How to Trade Futures: A Complete Guide for Beginners
Futures trading isn’t your typical market—it’s a high-leverage environment where elite traders like Richard Dennis and Paul Tudor Jones forged their reputations. It’s fast, unforgiving, but full of potential—if you’re ready to put in the time and effort.
In this guide, we cover:
- Critical considerations for setting a realistic futures trading capital
- Why futures are my go-to trading vehicle
- Strategies to navigate today’s futures markets
- Essential risk management to protect your account
- Real-world examples to sharpen your trading skills
Reflecting on my achievements and missteps in futures trading, this piece is meant to offer lessons for traders of every background.
Let’s dive in.
Key Takeaways
Getting started with futures isn’t rocket science, but consistently making profits is a whole different ballgame.
Futures are ideal for day trading – they give you high liquidity, low fees, and extended market hours.
Leverage in futures is powerful – you can control large positions with a relatively small amount of capital. But it’s a double edged sword.
Choosing the right broker and platform can make or break your trading experience.
Trading exposes you to the risk of losing more than your initial investment and incurring financial liability. Trading is suitable only for well-informed, sophisticated clients able to understand how the products being traded work and having the financial ability to bear the aforementioned risk.
Transactions involving foreign exchange instruments (FOREX) and contracts for difference (CFD) are highly speculative and extremely complex. As such, they are subject to a high level of risk due to leverage. Please keep in mind that CFD trading is banned in the US.
Information published on the NewTrading.io website is for informational purposes only and should not be construed as offering investment advice or as an enticement to trade financial instruments.
What is Futures Trading?
A futures contract is a derivative financial product, meaning its value is tied to another asset’s value.
When you buy futures, you’re not buying the actual asset. Instead, you’re agreeing to buy or sell that asset at a future date and a specified price.
Futures are standardized contracts that allow traders to hedge or speculate on price changes without ever owning the asset. Futures are traded on margin, meaning you only need to put up a fraction of the contract’s full value to open a position.
Margin creates leverage, which can magnify both gains and losses.
Futures contracts are traded on
exchanges
,such as Euronext, the CME (Chicago Mercantile Exchange), or the London Stock Exchange.
There are two main positions in futures trading:
- Buying (going long)
The buyer commits to purchasing the asset later at a set price, profiting if the price rises. - Selling (going short)
The seller commits to selling the asset later at a set price, profiting if the price falls.
Futures positions are marked-to-market daily, meaning profits and losses are calculated and settled each trading day.
A Practical Example
Say you buy a gold futures contract–which trades under the symbol GC on the Chicago Mercantile Exchange (CME)–that expires at the end of December 2024. By purchasing this contract, you’re committing to buying 100 ounces of gold at a specific price at the expiration on December 27, 2024.
When the contract expires, you have two options:
- Take delivery of the actual 100 ounces of gold, or
- settle the difference between the contract price and the market price in cash.
Most everyday traders buy and sell futures contracts just to make money from price changes.
They never actually want the physical goods. Instead, they typically close their positions before the contract expires, either to secure a profit or limit potential losses.
This is different from companies or institutions, who might use futures to actually get commodities or protect themselves from price swings.
Many futures brokers don’t facilitate the physical delivery of commodities like gold and crude oil; if traders don’t close the positions by the last trade day, which can vary depending on the futures contract, the broker will close the position on the trader’s behalf.
Do Futures Traders Make Money?
Research shows most retail traders lose money in financial markets.
In reality:
- Some manage to beat the odds, generating either an additional or a full-time income.
- A few legendary traders have made fortunes, but these success stories are far from typical.
Please fill all the fileds above to see the result.
If you start with a capital of [starting_capital], risk [daily_risk] per day, and trade [trading_days] days per month with a success rate of [win_rate], you could generate an estimated profit of [month_profit] per month.
To simplify, let’s take Joe, a conservative retail trader. Joe starts with $10,000 in capital and follows a strict rule: he won’t risk more than $200 per day.
Now, let’s assume:
- Joe has a 66% win rate (he wins 2 out of every 3 trades).
- He trades 20 days a month.
- His risk-reward ratio is 1:1.5, meaning he risks $200 to make $300.
Potential monthly earnings (theoretical):
In a typical month, Joe would have:
- 13 winning days, earning $300 each day, for a total of $3,900.
- 7 losing days, losing $200 each day, for a total loss of $1,400.
Joe’s monthly profit would be estimated at $2,500 ($3,900 – $1,400), excluding costs.
In short, the amount you can earn from trading futures isn’t set in stone. It’s crucial to consider all variables and run through scenarios to estimate potential returns.
