The average duration of a futures account

We already should know how difficult it is to win doing day trading in the different makets.

If not you should read some of my previous articles about trading.

The vast majority of people doing this kind of trading lose in the long term.

If there are a few winners they will not probably share with you their systems with any sort of signals or courses.

The average duration of the trading accounts vary depending on the asset.

Let us have a look into the futures.

Futures accounts duration

Time will tell us what futures trading is not as easy as it seems at first sight. Image via Moritz320/pixabay

It is not the same trading stocks than trading the binary options of those stocks.  Binary options have more leverage than it seems.

A stocks day trader might last for quite a significant time in the markets.

When I say “significant” it may be months or some years before destroying the account completely. It will depend on the leverage we can actually use.

For instance, in the United States we could use 4:1 doing day trading, which would accelerate the process, of course.

In other words, the more leverage we use, less time will be required for the trader’s account to go to 0.

When we use leverage in assets like Forex or futures we can be sure our accounts will not last long.

The short term markets or day trading ones are in a way random, and what they give you today they take from you tomorrow.

You can even have some “good pattern” for a while and see how that pattern stops working completely in a while. Therefore there will always be “patters”, but those patterns will be limited in time. The main problem is that traders do not know when patterns end.


Let us say a typical futures account

Imagine you have 10.000 USD to trade futures with any futures broker.

You want to trade the S&P 500 futures and will do several trades per day using your “perfect” scalping strategy you have studied for long time.

Commissions will be USD 1 per side. So every time we buy and sell a contract it will be 2 USD.

The problem with futures (we start seeing problems here) is that the real cost of trading a futures contract is not just the commission but also the spread, which in this case would be 0.25 equivalent to 12.5 USD. This type of cost not many people think about it.

Therefore every time we buy and sell that contract we have to pay 12.5*2 + 2*1, which equals 27.

The guy thinks that the cost of that trade is only 2 USD, the commissions.

Nothing further from the truth.

The fact is that if we make three trades a day, which is something quite moderate we may have that we would be paying already 81 USD in costs.

Do you think the standard futures accounts can stand this for a long period?

Futures accounts costs

As I take for granted that the strategy is not going to be as good as it seemed in paper, I assume that we will end up losing half of the times, considering a trade in which our win/lose ratio is similar in quantity.

So we might win 50% of times and lose the rest.

The problem is that every time we win or lose we are paying 27 extra USD.

If we win 200 USD we have to deduct 27, which give us 173 USD profit.

If we lose 200 USD we have to sum 27, which give us 227 USD loss.

Can you see the difference?

That is for a trade of the same magnitude: 8 ticks in this case.

Well, going back to the example, we take 3 trades a day and 81 USD paid in costs.

Taking that into account, I can say that the average duration of that account, or the vast majority of the 10.000 USD accounts that do day trading in the ES, is 123.45 trading days, which is not that bad, considering what really goes on in the trading community. So you spend several months doing futures day trading thinking you are the best until you reach the end point.

Of course, there will be people with better and worse streaks.

We are talking about an average.

Let us say that half of those who trade that contract in that way, might have luck and end up with half the money after six months. It might even be possible that someone wins money after that time.

The fortunate will keep trading, of course. After a few months the majority of them will be liquidated.

This amount of 123 days I have mentioned, around 4 months, is only an example for a case when traders do 3 trades a day in that contract and with that capital (10.000 USD).

Results will vary depending on the account size, used leverage, market traded, etcetera.

It will also vary depending on the trader’s experience hence a trader with experience or talent will probably last longer.

The good traders will eventually end up trading longer time frames.

However, considering the facts we might say that the average duration of a typical futures account is simply several months.

Of course, prop traders, dealers and market makers of those markets will be very happy.

  • Consider that for this example we “chose” American brokers, which are quite cheap. Some futures brokers, for example in Spain or other countries, are much more expensive.