When it comes to choosing which futures trading system to purchase, the question of trading timeframe often comes up. The choice lies mainly between three main categories: long-term, swing trading, and day trading systems. Let's discuss day trading systems and their positive and negative points.

Day trading futures trading systems all have one thing in common: they do not hold positions overnight. This means that before the end of the closing bell for the regular session, any open positions will be closed. The closing bell occurs at different times for different markets, but it generally occurs around 3:30pm Central time.

This means lower margin rates too, as most futures brokers provide day trading margin rates that are less than the minimums set by the exchange. This benefit leads to an increase in a investor's leverage, and this increased leverage allows him to trade more contracts from a given account size.

Day trading systems attract many investors because they close all positions at the end of the day. Knowing that no matter how the day's trading goes, your position will be flat ("flat" refers to not having any position, long or short) at the end of the day compels many traders to choose these kind of systems over other choices.

The main benefit to trading a day-trading system is limiting risk. Because the system doesn't hold positions overnight, the trader has removed the possibility that overnight prices going against him. This not only decreases risk on a per trade basis, but on a portfolio basis as well. And reducing risk is very important to a trader's ability to remain profitable.

Unfortunately, when you limit risk in this way, you have to pay for it somehow. The cost is that trades that could have been greatly profitable are usually closed out prematurely. Depending on the market being traded, good trades can take days to develop, and if you're using a day trading system, the system will exit every trade, even great trades, at the end of the day no matter what.

Another drawback of day trading systems is that they usually profit less per trade than swing or long-term systems. Unfortunately, commissions and slippage are magnified in day trading systems versus swing or long-term systems. Because of this it is vital that you choose a futures trading system that has already accounted for commissions and a generous amount of slippage.

If you can find a day trading system that has adequately handed the previously mentioned problems then you might just have found a a wonderful way to trade futures. A solid, well-constructed day trading futures system can reap large profits in short periods of time. This is because the futures markets allow for increased amounts of leverage, which allows futures traders to turn even small price fluctuations into large gains.

Depending on the system, it may enter the market only once a month or once a week, or may trade many times per day. Most professionals agree that, unless you have access to high-tech algorithmic infrastructure that allows trade executions in milliseconds, you're best off avoiding systems that trade more than a few times in a day. This is because after accounting for commissions and slippage, there generally just a few good trades each day in any given market. Trying to force more trades that the market offers usually leads to suboptimal returns.

It is best to look for systems that have already factored in slippage and commssions in their results, and systems that trade less than 3 times per day (a few times a week is perfect) on average. Once you find a system that meets those criteria, then apply your money management skills, and you're on your way to reaping the rewards!

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