1. High Leverage*: Futures contracts require a margin deposit. This deposit represents a mere fraction of the contract’s full value. It also allows you to control big positions with little money, boosting potential gains but also amplifying your losses.

1. High Risk (from High Leverage*): The same leverage* that could potentially amplify your gains can also magnify your losses. Because of this leverage*, futures trading can be highly volatile, especially for inexperienced traders.

2. Complexity: Futures trading has its unique complexities. You need to learn about expiration dates, contract specifications, contract sizes (standard, mini, and micro), different margin requirements, etc. This can be intimidating for beginners or new traders.

3. Expiration Dates: Futures contracts have expiration dates. Positions must be rolled over or closed before the expiration, otherwise, a whole mess of complex issues can arise if you don’t.

4. Potential to Lose More Than the Value of Your Account: Also called “going debit,” you can lose more than you have in your entire trading account if you’re either careless in the size of your trade, or just plain unlucky with a huge and unexpected market movement. If you’re lucky, you’ll get a margin call or go into forced liquidation. If you’re unlucky, you’ll end up owing more than you have in your account.

1. Use Stocks to Gain Ownership and Dividends: Buying shares of stock gives you ownership in a company. If a stock offers dividends, this gives you the benefit of receiving income in addition to potential growth in the value of a stock.

2. Long-Term Growth Potential: If you’re looking to hold on to an investment indefinitely for long-term capital appreciation and compounding returns, stocks are suited for such a goal.

1. Stocks Have Limited Market Hours: You can’t trade around the clock, as stock hours are limited to a few hours each business day. You can trade during ”after-hours” sessions, but the higher spreads are higher, and lower liquidity can be unfavorable.

2. Stocks Have Greater Capital Requirements: Given the lower leverage* characteristics of most stock accounts, you need a much larger amount of capital to trade large positions compared to futures.

3. Stocks Have Short Selling Restrictions Short selling involves borrowing the shares before selling. The princess isn’t always easy with stocks. The uptick rule requires you to sell at a price above the most recent trade. Unlike in futures, you can’t sell short on the way down.

4. Pattern Day Trading Rules Apply to Stocks, Not Futures: If you’re a day trader, you need a minimum account balance of $25,000. Otherwise, you’re subject to the pattern day trading rule (executing four or more day trades within five business days in a margin account) which can lead to various penalties upon repeat violation.

5: Wash Sales Apply to Stocks, Not Futures: Day traders often trade the same stock up and down, sometimes several times in one session. The IRS wash sale rule complicates things. It stops you from claiming a tax deduction on a loss if you buy the same or similar security within 30 days before or after the sale. This rule can make your tax planning very tricky and burdensome.

Futures offer high leverage*, liquidity, 24/5 trading, easy short selling, and more, but come with risks and complexity. Stocks provide ownership, dividends, long-term growth, and fewer tax issues but have lower leverage* and market hour limits.

If you’re a swing or day trader, you should weigh these pros and cons based on your risk tolerance, market knowledge, and trading styles. Understanding these nuances can help you choose the type of market that’s better suited for your financial goals and means.