A Beginners Guide to Trading Futures
How and Where to Trade Futures
If you’re wondering the best way to learn futures trading, then you’re on the right track to making a solid investment choice. Day Trading Futures is relatively unknown compared to mainstream forms of trading such as trading Stocks, or Forex. Futures trading provides a number of advantages over these better known and more highly promoted forms of trading.
One of the most attractive features of trading Futures is that Futures Traders execute their trades directly on regulated stock exchanges. Other traders will access the markets via an OTC Broker. More on this later.
Futures Traders are also able to trade with lower leverage when compared to some other derivative instruments. Lower leverage means lower potential risk for both profit and loss. Higher leverage means a high potential for profit, and a high potential for loss.
When trading any derivative, it is important to note that leverage means risk, so hence great traders need to be very good at risk management.
Below you will learn exactly what Futures are and how and where to trade Futures. We’ll provide reasons why Day Trading Futures for beginners and experts alike is recommended over all other forms of trading, and provide tips to trading them.
How and where to trade Futures in 2025 contents
What are Futures?
Futures, or a Futures contract is an agreement between two parties. The agreement states that the buyer or seller of the contract will then sell or buy back the contract at or before the contract’s end date. A Futures trader can choose to exit a contract early with no penalties should they choose. The value of the contract is derived from an underlying asset. For example, a trader may buy a contract on Oil, that contract is assigned the value of the current price of Oil on the Futures market.
Trading Futures gives you the ability to both buy and sell contracts. This means that it does not matter whether the market goes up or down, there exists an opportunity to profit if you are good enough to do so.
How Does a Typical Futures Contract Trade Work?
To understand how trading a futures contract works in practice, let’s look at a straightforward example using oil as the underlying asset. Imagine it’s April, and you anticipate that oil prices will climb over the next few months. With this outlook, you could enter a futures contract that settles in June, agreeing to buy oil at today’s price.
If oil prices do indeed rise by June, you’ll have secured a lower purchase price, and you can sell the contract for a profit. On the flip side, if you believe oil prices are headed for a drop, you could enter a contract to sell oil at today’s price. Should the market move in your favor and prices fall, you’ll be able to buy it back for less, keeping the difference as profit.
A few things to keep in mind:
- Positions can be closed early: While futures contracts have set expiry months (like June, December, etc.), you don’t have to hold your position until expiry. If the market moves in your favor before then, you can close the contract early and secure your gains (or limit your losses).
- Profit and loss depend on price movement: The amount you make or lose will directly relate to the difference between the initial contract price and the price at which you exit the contract, multiplied by your contract size.
- Expiry dates vary: Each futures contract will list its specific expiry date—always double-check this before you begin trading.
This flexibility to profit in both rising and falling markets, combined with the ability to close your trades early, makes futures trading a dynamic way to capitalize on price movements in a variety of markets—whether it’s oil, gold, wheat, or even stock indices.
The Background of Futures
Futures contracts were originally created to trade agricultural goods. Having a written contract guaranteeing an amount of money gave historical farmers a level of security in making long term plans.
Speculators would assume the risk of entering Futures contracts in the hope that the price they would pay upon delivery will be lower than the marketing price at the future point in time.
These Futures contracts have become more common over the years as their regulated nature means they are accompanied by smaller counterparty risk.
Futures Contracts vs Forward Contracts
Both Futures and Forward contracts are derivative arrangements that describe two separate parties agreeing to buy or sell assets at an agreed price by a specific date. There are distinct differences between these two types of contracts.
A Forward contract is an over-the-counter (OTC) arrangement in which securities are traded through a broker-dealer network rather than on a centralised exchange. This means that the parties involved in forward contracts will privately negotiate its terms.
Forward contracts are riskier for both parties due to the greater chance of default or non-settlement by the client. They mostly exist as an instrument for hedgers to manage the volatility of assets.
