From the onset let me admit that one of the biggest problems many e-mini day traders face is undercapitalization. There is a notion that you can start with a very small account, say $1000, and turn into a million dollars in a couple of months. Day trading simply does not work that way. I will grant that a highly skilled trader couple multiply the value of this size account in a short period, but skilled traders are generally very well capitalized and increase the value of their already hefty accounts by trading substantially more contracts than a $1000 would afford. Proper capitalization is essential for new or novice e-mini day traders as inexperienced traders learn through a process of success and failure. A small account simply doesn’t afford any wiggle room for error, and several unsuccessful trades will cause the account to bust and require new money; often times, the novice doesn’t have the spare cash to do this and ends up dropping e-mini day trading altogether.
So how much money should a new trader deposit in his/her futures trading account in order to be properly capitalized?
The answer to this question is a simple math problem. No trader should risk more than 1-3% of his futures trading. While I have often watched in dismay as inexperienced traders risk 10-20% of their futures account value, as a long time institutional trader I stick with the initial risk percentage I initially stated; 1-3% will keep you in the trading game.
To calculate the dollar amount at risk in a given trade, multiply the stop/loss by the tick value of the contract you are trading. I set my stop/loss and profit targets by observing the Average True Range (ATR). Generally 2x the ATR will give you a good stop loss and keep you from getting knocked out of a trade by market noise; which is the ongoing machinations of day trading not related to a trend. So, if the ATR is 10, you would set your stop loss at 20 ticks. Pretty easy so far; say you are trading the TF, which trades at $10/tick, your money at risk is $200. This trade would require a $5000-6000 account to stay within the parameters I have described.
But my suggestion, especially for new traders is to start with a minimum of $8000-10000 to err on the safe side. This gives you a good cushion to compensate for trades that inexperienced traders sometimes fall into; which is to say that you wipe your account out with one lousy trade. The name of the game is to trade another day, and an under-capitalized account makes that proposition a difficult gambit to cross.