Micro contracts have made trading more popular among retail investors. Known as E-Micros and Micro-E-Minis, micro-contracts come with reduced contract sizes, margin needs, and tick values. These features make future trading more appealing and accessible to traders of all levels. These new contracts work similarly to regular contracts but at a lower cost to attract more retail investors. What are the benefits of using micro contracts in trading? Let us explore to find the best answer to this question.
Strategic Flexibility
The strategic flexibility or freedom makes micro contracts a trusted instrument for active traders. The market exposure can be reduced considerably with E-micro and Micro E-Mini contracts. This aspect lets traders use several new strategies for futures trading. It gives them more freedom to employ different tactics and improve their trading success rate.
With micro and mini contracts, you can hold open positions in trading through weekly and daily closes. Thanks to lowered tick values and margin requirements. That is to say, micro contracts offer improved strategic flexibility and liberty for traders. These characteristics help you take on larger position sizes. You can create advanced strategies like multi-bracket orders.
Generally speaking, intraday traders are expected to keep the account net flat at the end of each session. It is a disadvantage that many day traders face nowadays. One of the main reasons is the extensive overnight margins involved with carrying a short or an open long position through the market close.
Let us compare per contract margin requirements of Micro E-mini S&P 500 and E-mini S&P 500 to bring more clarity. Micro E-mini S&P 500 intraday margins are $100. The overnight or maintenance margins are $630. The intraday margins of E-mini S&P 500 are $500. The maintenance margins are $6,300.
What about the size of the Micro E-mini S&P 500 compared to the conventional E-Mini contracts? The formed has only one-tenth the size of the latter. It clearly suggests that Micro E-mini S&P 500 lowers the minimum tick value to $1.25 per contract. The E-mini S&P 500 comes with a $12.50 per tick. There is a massive difference between these two.
You can always associate more strategic freedom with micro contracts than regular contracts. Many retail traders with limited capital stay away from putting on larger positions. They are worried about breaching brokerage margin requirements. Are of one of them? Don’t worry. Micro contracts let you put on larger positions without disturbing the margin requirements.
Access to a wide variety of asset classes
When you use micro contracts for futures trading, you can explore a wide variety of asset classes. The diversity of asset classes is highly appreciable. In other words, E-micros and Micro E-minis provide active traders access to various asset classes, such as metal, currency, and equities. These contracts have something for everyone. This aspect plays a vital role in attracting more and more people to micro futures trading contracts.
Enhanced capital efficiency
What is capital efficiency? It refers to the return on capital employed, also known as ROCE. As a trader, you must have a clear idea about the relationship between invested capital, operational expenses, and returns. Successful traders always evaluate capital efficiency to keep their productivity at optimal levels.
If you don’t know how effectively monetary resources should be utilized, you cannot become a successful trader. Your capital efficiency improves when you use your existing resources efficiently. Retail investors must understand this vital aspect and make informed decisions at the right time. You cannot succeed without knowing how to get the most out of the risk capital.
Are you struggling to get the maximum out of your risk capital? One of the most prominent reasons which make many people fail is their inability to take advantage of the risk capital. Micro futures offer the best solutions to achieve this critical objective. You can participate in trading with more assurance with the help of E-micros and Micro E-minis.
When the risk factors are efficiently managed, investors, especially, retail traders will become more confident. That is what exactly happened with micro futures trading contracts. Many people have become more active with the launch of these trading contracts. The bottom line is that if you want to improve your capital efficiency, you can utilize E-micros and Micro E-mini instruments in trading.
How do E-micro and Micro E-mini contracts improve capital efficiency? Let us explore this aspect in detail.
You can customize risk exposure with micro contracts. With a better grasp of the position size, you can control risk exposure in trading more efficiently. That is to say, futures trading contracts allow you to modify position size with improved accuracy. It is one of the most remarkable advantages of E-micro and Micro E-mini contracts. This benefit takes your capital efficiency to the next level.
You don’t need to worry about high fees when you depend on these contracts. As the name suggests, they are smaller in contract size. So, you can expect a lowered fee structure and commission. This aspect makes micro and mini contracts retail investor-friendly.
As mentioned above, reduced margin requirements are a prominent factor that enhances the capital efficiency of traders. You need higher capital when investing in E-Mini or other traditional contracts. With a ten-fold reduction in contract size, micro contracts lower initial and maintenance margins appreciably. Retail investors need only minimal capital for maintaining an open position.
It is hard to find a better choice than E-micros and Micro E-minis to fine-tune your exposure to a wide variety of asset classes. These contracts have become an integral part of many successful retail traders. With improved versatility, flexibility, and affordability, they make your trading plan well-balanced. Whether you want to trade in gold, currency, or S&P 500, micro E-Mini has your needs covered.
Conclusion
These benefits make micro contracts an attractive option for active traders. If you are interested in the most popular asset classes, you can choose micro futures contracts. Futures trading contracts become more accessible with options like E-Micros and Micro-E-Minis. You can make your trading efforts goal-oriented with these unique instruments.
Be Notified Of New Trader Evaluation Promotions
Submit your email if you want to be notified of new trader evaluation promotions. I never spam nor sell anything. Usually 2-3 emails a month are sent with the latest deals.
Risk Disclosure:
Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure:
Hypothetical performance results have many inherent limitations, some of which are described below. 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. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
You can read more here: Risk Disclosure
Affiliate Disclosure:
The external links on my site and in my video descriptions to trader evaluation companies and software companies are primarily affiliate links. I earn a commission from these companies on any sale made from people visiting these links. That said, I only recommend companies and software I personally use and actually do recommend. Believe me, I turn down a lot of companies who approach me. You can read my full Affiliate Disclosure here.
Additional Disclosure:
The content provided is for informational purposes only. I do my best to keep the content current and accurate by updating it frequently. Sometimes the actual data, rules, requirements and other can differ from what’s stated on our website. CanadianFuturesTrader.ca is an independent website. You should always consult the rules, faqs, knowledge base and support of any of the websites and companies we link to or talk about on our site. The information on their site will always be what ultimately dictates the current rules of their program, software or other. While we are independent, we may be compensated for advertisements, sponsored products, or when you click on a link on our website. The contributors and authors are not registered or certified financial advisors. You should consult a financial professional before making any financial decisions.