Stocks or futures?  It’s a principal issue for many new investors and traders.  Today we’ll consider the pros and cons of both trading instruments, and which might be better for you.  Also be sure to speak to your registered financial consultant before making any final decisions on trading, depending on your specific financial situation, the risk you can tolerate , and so forth.

One of the largest potential benefits of day trading futures is the leverage provided.  While stock trading may extend 2 to 1 leverage (depending on brokerage), futures trading can offer up to 100 to 1 leverage (again, depending on brokerage).  Some discount brokerages offer  e-mini S&P (ES) trading with intraday margin as little as $500 per contract.

Considering that the ES may have intraday trading ranges of 20-30 handles, and that the value of an ES contract increases (or decreases) $50 per handle per contract traded, emini day trading certainly offers the opportunity for very substantial gains not generally offered by trading stocks.

Also, one of the cons of trading stocks is that there are more elements to keep in mind .  When trading a stock, it is important to consider the future direction of the market in general, the stock’s sector (semi-conductor, healthcare, etc.), and then the likely direction of the stock, as well. 

There are still further circumstances outside of your control, such as scandals, disasters, earnings, and more.  With stocks, you’ll find that their prices are both driven by macro economic events and direction of the parent index, but also the micro events that have to do with the specific company as well.  This can make profitable stock trading more of a challenge .

Due to the comparatively small initial account size required and the capability to trade without having to follow so many different variables, deciding to learn day trading is certainly an intriguing idea.  However do keep in mind that due to this increased leverage, timing is more critical than ever.  Because of the lack of leverage in stocks, they do tend to be a bit more forgiving (depending on your risk profile).