This example is purely hypothetical and doesn’t factor in real-world elements like brokerage fees, taxes, or slippage—all of which can significantly impact profit. Before trading, be sure to understand the risks.
Why Trade Futures?
Futures are, in my opinion, the best financial products for day trading.
Here’s why:
- No PDT Rule (for U.S. residents)
Unlike stocks, ETFs, or options, futures lets you day trade as much as you can afford to, even if your account is under $25,000. - Low brokerage fees
Futures brokers offer highly competitive fees. For example, Interactive Brokers charges just $0.25 (0.00125%) for a Dow Jones Mini Future contract. - Profit from market declines
Short selling is built into futures trading. You can make money when markets fall between your entry and exit prices. While it’s also possible to short stocks and ETFs, brokers charge a fee called a borrowing rate. There are no interest charges when selling futures short. Rather, the trader must meet the margin requirements, just as if they were going long. - Powerful leverage
Futures allow you to trade on margin. For example, the Micro E-Mini Dow Jones Industrial Average futures (MYM) is equal to half (0.50) the value of the Dow. If the notional value is 40,000, the value of one contract is $20,000 (40,000 x .5). The margin required (which can change based on market volatility and the futures broker), might be a fraction, such as $800 or 4% of the future contract’s value.
- Extended trading hours
Futures trading hours are longer than those of their underlying assets.
For instance, while the S&P 500 stocks only trade between 9:30 AM and 4:00 PM Eastern Time, the E-mini S&P 500 futures contract trades nearly 24 hours daily, from 6:00 PM Sunday to 5:00 PM Friday Eastern Time, with only a brief daily maintenance period. - Unmatched flexibility
You can trade entire markets without owning individual assets. For example, you can gain exposure to the S&P 500 with a single futures contract.
- High
liquidity
Recent data from CME Group shows E-mini S&P 500 futures consistently trading over 2 million contracts daily, with some days exceeding 2.5 million.
High trading volume generally allows for efficient market order executions at or close to market price, with typically less slippage compared to less liquid markets.
Futures have a direct price relationship with their underlying assets, meaning their prices move almost in sync. In contrast, options and stocks don’t have this one-to-one price movement. For example, if the price of crude oil rises, a crude oil futures contract will likely reflect this change directly, while shares of an energy company might not move in the same way. - Transparency
Unlike CFDs, which are often traded on private broker-controlled markets, futures are traded on regulated public exchanges overseen by the CFTC (Commodity Futures Trading Commission) and the NFA (National Futures Association).
This means that real-time pricing is available to all participants, trade data is publicly accessible, and there are no hidden fees and less risk of price manipulation.
CFDs are highly risky financial instruments that are banned in the U.S. and many other countries due to their potential for significant losses and regulatory concerns.
How Much Money Do You Need to Trade Futures?
Before you start trading futures, you need to meet your broker’s minimum deposit requirements.
For instance, with the ProRealTime Trading offer in partnership with Interactive Brokers (which I use), you’ll need a minimum deposit of €3,000.
But that’s just the first step.
Margin requirements
Futures trading let you control a large position with a much smaller deposit. That’s what we call margin trading.
For example, a Micro Dow Jones Futures contract (MYM) worth $20,000 might only require $800 in margin—meaning you’re controlling 25 times the amount you’ve actually deposited in your trading account.
However, It’s a double-edged sword: while this 25x leverage boosts your potential gains, it also amplifies losses if the market turns against you.
That’s why understanding the initial margin requirements for each contract is crucial—not just to protect your account from large swings, but also to determine how much capital you need to deposit upfront.
How is this margin calculated? It depends on a few factors:
- The specific futures contract you’re trading (e.g., E-Mini Nasdaq, Micro E-mini)
- The number of contracts you plan to trade
- Your broker’s margin requirements
Here’s a quick look at actual initial margin requirements for popular contracts from my broker:
| Future Contract | Initial margin per contract |
|---|---|
| Micro E-mini Russell 2000 (M2K) | $638.4 |
| Micro E-mini Dow Jones (MYM) | $854.1 |
| Micro E-Mini Nasdaq (MNQ) | $3224.6 |
As shown in the table, opening a Micro E-mini Dow Jones position requires $854.10, but you’ll also need a maintenance margin to keep it open.
| Margin Type | Definition | Example |
|---|---|---|
| Initial Margin | The amount needed to enter a Futures contract. | $854.10 for a Micro E-mini Dow Jones |
| Maintenance Margin | The minimum amount required to keep your trade active. | $739.83 |
| Margin Call | Triggered if your balance falls below the maintenance margin; your broker will ask you to add funds or close your position. | Occurs if your balance drops below $739.83 |
Always check your broker’s margin requirements to stay on top of the most up-to-date information on margin requirements because margin requirements often change.