Unlike Forward contracts, Futures contracts are standardised contracts that are traded through stock exchanges and are settled on a daily basis. Futures contracts hold comparatively little risk, as they come with uniform terms and fixed maturity dates.
The Benefits of Trading Futures
There are many good reasons why we choose to trade Futures above all other forms of trading. Our Futures trading course reviews also demonstrate the popularity of Futures trading amongst all kinds of people.
Let’s go through some of these reasons:
Fair and transparent pricing
The Futures markets allow a trader to directly connect to an exchange without the need for a traditional OTC style broker. Connecting directly to the market means that you receive the ‘true price’ rather than the broker’s interpretation of that price.
It is worth noting that the broker’s interpretation of the correct price for a market may be completely different to the stock exchange defined price of the market. In this interpretation, there is a great deal of room for price manipulation in favour of the broker and against you the trader.
In direct comparison, futures traders trade directly to their chosen stock exchange with only one price point for all traders. One global price point produces a level playing field for traders big and small.
When trading the Futures market you can be confident that the price you are given is the real current price, and not a price manipulated in favour of your Broker.
Leveraging
Futures trading allows a trader to leverage a small account. This means that a Futures trader doesn’t need to trade funds equal to the full value of the contract. An initial margin is required instead and is a fraction of the contract price. This means that the potential return as well as the potential loss is increased. While this does create more risk it provides successful traders the ability to access more buying power.
When weighing up whether to use leverage in your trading, always keep in mind that while it can serve as a powerful tool for increasing your market exposure, it should be approached with caution and careful planning. Proper risk management and an understanding of margin requirements are vital to long-term success in the Futures market.
Smaller account size potential
One of the biggest complaints from stock traders that have a small amount of capital is the restrictions on trading accounts that are under $25,000. While you can trade stocks with a small account you can only day trade a certain number of times per week, or create a cash account which then involves waiting for trades to ‘settle’ which is essentially the same problem dressed a different way.
A major benefit of Futures trading is that this constraint doesn’t exist, you don’t need that much capital to day trade. All you ever need is enough funds to cover margin, so you can day trade with an account smaller than that of a stock trader. Futures also provide E-mini and E-micro markets that require a much smaller margin in order to trade and are well suited to traders with limited funds.
Liquidity
The Futures markets are some of the most liquid markets available in the world. What this means is that there are a lot of people trading these markets each and every day and the volume of tradable contracts in these markets is huge. To quantify huge, the US Markets alone turn over more than 3 Trillion US Dollars every day. The Futures markets are significantly larger than the global FOREX markets.
A liquid (high volume) market allows a trader to instantly place trades and have them executed into the market. Trading products like Options with lower liquidity means that you might not get your trade ‘filled’ straight away which means that price could move away from your desired trade entry point before you have a chance to enter your trade.
Access deep liquidity:
The sheer volume and international reach of futures markets ensure that there is enough liquidity for traders to execute larger orders without significant price slippage. This is particularly advantageous if you prefer dealing in sizable contracts, as your trades are more likely to be filled at your desired price.
Go long or short
With futures trading, you aren’t limited to profiting only when the markets rise. You have the flexibility to go long (buy) if you believe the price will rise, or short (sell) if you think it will fall. This versatility means that opportunities to profit exist in both bullish and bearish markets, provided your predictions are accurate.
Diversification
There are over 70 different markets available to Futures Traders. These include Oil, Gold, all Currency Pairs and most major global stock index markets. In trading, these are known as asset classes.
Because of the number of asset classes available to Futures Traders, there is opportunity to focus on the best market opportunities. If Oil is running, trade oil. If gold is falling, trade gold. Your market trading options are many and varied. For those who choose to trade longer term (swing traders for example) the ability to diversify your trades across different markets helps you hedge your account and limit risk.
| Product | Liquidity | Volatility | Transparency |
|---|---|---|---|
| Mid/Large Cap Stocks | YES | SOMETIMES | YES |
| Penny Stocks | NO | SOMETIMES | YES |
| Forex | YES | SOMETIMES | NO |
| Options | NO | SOMETIMES | YES |
| Futures | YES | YES | YES |
Hedge your existing positions
Futures aren’t just for speculators. Many traders use futures to hedge existing positions and control risk. For example, if you hold shares in a company and are worried about a market downturn, you could short a futures contract on a related index. If the market falls, gains on your futures position can help offset losses in your stock portfolio. Conversely, if you have a short position and are concerned about a rally, going long on a futures contract can serve as protection.
