Emini S&P Cash Management and using Leverage Right

Many traders want to maximize the number of contracts that they trade. However, leveraging ultimately leads to lack of cash management and lack of risk management.  Nowadays, I see many day traders looking for the best margin for their money.  Some could even trade as low as $500 per one Emini SP.

Trading a larger number of contracts, should be something that is exercised by someone who has traded a number of years, and used a method that has the three main components:

1)   Methodology

2)   Risk and Reward

3)   When to stay out

But, I see that when most people over leverage it is during periods of drawdowns, and that is the exact same time when you should lower your number of contracts.

You may consider raising the numbers if your account size justifies it and you have consecutive winning days with your day trading methodology.

Most traders who have small accounts and/or are beginners, should consider trading a small number of contracts until they develop the comfort trading a larger number of contracts/

Increasing the size of the contracts, also increases the leverage and risk, so you have to consider those factors beyond the rewards it might bring.

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