How it works (Example Scenario)
Say you deposit $3,300. This will be your available margin.
It’s enough to meet the initial margin requirements for three different contracts:
- 1 Micro E-mini Russell 2000 ✅
- 1 Micro E-mini Dow Jones ✅
- 1 Micro E-mini Nasdaq ✅
Now, let’s focus on the E-Mini Nasdaq Future, which has an initial margin requirement of $3,224.60.
If after placing your trade, you close the trade and incur a $100 loss, dropping your account balance from $3,300 to $3,200, your available margin—the funds you can use to open new positions—has dipped below the minimum initial margin threshold of 3,224.60. This means you can’t open a new E-Mini Nasdaq position until you top up your account.
Think of the “available margin” as your “working capital” for trading—it’s what’s left in your account after accounting for your open trades.
Setting a Realistic Trading Capital
The real challenge in futures trading isn’t just meeting the margin—it’s ensuring your capital can handle the ups and downs without blowing up your account.
Because no single trade outcome is ever guaranteed, your strategy’s true strength (if it has an edge) will only reveal itself over a series of trades.
That’s why I always maintain a buffer—funds that go beyond both the required margin and my trading strategy’s maximum drawdown.
If you can handle 10 losing trades in a row, each with a $200 loss, your maximum drawdown would be 10 x $200 = $2,000.
You can estimate this by testing your strategy or deciding how many losses you can take in a day.
Here’s a simple formula to estimate a more realistic trading capital:
Minimum trading balance = Required initial margin + Maximum drawdown
For example, if you’re trading the Micro E-Mini Nasdaq Futures contract:
- Required initial margin: $3,224.60
- Maximum drawdown: $2,000
- Minimum deposit: $3,224.60 + $2,000 = $5,224.60
The right starting amount will differ for each trader, but in my view, it’s wiser to approach futures trading with at least $10,000 in disposable capital. This ensures you have enough funds to manage trades comfortably and withstand market fluctuations without too much stress.
On the flip side, don’t overfund your account.
Psychological factors such as fear and greed are well-documented in trading psychology.
Having too much capital at risk can increase the likelihood of making impulsive, emotion-driven decisions, particularly for newer traders.
If a reasonable trading budget is out of reach, take your time to build skills and experience with a paper trading simulator before diving in.
How Does Trading Futures Work?
Now that you know what capital you may need, let’s look at how the futures market actually works
Futures contracts started out as a way for farmers to sell their crops in advance. Fast forward to today, and they’ve become the second most traded financial derivative in the world—with over 29 billion contracts traded.
Futures now cover a wide range of assets, from oil and orange juice to stock indices, making them easily accessible through top brokers.
Futures traders fall into three main camps:
- Speculators
This is where traders bet on price movements. They buy or sell futures contracts hoping the market moves in their favor. For retail traders, this is the bread and butter of their strategy.
- Hedgers
Companies use futures to reduce the risk of price swings. They take positions to protect against future costs or losses.
- Arbitrageurs
They look for price differences across markets. By buying in one and selling in another, they aim to profit from tiny discrepancies.
Regardless of which group you belong to, managing risk and exposure is critical, especially in case of trading halts.
Understanding Futures Trading Halts
Trading halts occur more frequently than many new traders realize. These sudden pauses in market activity typically result from one of several key triggers:
- Sharp price swings
Exchanges use circuit breakers to halt trading when prices move too quickly in either direction, giving investors a chance to reassess. For instance, Dow Jones futures will halt if the index falls 10% in a single session. - Surprise announcements
Central bank policies, major geopolitical events, or unexpected economic news can lead exchanges to freeze trading temporarily. The goal is to give investors time to digest new information. - Regulatory interventions
If exchanges or authorities detect suspicious activity—like potential insider trading—they might halt trading until an investigation is complete. - Liquidity gaps
When buy and sell orders are heavily imbalanced or liquidity suddenly dries up, the exchange might stop trading to prevent chaotic price movements.
So, What Should You Do?
I’ve never personally faced a trading halt while active on index futures. But just knowing that they can happen is enough reason to stay cautious.
Always ask yourself: If trading suddenly stops and reopens at a worse price, would I still feel comfortable with my position size and exposure?
Sometimes, halts are entirely unpredictable—think flash crashes. But other times, like when the market’s down 9% and about to hit a 10% circuit breaker, you can see them coming.
