Can you do futures with as little stop loss as possible?

Futures trading is a form of financial speculation that involves buying and selling contracts that represent the future delivery of an asset, such as a commodity, a currency, an index, or a stock. Futures traders aim to profit from the price movements of the underlying asset, without actually owning or delivering it.

However, futures trading also involves significant risks, as the price of the underlying asset can fluctuate unpredictably and rapidly. Therefore, traders may use stop-loss orders to limit their potential losses in the market. A stop-loss order is a type of order that instructs the broker to sell a security at the market when it reaches a certain price, known as the stop price. A stop-loss order can help traders to exit a losing position automatically and prevent further losses.

But can you do futures with as little stop loss as possible? The answer is yes, but it is not recommended. Trading futures with a very small stop loss can expose traders to several disadvantages, such as:

• Higher chance of getting stopped out: A very small stop loss can be easily triggered by the normal price fluctuations or volatility of the market, even if the overall trend is in favor of the trader. This can result in frequent losses and reduced profits.

• Higher trading costs: A very small stop loss can also increase the trading costs, as the trader has to pay more commissions and fees for entering and exiting more trades. Moreover, a very small stop loss can also increase the slippage, which is the difference between the expected price and the actual price of execution. Slippage can reduce the profitability of the trade and increase the risk.

• Lower risk-reward ratio: A very small stop loss can also lower the risk-reward ratio, which is the ratio between the potential loss and the potential gain of a trade. A very small stop loss means a very small risk, but also a very small reward. This can make it harder for the trader to achieve a positive expectancy, which is the average amount of profit or loss per trade.

Therefore, trading futures with as little stop loss as possible is not a wise strategy, as it can increase the likelihood of losing money and reduce the profitability of the trade. A better strategy is to use a reasonable stop loss that is based on the market conditions, the trading system, and the risk tolerance of the trader. A reasonable stop loss can help traders to protect their capital, control their risk, and optimize their returns.