Trading for Beginners: Why Futures Beat Stocks
When most people think of "trading," they think of buying shares of Apple or Tesla. But for active traders looking to make a living, the stock market has significant barriers. Enter the Futures market.
1. The Pattern Day Trader (PDT) Rule
In the US stock market, if you have less than $25,000 in your account, you are limited to 3 day trades in a rolling 5-day period. This is a massive hurdle for beginners.
Futures have NO PDT rule. You can trade as much as you want with an account as small as $500.
2. The 60/40 Tax Rule
This is the best-kept secret in trading. Short-term stock gains are taxed at your ordinary income rate (up to 37%). Futures contracts (Section 1256) are taxed differently: 60% of your profits are taxed as Long-Term Capital Gains (lower rate), and only 40% as Short-Term. This can save you thousands at the end of the year.
3. Leverage and Capital Efficiency
To buy $100,000 worth of stock, you typically need $50,000 (2:1 margin). To control $100,000 worth of S&P 500 futures (roughly 4 Micro ES contracts), you might only need $200-$500 in intraday margin. This allows you to grow a small account much faster—but remember, leverage cuts both ways.
4. Simplicity
Instead of scanning 10,000 stocks every morning, futures traders focus on a few liquid markets: the S&P 500 (ES), Nasdaq (NQ), Gold (GC), and Crude Oil (CL). You get to know the "personality" of these markets intimately.
Conclusion
If you have a small account and want to day trade actively, futures are the superior instrument. Combined with our automated strategies, you can trade these powerful markets with precision.
Risk Disclosure & Disclaimer
Educational Purposes Only: The content provided in this blog is for educational and informational purposes only. It does not constitute financial, investment, or trading advice. Young Money Investments is not a registered investment advisor, broker-dealer, or financial analyst.
Risk Warning: Trading futures, forex, stocks, and cryptocurrencies involves a substantial risk of loss and is not suitable for every investor. The valuation of futures, stocks, and options may fluctuate, and as a result, clients may lose more than their original investment.
CFTC Rule 4.41 - Hypothetical or Simulated Performance Results: Certain results (including backtests mentioned in these articles) are hypothetical. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
Testimonials: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.