The key? Stay prepared. When volatility is high, scale down your positions and make sure you have a plan in place for worst-case scenarios.
Position Sizing and Exposure in Futures Markets
When trading futures, the big question is always: How much should I trade?
Calculating your position size isn’t just about picking a number—it’s about knowing exactly how much each market tick could impact your bottom line, how much capital you’re putting at risk, and whether your trade size aligns with your risk management strategy.
How it works
Whether you’re trading the S&P 500 or Crude Oil, each contract has unique specifications that affect your potential gains and losses. Before diving into the details, it’s crucial to understand two key terms: Point value and tick size.
- Point value: How much you gain or lose for each 1-point move. It varies by contract.
- Tick size: The smallest price movement a futures contract can make. It directly impacts your profit or loss and helps define your risk per trade.
But let’s put theory into practice.
A Real World Example
In the screenshot, here’s what’s happening:
Position details:
- I have one E-mini Dow Jones (YM) contract open at an entry price of 42,593 points.
- The market has moved up to 42,605 points, and I’ve set my stop-loss at 42,590 points (just 3 points below my entry).
Let’s break down the numbers for an E-mini Dow Jones futures contract, where each point is worth $5:
- Current profit
With the price moving from 42,593 to 42,604, I’m up 10 points.
In dollar terms, that’s a $50 profit. . - Risk management
If the price falls to my stop-loss at 42,590, I’ll lose 3 points.
That’s a $15 loss. - Real-time exposure
Exposure is the total value of the position I’m controlling.
For 1 contract at 42,605 points, the total exposure is $213,025.
Accounting for notional value is critical when managing risk and planning position size. It reveals the exposure of your futures position.
For instance, if the E-mini Dow Jones has a point value of $5 and trades at 42,000 points, the contract’s worth is $210,000 ($5 x 42,000). Even if your margin deposit is only a fraction of this amount, your true market exposure is much bigger.
Why is this important? Because even a small move can have a big impact. If the index drops by 100 points, that’s a 500 loss.
Point Value and Tick Size by Market
To see how this works with other futures contracts, here’s a quick reference:
| Market | Futures Contract | Unit of measurement | Point Value | Tick Size |
|---|---|---|---|---|
| Stock Index (Dow Jones) | E-mini Dow Jones Futures | Points | $5 per point | 1 point ($5 per tick) |
| Micro E-mini Dow Jones Futures | Points | $0.50 per point | 1 point = $0.50 | |
| Stock Index (S&P 500) | E-mini S&P 500 Futures | Points | $50 per point | 0.25 points = $12.50 per tick) |
| Micro E-mini S&P 500 Futures | Points | $5 per point | 0.25 points = $1.25 | |
| Commodity (Crude Oil) | Crude Oil Futures (CL) | Barrels | $1 per barrel = $1,000 per contract | $0.01 per barrel = $10 per tick |
| Commodity (Gold) | Gold Futures (GC) | Troy Ounces | $100 per point | 0.1 points = $10 per tick |
| Commodity (Corn) | Corn Futures (ZC) | Bushels | $50 per 1 cent/bushel | 0.25 cents = $12.50 per tick |
| Currency (Euro/US Dollar) | Euro FX Futures (6E) | USD per Euro | $125,000 per contract | 0.0001 points = $12.50 per tick |
| Interest Rate (10-Year Notes) | U.S. 10-Year T-Note Futures (ZN) | $1,000 face value of bond | $1,000 per point | 0.5 points = $500 per tick |
| Cryptocurrency (Bitcoin) | CME Bitcoin Futures | Bitcoin (BTC) | $25 per point | 5 points = $25 per tick |
Micro and E-Mini contracts issued by exchanges have a lower point value than standard contracts. For instance, the Micro E-mini Dow Jones is just $0.50 per point, compared to $5 for the full-sized version—that’s a 10x difference.
Making a Choice
Picking the right position size is more than just doing the math—it’s about feeling good in the trade. If you’re bored and barely paying attention, your position size is probably too small. If every price move has you sweating, it’s probably a bit too big.
Start small and build up as you gain confidence.
A common rookie mistake?
Going bigger after a loss to make up for it or shrinking down your positions after a win to “protect” profits. This can mess with your trading mindset and hurt your account.
Pros play it differently. They cut back when they’re off their game and increase only when the market is working in their favor.
While platforms can do the math for you, it’s always worth using a position size calculator to double-check and keep your overall risk management in check.
What are the Costs of Futures Trading?
When you trade futures, on top of commissions—you’ll also need to factor in other costs.