As you can see, the world of futures trading is broad and versatile, offering tools for risk management, diversified opportunities, and dynamic trading strategies for beginners and experienced traders alike.
How and where to Day Trade Futures
Futures trading is becoming more and more popular among ‘mum and dad’ investors. The Futures markets are not strictly for hedge funds and wholesale investors, they are extremely accessible to the average trader. Due to the advancement of the internet, trading markets such as the Futures markets are accessible to just about anyone.
What you’ll need in order to trade Futures
There are a few tools and services that you will need in order to access the Futures markets and place trades. Here is what you will need:
A laptop or computer
You will need to have a laptop or trading computer that is capable of running software that will allow you to connect to the market and place trades. You won’t need a top of the line machine, however it should be robust enough to not lag or crash at the wrong time.
Many of our members choose to use a laptop as it provides mobility and extra flexibility for where they can trade. Others prefer to set up a desktop computer in a designated location (a trading den, if you will).
Some traders use multiple computer screens to trade with. This typically enhances your ability to look at larger and smaller trading charts simultaneously. We find that this micro/macro perspective on the market assists greatly in detecting high probability trades.
A reliable internet connection
Because the live markets can move quickly it is important to execute your trades quickly. It is also important to have a reliable connection that won’t drop out and leave you stuck in a trade until you’re back online. Broadband or cable internet are the most preferred connections for trading.
A Trading platform
In order to connect to a market and execute trades you will need a special software called a trading platform. This software will provide you with the charts and drawing tools that will help you identify trades, as well as the functionality to place trades.
Our favourite trading platform is NinjaTrader and it is the platform that we and our members use.
Broker vs Clearing house
You need to have a trading account in order to trade. Most people open a trading account with an OTC style broker like eToro, IG or Saxo, but we recommend you don’t. We suggest you open your trading account with either a Clearing House, or a non-OTC broker which doesn’t control price.
Your trading account holds your funds which are accessed by the trading platform when you place trades.
We choose to use NinjaTrader as our trading platform which also acts as our Clearing House.
This allows us to trade directly to and from the stock exchange of our choice. This gives us 100% market transparency without the potential for market data interference or manipulation.
NinjaTrader connects live market data directly from the exchange, this means you see the ‘true price’. The trading platform then facilitates the execution of trades.
A live connection and data feed
A live connection to a market is needed so that a trading platform can make the request to execute a trade. The data feed will provide the information about price and allows the trading platform to build trading charts.
Steps to Trade Futures Successfully
Equipped with the right setup, you’ll also want to know the key steps involved in placing and managing your trades:
1. Understand how futures trading works
Futures trading allows you to speculate on the price of a market rising or falling. You can profit from movements in either direction—provided your predictions are correct—by going long (buying) or short (selling) on a futures contract.
2. Pick a futures market to trade
With access to more than 70 global markets—including Oil, Gold, major stock indices, currencies, and more—you can select the instrument that best suits your trading style and risk appetite. For example, some indices like the Germany 40 tend to show higher volatility and might appeal to active day traders, while gold or silver often attract traders seeking lower volatility.
3. Decide whether to go long or short
Based on your analysis (which could be technical, fundamental, or both), you’ll determine whether to buy (go long) if you expect prices to rise, or sell (go short) if you anticipate a fall.
4. Place your first trade
On your trading platform, select the market and the specific futures contract you wish to trade. Decide on your position size and whether you’re buying or selling. Many platforms, including NinjaTrader, make this process straightforward.
