is worth 50x the S&P 500 index, that puts a current contract value at 50x 1,752 dollars. So in effect one single contract is worth $87,600. Knowing all that really puts things into perspective and makes the $4510 initial margin perfectly understandable! And to Seeker, sorry for the impolite response. However, you either didnt really read what i posted, or otherwise misunderstood my question... Cheers

Uhm, yeeeah... OK! thanks...

Hi, Edit: Right, so i think ive answered my own question through research. The reason for the capital requirement is the "initial margin" requirements set by the exchange CME+broker. As far as i understand it they require around $4500 as a form of liquidity(insurance) per contract, pretty much to do risk management for you..? Still seems high to me given the actual movements a contract typically can do. -- I'm a noob. And i keep reading about how E-minis require relatively huge capital to trade safely, but dont understand it. I've also noticed all the warnings of it being extremely risky for those who do not understand it, hence this post. So the advice i keep seeing is to have a bankroll of $5000-$10.000 PER contract you trade. A general observation of the ES is that it tends to move 15-30 points an average day. It is also very rare to see it move more than 10 points in 1 hour, usually averaging 2-4 points of movement an hour. In contrast to forex, this seems a lot "safer" - making the likelyhood of huge sudden moves a lot lower. Now, not that any strategy would allow this to happen, but lets take a worst case scenario. You've got $5000 on your account, and buy 1 ES contract when it opens. You for some reason ride the downtrend and the ES closes 30 points down. Netting you a loss of 30x$50 = $1500. You still have $3500 left. Now, if you have a long term strategy that must allow for huge stop losses, then i can get behind the $5000 recommendation. However, if i were to guess, i would imagine most strategies(at least mine would) use a SL of.... 2-5 points? $100-250 potential loss. Then my question is, why would you advise having a $5000-10.000 bankroll, when your worst case SL stops you out at a $100-250 loss? Is this the "max 2% capital risk" rule in action? Dont want to come off seeming reckless here, but somehow this just seems a bit overly cautious to me? Appreciate any thoughts!