The Futures Market & Trading Strategies

Futures are a popular trading market for both day and swing trading. Futures contracts are how many different commodities, currencies and indexes are traded, offering traders a wide array of products for futures trading. Futures markets don’t have day trading restrictions like the stock market. Traders can buy, sell or short sell a futures contract anytime the futures market is open.

Common Futures Contracts

Emini Futures
Forex Market Futures
Energy Futures
Precious Metals Futures
Bond Futures

Futures Trading at a Glance

A futures contract is an agreement between a buyer and seller of the contract that some assets such as a commodity, currency or index will be bought/sold for a specific price, on a specific day, in the future (expiration date). For example, if someone buys a July crude oil futures contract (CL), they are saying they will buy 1,000 barrels of oil from the seller at the price they pay for the futures contract, come the July expiry.

Day traders don’t trade futures contracts with the intent of actually taking possession of (if buying) or distributing (if selling) the physical barrels of oil. Day traders make money on the price fluctuations that occur after taking a trade. This is why understanding futures trading strategies and various commodity markets is essential to success.

Futures are a popular day trading market because traders can access indexes, commodities and/or currencies. Futures market move in ticks, with an associated tick value. This tells you how much you stand to make or lose for each increment the price moves. Futures market contracts expire, but day traders buy and sell before expiry, never taking actual possession (or having to distribute) the underlying asset. Futures traders pay a commission on each trade they make. Each contract requires a certain amount of margin, which affects the minimum balance required to trade.

Futures trading occurs on exchanges like the Chicago Mercantile Exchange (CME) or Intercontinental Exchange (ICE).

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