Here’s a quick breakdown of the fees I deal with when trading futures on my trading platform.
| Futures Contract | Fee per Order | “Round-Trip” Fee |
|---|---|---|
| Mini CAC 40 | $0.85 | $1.70 |
| Micro-DAX Futures | $0.25 | $0.50 |
| E-Mini Dow Jones | $0.25 | $0.50 |
| Micro E-Mini Nasdaq | $0.25 | $0.50 |
USD Futures (Micro E-mini Nasdaq)
| Symbol | Date/Time | Quantity | Trade Price | Close Price | Notional Value | Commission/Fee | Basis | Realized P/L |
|---|---|---|---|---|---|---|---|---|
| MNQU4 | 2024-08-07, 9:59:18 | -2 | 18,514.25 | 17,966.50 | 74,057.00 | -1.24 | -74,055.76 | 0 |
| MNQU4 | 2024-08-07, 15:59:21 | 2 | 17,958.75 | 17,966.50 | -71,835.00 | -1.24 | 74,055.76 | 2,219.52 |
| Total MNQU4 | 2,222.00 | -2.48 | 0 | 2,219.52 |
- I sold two Micro E-mini Nasdaq contracts at 18,514.25 points and bought them back at 17,958.75 points.
- That’s a gain of 555.5 points, with a position size of $4 per point, netting me $2,222.
- After deducting $2.48 in commission, my net profit was $2,219.52.
EUR Futures (Micro DAX 40):
| Symbol | Date/Time | Quantity | Trade Price | Close Price | Notional Value | Commission/Fee | Basis | Realized P/L |
|---|---|---|---|---|---|---|---|---|
| FDXS 20240920 M | 2024-08-07, 3:45:32 | 4 | 17,518.00 | 17,693.00 | -70,072.00 | -1.48 | 70,073.48 | 0 |
| FDXS 20240920 M | 2024-08-07, 5:27:15 | 4 | 17,650.00 | 17,693.00 | 70,600.00 | -1.48 | -70,073.48 | 525.04 |
| Total FDXS 20240920 M | 528 | -2.96 | 0 | 525.04 |
- I bought four Micro DAX 40 contracts at 17,518 points and sold them at 17,650 points.
- That’s a 132-point gain, and with a position size of €4 per point, I made €528.
- After subtracting €2.96 in commission, my net profit was €525.04.
Besides brokerage fees, you may also face small charges from third parties, like the exchange and regulatory bodies.
Other Miscellaneous Fees
To access real-time data and the tools I need, I subscribe to a few additional premium services.
| Subscription | Monthly cost |
|---|---|
| ProRealTime Premium | $84 |
| Premium Market Data | $142 |
| Financial Times | $75 |
| Barron’s | $4 |
| TOTAL | $305 |
On top of reading financial and economic news, I also continually invest in my education by reading trading books and I encourage any new trader to do the same.
How to Choose the Right Broker for Trading Futures
Choosing the right broker can make or break your futures trading experience.
Since 2018, I’ve been trading futures using Interactive Brokers paired with ProRealTime Trading—a setup that provides me with both performance and cost efficiency.
Here’s why I use this combo:
- Interactive Brokers offers some of the most competitive rates in the futures market.
- While not the absolute cheapest, their execution quality is top-tier—a critical factor when every point matters.
- ProRealTime provides high-quality, customizable charts which I can trade from.
Here’s how I’ve customized my ProRealTime layout for futures trading:
- Quick access panel to my top futures contracts (top left)
- A performance tracker chart tracking the current day’s activity (bottom left)
- A 5-minute price chart to monitor short-term movements (center left)
- A tick-by-tick chart for real-time price action (right)
I keep my setup clean and focused on price action.
My priority is tracking the bid/ask spread and key levels like the daily, weekly, and monthly highs and lows. No clutter—just the essentials for reading price movements.
When selecting a broker, ensure they are registered with the CFTC, which oversees futures trading in the United States. International traders should look for oversight from reputable financial authorities in their region, such as the FCA in the UK, ASIC in Australia, or MAS in Singapore.
What’s the Best Futures Trading Strategy?
The best strategy for trading futures depends on three things: your available time, your level of knowledge, and your personal style.
- Scalping: Quick in and out. You’re holding positions for seconds or minutes, aiming to profit from small price movements.
- Day trading: You hold positions for a few minutes to several hours, but everything is closed by the end of the trading day—no overnight risks.
- Swing trading: This strategy involves holding positions for several days or weeks, allowing you to ride medium-term market trends.
- Position trading: Long-term trend following. For futures, this means “rolling” your positions over when a contract nears expiration by buying a new one.
Retail traders typically go for day trading or scalping to avoid holding positions overnight and dealing with overnight price gaps.
