Understanding Trading Margin and Managing Losing Trades

Margin and Losses

  1. Futures formula for growth
  2. Adjusting to the formula: Risk vs Reward
  3. Your first $5,000
  4. What Is the Intraday Margin?

If you want to be a futures trader, then you’ll need to know all about the formula for growth, risk versus reward, and trading margins. It’s also a good idea to learn how you can make your first $5,000 in futures trading with the right strategy in place.

Formula for Growth

A formula for growth is applied in futures trading. You’re not going to win every single trade, so you’re going to need a strategy. You have to acknowledge the fact that when walking into a trade, there’s a chance that you’re going to lose some of your money in the process.

Trading is never viewed as simply one, two, three, or four trades. For you to have a better understanding of the formula, we’ll call ten trades “one block”. Keep in mind that you should always set a minimum of a 10-trade or one block when it comes to succeeding in trading. Placing ten or more trades will help you generate more profit.

The formula helps you to estimate the percentage that you’re going to lose or win on a single trade with a one-block minimum. For example, say that you win six blocks and you lose four. If you know that you’re going to be a 60% winner, you have to have a plan for this.

Here’s the scenario: If you’re winning $100 a time, that would be a total of $600 in winnings and $400 in losses. If you win half and half, you’ll break even. If you lose six trades and win four trades, you lose $200. Knowing that this could happen, you can adjust the amount of trade you put in to gain more profit.

Adjusting to the Formula: Risk vs Reward

Let’s look at this from a different angle. Say that you see you’re going to win double the amount that you lose, or you’re trying to win $200 per trade. By playing six trades, you’ll get $1,200. With the formula mentioned above, all you have to do is double, triple, quadruple, or add more to your initial trade to win more profit in the end. So, for six trades, you might get $1,200, but you’ll lose $400. All in all, you’ll end up with a net gain of $800 for every ten trades.

What happens is this; if you start trading and immediately lose $200, you might think that the strategy is not working and give up. However, you’re going to prevent yourself from the $1800 net gain that the formula is supposed to give you. You have to understand how many times and how much you’re going to win and lose.

How Can You Gain Your First $5,000?

First, you’ll need a strategy. You have to know how to find direction, where you need to enter the market, where to place your stops and limits, and more importantly, how to have fun while doing so. Let’s say that for every 10 trades you place, you make $1000, and that is one trading block. In order for you to get that first $5,000, you have to do it five times, and you have to trade five blocks. That is the strategy, and knowing the basics above will help you fully understand how simple this tactic is.

What Is the Intraday Margin?

The intraday margin is a fixed sum per contract of the asset being traded. It essentially restricts how much exposure can be assumed at one time by the trading account. It’s easy to measure intraday margin quantities. For instance, a $500 intraday margin is generally applied to the E-mini S&P 500 futures contract, while micro contracts can cost just $50.

As for the initial margin, this is the amount that a trader must deposit with their broker. To continue holding the position, a maintenance margin must be applied. This is the amount of money that a trader must have on deposit in their account and is usually between 50-70% of the initial margin.

For more information on trading margins, you can contact your broker so they can explain how the intraday, initial, and maintenance margin works in more detail.

Josh Martinez

Josh Martinez

Josh Martinez is an elite Analyst who’s been actively trading the financial markets since 2011. He’s known as one the leading innovative traders in this industry due to his his cutting-edge strategies.

Josh first burst into the scene when he took an initial deposit investment of $500 and turned into over $39,000 in just under 2 years.
Josh’s trading articles have been featured in Your Trading Edge, The FX Street, Trader Planet, Forex Crunch, Trading Pub, and Equities.com.

In addition to trading, Joshua has also trained thousands of traders worldwide. His strategies and systems have helped others find success in the market

Reader interactions

6 Replies to “Understanding Trading Margin and Managing Losing Trades”

  1. This is awesome info Thank you


    1. Traders Agency Analyst July 20, 2021 at 2:25 pm

      Our pleasure Jerry, we're glad you're enjoying it and finding value. We look forward to working with you!


  2. Without any further ado, This is awesome, informative, and constructive information


  3. informative information and I hope that I may some-day reciprocate it in someday


    1. Traders Agency Analyst Anthony Speciale August 5, 2021 at 9:48 am

      Hi Salman. Thank you for your kind words!


  4. Imogene Barnett Ms September 8, 2021 at 4:47 pm



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