How Many Contracts Should You Be Trading?

As a day trading coach, I am frequently asked, “How many contracts should I trade?” It may surprise you that there is no simple answer (one, two, ten, etc.). There are several factors to consider when answering this question.

Brokers usually advise clients on how many lots they are able to trade based on account balance and margin requirements. Some brokers offer as little as $500 margin per lot to trade E-minis or currencies. Other brokers require much more. Want to hold a position overnight? Expect a change in margin requirement, as daytime and evening margins differ.

When discussing contract quantity with my students, I often point out the psychological requirement of trading multiple contracts – the “can you handle it?” factor.

First, you must be comfortable with how it feels to take a loss with one contract. After trading one contract, taking a loss and then recovering, you will have gained confidence in surviving the trading game. Regardless of how much money you have in your trading account, you should be able to trade one contract with consistent success. Once satisfied, you should then stick with two contracts and advance accordingly.

Again, the idea is to overcome the fear of losing by taking a loss while still following the rules, recover, then maintain consistency. You must first succeed with trading one to two contracts before moving up to five or 10 lots. The amount of time you stay at each contract benchmark is entirely up to you. Traders who start out with 10 contracts get psyched out because of the overwhelming profit or loss in a short period of time. Instead, follow the trading rules (my day trading courses are entirely objective) like a machine to reduce emotional mistakes. Start trading live with one contract, move to two when ready, and so forth.

My goal is to start you off trading correctly and sustainably using methods that actually work. I want you to be consistently successful, long-term.