Personally, I prefer day trading.
It lets me finish the day without worrying about competing with high-frequency trading algorithms or the complex setups scalpers use.
That said, scalping can still be a solid choice for retail traders, but it requires more advanced tools—like a fast internet connection and a powerful graphics card to keep up with quick trades.
If you’re just starting out, you may consider sticking to a simple, systematic trading strategy.
This means using a clear set of predefined rules for buying and selling based mainly on technical analysis. While the risk is always there, this approach helps you build the discipline needed to stick to a predefined set of rules while you learn more.
After a few weeks of consistently executing your strategy, you can introduce more nuanced factors like market sentiment or broader economic conditions.
Example of a Futures Trading Strategy
This breakout strategy won’t guarantee profits, but it’s a great way to start without going off track. It’s the strategy I used when I first began trading.
| Required capital | $1000 |
| Future contract | Micro E-mini Dow Jones |
| Position size | One contract, or $0.50 per point |
| Strategy type | Intraday |
| Preparation | Identify the high and low of the Dow Jones futures during the first 30 minutes of trading. |
| Entry | Buy if the price breaks above the high, or sell short if it breaks below the low. |
| Stop-loss | Place your stop-loss on the opposite side of the range—below the low if buying or above the high if selling short. |
| Take Profit | Close your position or take profit at the close of the U.S. market. |
It relies on a couple of strong trading habits every new trader should build:
- Create a simple trading plan
- Avoid impulsive trades
- Limit the number of trades (and reduce brokerage fees)
- Stick to your position size
- Accept losing trades as part of the process
- Always use a stop-loss
- Let your winners run
Off-the-shelf strategies rarely outperform the market whatever their price tag may be… To build a true competitive edge, you’ll need to tweak the strategy based on your research and insights.
For example, you could:
- Skip shorting if you expect the market to rise
- Take profit at a specific price target
- Avoid trading on certain days.
While it probably won’t beat the market each time, it’s crucial to have a predefined trading plan. Over time, you can refine it to fit your personal style.
Keep a trading journal to track market behavior and your own decisions. This will help you develop a unique perspective on how the market moves and how you react.
Example of a trade on futures
How to Start Trading Futures
In your first year of trading Futures, focus on three things:
1 – Survival
Your first year is very likely to involve losses. That’s normal. The goal is to stay in the game long enough to build experience.
Start by using a trading simulator to get comfortable with your platform and test your strategy risk-free. When you’re ready for live trading, keep your position sizes small (e.g., one Micro E-Mini Dow Jones contract at $0.50 per point).
2 – Learning
Use this year to build skills—not just in trading, but in discipline, emotional control, and strategic thinking. Be proactive and take every opportunity to learn from your trading mistakes.
3 – Focus on the process.
Trading isn’t a shortcut to quick money. It’s a high-risk game, and if you rush, you’ll burn out. Instead, treat your first year like a learning experience. Focus on improving, not profits.
By the end of the year, you’ll know whether trading is something you want to pursue further. But don’t rush that decision—take it at your own pace.
Which Futures Contract Should You Trade?
Different exchanges offer their own derivative products:
I have a soft spot for index futures because I find their economic, financial, and monetary mechanics easier to grasp.
Some traders prefer specializing in commodity futures, but that asset class often requires deeper research to understand factors like supply and demand (producer/exporter countries, advanced correlations, weather, and geopolitical factors).
Regarding expiration, traders typically choose the contract with the nearest expiration date, which is known as the active contract, for better liquidity.
Example of different expirations for the CAC 40 Futures:
The image above shows the list of available futures contracts for the CAC 40 index, with different maturities ranging from the nearest expiration in September 2024 to June 2029. Each contract is identified by its unique code (e.g., FCE0924 for September 2024), along with the number of days left until expiration (D).
In this example, the September 2024 expiration is the active contract.
The contract labeled “FCEXXX” (where “XXX” stands for the month and year) always corresponds to the futures contract with the nearest expiration date.
Top Futures Contracts by Asset Class
Different contracts have different margin requirements, so the cost to enter a position can vary greatly.
With so many futures contracts, how do you pick the right one?
Focus on three things: liquidity, your trading goals, and your budget.
