Day Trading Margin

Day trading margin is one of the criteria that affects a day traders choice of market, but what exactly is margin?

Margin is a minimum amount of equity that must be held in order to trade a particular market. Margin equity can be either money (cash) or financial instruments (stocks, futures contracts, etc.), and it must be deposited with a day trading brokerage. The margin for each day trading market is set by the exchange that offers the market (such as CBOT for the ZG gold futures market). Margin varies from one market to another, depending upon the tick value and volatility (price range) of the market.

There are two different types of margin, and both of them must be covered in order to trade a particular market. Initial margin is the amount of equity that is needed to open a new position (enter a trade), and maintenance margin is the amount of equity that is needed to maintain a position (stay in a trade). Initial margin is always higher that maintenance margin, so as long as the initial margin is covered, the maintenance margin is also covered.

The initial and maintenance margin for some of the most popular day trading markets are as follows :

• ES (S&P 500) - Initial : $1750, Maintenance : $1400
• ER2 (Russell 2000) - Initial : $2000, Maintenance : $1600
• YM (Dow Jones) - Initial : $1406, Maintenance : $1125
• ZG (Gold 100 troy ounce) - Initial : $1175, Maintenance : $870
• DAX - Initial : 8600 EUR, Maintenance : 6880 EUR
• CAC40 - Initial : 1688 EUR, Maintenance : 1350 EUR
• Z (FTSE100) - Initial : 1313 GBP, Maintenance : 1050 GBP
• HSI (Hang Seng) - Initial : 33873 HKD, Maintenance : 27098 HKD

As most beginning day traders only deposit the minimum amount of equity required to open their day trading account, some of the higher margin markets are not available, such as the DAX and the HSI (Hang Seng). Further information about margin, and using margin as a criteria for choosing a market, can be found in the Trading Deposit and Margin section of the Choosing a Day Trading Market tutorial.