5. Set your stops and limits
Risk management is crucial. Use stop orders to automatically close your position if the market moves against you, limiting potential losses. Limit orders can be set to automatically take profits if the market reaches your target. Some platforms allow you to set regular, trailing, or guaranteed stops directly from the order screen.
6. Monitor and close your position
Once your trade is live, keep an eye on the market. If the trade moves in your favor, you may wish to close out for a profit—or adjust your stops to lock in gains. If the market doesn’t go your way, closing early can help minimize losses. Remember, you don’t have to hold a futures contract until its expiry; you can close your position at any time.
By making sure you have the right hardware, software, and trading account setup—and following a clear trading process—you’ll be well-positioned to navigate the futures markets with confidence.
Tips for being profitable when trading Futures
There are many beginner traders that have tried and failed in all forms of trading and they all lacked the same thing. Here are some tips to avoid those mistakes and give yourself a better chance of being profitable in trading.
Develop or copy a proven trading strategy
Not having a trading strategy is possibly the number one reason why new traders fail. You need to have a set of rules and a plan for every trade that you place. Not having a strategy often leads to spur of the moment decisions that can be costly. Your strategy will also help you understand what a good opportunity looks like and what a bad trade might look like.
Learn from a reputable trading educator with an online Futures trading course
It is so incredibly important to invest in your education, with your time, money, and effort. While it is possible to teach yourself you will find that your learning is unstructured, unsupported, and a Frankenstein’s Monster of different techniques and strategy.
It’s best to learn trading with an educator/ take a futures trading course with the International Day Trading Academy, which has a solid track record of success. You should find someone who provides a high level of support and guidance. Choose a program that you feel confident that you could learn.
Learn to Trade in a Live Trading Room
A Live Trading Room is an online coaching tool where trades are called live in the market. In our opinion, a Live Trading Room provides guidance in identifying high-probability trades. We would go so far as to say that if an educator does not run a Live Trading Room, you need to question the integrity of their strategy. You also need to ask them why they are not prepared to call trades live, in real time, so you can measure their true professionalism.
We suggest you only use an educator that also runs a Live Trading Room and will let you test that Live Trading Room before you decide to be educated by them.
Are Futures Suitable for Beginners?
While the world of futures trading can seem exciting, these instruments aren’t typically recommended for newcomers. Futures involve leverage, which means you’re trading with both your own money and additional funds provided by your broker. This setup can magnify profits, but it also increases the risk of significant losses—sometimes beyond your initial investment.
With this in mind, it’s important to learn to trade futures with a licensed futures educator with a depth of experience teaching beginners futures trading.
Downsides to trading Futures
There are a lot of great reasons to trade Futures, however it must be noted that every form of trading carries two risks, the risk of making money and also the risk of losing it. In short, the Futures markets involve risk that needs to be managed with proper risk management techniques if you want to be successful as a Futures trader.
Learning Futures trading bottom line
The popularity of Futures amongst its traders comes largely from being able to access a fair market that they can get in and out of quickly. The appeal also comes from being able to trade a smaller account. Futures traders can negate the restrictions that are involved in other forms of trading.
Combining Day Trading with the Futures markets gives you the opportunity to create an income on a daily basis (when the markets are open). This is popular because it can provide either a second source of income or even a full time income working fewer hours.
Online Futures Trading Course
If you are looking to learn how to day trade Futures online, make sure you properly prepare yourself. A good place to start is with one of our courses in Futures trading for beginners.
Our Futures trading course reviews and testimonials demonstrate our course’s value in teaching key insights into day trading.
It’s always best to create a simulation account where you can practice strategies that you’ve learnt. Never trade your own money until you have proven to yourself that you can be profitable. We call this go slow to go fast and we believe this is the best way to approach any learn Futures trading.
Cameron has over 10 years experience in teaching people how to day trade the futures markets. He has feature alongside the CME Group, and NinjaTrader, and has been published in multiple magazines, including leading trading magazine Your Trading Edge magazine.