U.S. Stock Index Futures
| Futures contract | Exchange | Ticker | Point Value | Tick size | Tick value |
|---|---|---|---|---|---|
| E-mini S&P500 | CME | ES | 50$ | 0.25 | 12.50$ |
| E-mini Nasdaq 100 | CME | NQ | 20$ | 0.25 | 5.00$ |
| E-mini Russell 2000 | CME | RTY | 50$ | 0.1 | 5.00$ |
| E-mini Dow Jones | CME | YM | 5$ | 1 | 5.00$ |
| Micro E-mini S&P500 | CME | MES | 5$ | 0.25 | 1.25$ |
| Micro E-mini Nasdaq 100 | CME | MNQ | 2$ | 0.25 | 0.50$ |
| Micro E-mini Russell 2000 | CME | M2K | 5$ | 0.1 | 0.50$ |
| Micro E-mini Dow Jones | CME | MYM | 0.50$ | 1 | 0.50$ |
European Stock Index Futures
| Futures contract | Exchange | Ticker | Point value | Tick size | Tick value |
|---|---|---|---|---|---|
| CAC 40 | Euronext | FCE | 10.00€ | 0.5 | 5.00€ |
| DAX 40 | Eurex | FDAX | 25.00€ | 1 | 25.00€ |
| Mini DAX 40 | Eurex | FDXM | 5.00€ | 1 | 5.00€ |
| Micro Dax 40 | Eurex | FDXS | 1.00€ | 1 | 1.00€ |
Commodities
| Futures contract | Exchange | Ticker | Contract Unit | Tick size | Tick Value |
|---|---|---|---|---|---|
| Crude Oil | CME | CL | 1,000.00 barrels | 0.01 | 10.00$ |
| Natural Gas | CME | NG | 10,000.00 MMBtu | 0.001 | 10.00$ |
| RBOB Gasoline | CME | RB | 42,000.00 gallons | 0.0001 | 4.20$ |
| Gold | CME | GC | 100.00 troy ounces | 0.1 | 10.00$ |
| Silver | CME | SI | 5,000.00 troy ounces | 0.005 | 25.00$ |
| Copper | CME | HG | 25,000.00 pounds | 0.0005 | 12.50$ |
Every futures contract has a unique identifier that combines the contract code, the expiration month, and the year. For example, a Micro E-mini Dow Jones contract expiring in December 2024 would be labeled “MYMZ24.”
Stock index futures have quarterly expirations and the months are represented by H, M, U, Z: “Dow index futures have quarterly expirations in March, June, September, and December. The expiration month is denoted by the letters “H”, “M”, “U”, and “Z” for those months, respectively
While these table highlights key futures contracts, CME Group offers a much broader range of products, including interest rate futures like Eurodollar and U.S. Treasury contracts, as well as currency futures covering major global currencies.
How Many Hours Should You Spend Trading Futures?
There’s no set rule for how many hours to spend trading futures. Some traders treat it like a full-time job, while others focus on just a few key trading windows.
Personally, I’m all about time boxing. I pick a specific time slot (like the first hour of the U.S. market) and go all-in. No distractions, just pure focus.
Here’s how it works: I pick a specific time slot (like the first hour of the U.S. market), and I stick to it. No distractions, just trading.
This helps me:
- Keep 100% concentration during my sessions
- Avoid burnout from staring at charts all-day
- Leaves room to recharge between trading sessions
While there’s no perfect formula, sticking to a structured routine—a few hours or even just one focused session—can help you stay sharp and in control.
What Gear Do You Need for Trading Futures?
Nowadays, you can trade futures with a mobile app, but if you want to stack the odds in your favor, a proper trading station is the way to go.
Why? Because trading from a computer gives you:
- Reliable internet (no more dropped trades!)
- Better visual comfort (you’ll appreciate this during long sessions)
- Faster access to advanced trading tools
Some traders go all out with multi-screen setups, but I like to keep things simple—a 15-inch MacBook Air is minimalist yet powerful enough to handle all my trading needs.
What is Open Interest in Futures?
Open Interest refers to the total number of outstanding futures contracts that have not been closed out by an offsetting trade. In other words, it’s the count of all open positions on a given futures market at a specific point in time.
How does it work?
- Whenever a trader opens a new position, the open interest goes up.
- When a trader closes an existing position, the open interest goes down.
Here’s a quick guide to interpreting changes in open interest:
| Open Interest | What it means |
|---|---|
| Increases | Fresh capital is entering the market, which can validate a trend’s strength. More positions mean more conviction—whether the trend is bullish or bearish. |
| Decreases | Positions are being unwound. This could signal that the trend is losing momentum, or that traders are taking profits and moving to the sidelines. Open interest can also fall after an expiration. |
| Is high | A vibrant market with ample liquidity, reducing slippage risk. It’s easier to execute large trades at the desired price level. |
| Is Low | A less active market with low liquidity. Caution is advised, as lower liquidity can lead to erratic price movements and increased slippage. |
Open interest can serve as a powerful confirmation tool. When paired with price and volume data, it helps validate the strength of a trend. Note that in futures, volume is measured in the number of contracts traded.
