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Traders (novice or not) should simply not trade size based on available
margin. Consider that one e-mini is worth 50 * roughly $1470 = $73,500.
Initial margin is roughly $5000 yielding nearly 15 to 1 leverage ... if
fully margined less than a 7% loss will wipe out the account. Size
should be based on the trade risk per contract divided into a nominal
percentage of account size e.g. (($25,000 * 0.03) / $350 risk between
entry and stop loss) = 2 contracts. Most experienced traders will not
risk more than 2-3% of account size on a trade making it possible to
sustain adverse excursions in losing trades without going down the
tubes.
I recommend funding an account properly for the risks to be taken using
2-3% of account size and placing 80% of the account in TBills. Bills can
be used for 90% margin (some brokers allow less) while earning interest.
The other 20% is used to satisfy the 10% cash margin requirement with
room to spare. Should it become necessary to cash in a TBill to satisfy
cash margin requirements, one should consider taking a holiday until the
account can be re-established at proper levels.
Earl
----- Original Message -----
From: "Michael Ferguson" <wl7bdn@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, June 07, 2000 5:51 PM
Subject: [RT] GEN: Trading: eMini- Novice level ONLY
> There were some questions earlier about trading SnP minis. I learned
> something of interest to novice traders today. If you have a trading
plan
> that allows you to trade 1 lots, and you have enough margin in your
account
> to trade more than 1 contract, and trading 2 contracts would violate
your
> risk rules, you might consider reducing your account balance to a
level that
> would prevent 2 lot trades from happening. This may mean telling the
nice
> person to please send you a check periodically.
>
> Because it is possible to open a bigger position than you planned to,
you
> might. Please don't ask how I came by this knowledge. Preserving my
capital
> by controlling my risk exposure and trading costs is Rule 1. If such a
thing
> came to pass, I would close the trade.
>
> Flatly,
>
> Michael
>
>
>
>
>
>
>
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