What Happen When Your Emini Trading Account Balance Falls Below Requirements?

Many beginner traders do not understand why there are so many specific account requirements when they open up a future trading account with a brokerage to trade emini. In short, the requirements are there to protect the brokerage and you from losing more money than what is available in your trading account. It is made possible because of modern computing power allows the brokerages to monitor all the trading positions in real-time.

There are several account requirements that are tracked in real-time by the electronic brokerages. I will discuss about them below.

Real-Time Net Account Balance

The account balance tracked by the future brokerages is the real-time net account balance. It is not the account balance you see from your brokerage statement as of the close of previous trading day. Your net account balance equals to the amount of cash you have in the account, adding potential profits and subtracting potential losses you have in the open positions as if they are liquidated at market price at the moment of evaluation. Real-time net account balance is the net account balance updated regularly during a trading day.

Some brokerages are too big to conduct full evaluation of all the accounts every second. So many of them choose to update the information every 30 minutes. Boutique brokerages and pro firms can often evaluate all the active trading accounts in real-time every minute or even down to every 5 seconds.

Margin Requirement

Every brokerage has its own margin rates for emini trading. They are mostly based on the ones set by Chicago Mercantile Exchange as emini contracts are traded there. Margin requirement can be confusing as there is the initial margin requirement and then there is also the maintenance margin requirement.  Initial margin is the amount of money needed when you open a position. The maintenance margin is the amount of money that has to be there when you are holding a position.

Some brokerages allow the use of net account balance that includes the potential profits from existing open positions in the account for margin requirement calculation.  Others use lower of the cash balance and net account balance as the reference.

For day trading, many brokerages also offer a special lower margin requirement for trading emini like $500 dollar instead of the regular rate.

It is important to learn about the specifics of the margin requirement rules directly from your brokerage. No one need a surprise from their brokerage at the worse moment of time when you are likely under distress with a open position incurring significant losses.

Minimum Account Balance Requirement

Majority of future brokerages have a minimum account balance requirement. This figure can be significantly higher than the day trading margin requirement with some firms. For example, some brokerages may offer $500 margin for day trading Emini S&P, yet their minimum account balance can be $2000 or $5000.

If your net account balance goes below the minimum account balance, you have breached one of the account requirements even though you may not have breached the margin requirement with your open positions.

Platform Account Balance Requirement

For some brokerages, they impose a special platform account balance requirement. That means the use of certain specific trading platform to place orders on your account would require the maintenance of an account balance that is usually higher than the minimum account balance.

Similar to the minimum account balance, breach of platform account balance is breach of account requirement.

When Your Account Breaches Any One of the Requirements

When your real-time net account balance breaches any one of the account requirements due to the open position you are holding, one of several things can happen. Some brokerages will liquidate just enough number of contracts so that your net account balance will be enough to maintain the account requirements for the rest of the open position. Some brokerages will choose to close the whole open position.

If you are holding multiple open positions like having positions in both Emini Nasdaq 100 and Emini S&P, and that both of them are losing money at the time of evaluation, it is likely they will all be closed out at the same time. If you have open positions that are profitable, those ones may be spared if closing out the losing positions only is enough to bring the net account balance back above the account requirements.

Be Conservative With Margin Usage

My advice is to keep your account balance as far away from the minimum account balance requirement and platform account balance requirement as possible. Believe me, you do not want to deal with that at the most inconvenient time. If you have severe constraint in getting enough capital to trade Emini S&P, consider switching to trade other markets.

There is absolutely no point to force yourself into a disadvantage position to trade Emini S&P in the first place. Making sure odds is in your favour in trading does not stop at your trading setups or strategies. It also extends to how you manage your trading account to maximize your chance in surviving the trading game.

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