For example:
- Uptrend + Rising Open Interest: Indicates a robust bull market with strong participation.
- Uptrend + Falling Open Interest: A sign of a potential reversal or weakening trend as traders exit their positions.
That said, I personally don’t use open interest much in my day-to-day futures trading. While it’s a valuable data point for longer-term strategies, it’s less critical for quick, intraday decisions. So if you’re focusing on short-term trades, don’t let it overcomplicate your analysis.
Tracking open interest is more about understanding the market’s pulse than making trade decisions. It won’t tell you what to trade, but it can provide an edge in when to trade—especially when used alongside price and volume.
Open interest is just one more tool in your arsenal—use it wisely, but keep your focus on the bigger picture.
Why I Prefer Futures Over CFDs
Beyond not being banned in many countries, including the U.S., there are mainly three reasons I prefer Futures over Contracts for Differences.
Reason #1: Access to natural spreads
Natural spreads are based on actual supply and demand, allowing for potentially profitable trading strategies directly from the order book.
With this, you can:
- Buy at the ask price
- Sell at the bid price
Futures contracts provide a natural spread that enables profits from small price movements, even in highly liquid markets.
With CFDs? The broker sets the spread, and the extra cost comes directly from your potential profits.
Reason #2: Less counterparty risk
While CFDs are traded over the counter, futures are traded on regulated exchanges.
This means:
- Transparent, public trading environment with standardized contracts
- Enhanced protection for my trades through clearing houses
- Significant reduction of counterparty risk
- Lower risk of broker shenanigans
Reason #3: Superior liquidity
For popular markets, futures often beat CFDs on liquidity:
- Tighter bid-ask spreads on major contracts = lower costs
- Ability to execute larger orders with less market impact
- Potentially lower trading costs due to competition among multiple market makers
Quick recap:
| Futures | CFD | |
|---|---|---|
| Market type | Organized exchange | Over-the-Counter |
| Spread | Natural | Synthetic |
| Overnight fees | ❌ | ✅ |
| Counterparty risk | ❌ | ✅ |
If you have the required funds, futures often provide a more professional trading environment than CFDs.
Some brokers might charge for rolling futures contracts at expiration. Always check the fine print!
Why Is the Price of a Future Different from the Underlying Asset?
Buying an asset today is not the same as buying it tomorrow.
When you buy an asset now, you’re using your money immediately, and sometimes you also need to cover extra costs like storage.
Imagine storing a herd of cattle from a futures contract in your living room—that’s when you start to realize the issue! In such situations, It’s better to take ownership only when necessary to avoid the hassle and expense.
On the other hand, if your futures contract is for a stock index (with companies about to pay dividends), you might want to own that index sooner to get those payouts.
In the financial markets, the spot price is the current price for an asset you want to buy right now. The futures price is the price agreed upon for buying or selling the asset at a future date. The difference between these prices is called the futures spread.
- If the spot price is higher than the futures price, this is called backwardation.
- If the spot price is lower than the futures price, this is called contango
For most retail traders, the exact math behind calculating the value of a futures contract isn’t necessary—you’re more focused on market movement and price changes.
But for those curious, here’s a simple example:
Let’s say you want to know the value of a CAC 40 futures contract today. To do that, you would adjust the future value to reflect today’s investment.
In other words, you calculate how much you need to invest today to get the value of the CAC 40 at the contract’s expiration date, factoring in any interest earned.
If the companies in the index pay dividends before the contract expires, that will also affect the price difference between the index and the futures contract.
Here’s a simple formula to calculate:
Without dividends:
F₀ = S₀ × e^(rT)
With dividends:
F₀ = S₀ × e^(r-d)T
Where:
r is the interest rate
d is the dividend yield
T is the time until the contract expires.
If this sounds a bit complicated, don’t worry! For most retail traders, understanding the basics is enough to get started.
Traders should be wary of trading courses that make exaggerated promises of success with futures trading, as they often set unrealistic expectations instead of building real skills.
If you want to go deeper into the technical side of things, there’s no shortcuts, practice and educate yourself. I recommend Options, Futures, and Other Derivatives by John Hull—it’s the go-to book for learning more.
Maxime holds two master’s degrees from the SKEMA Business School and FFBC: a Master of Management and a Master of International Financial Analysis. As founder and editor-in-chief of NewTrading.fr, he writes daily about financial trading.
Enjoy free trading practice on
ProRealTime Paper Trading Simulator.
