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Futures Trading Basics Explained

 

Photo by Melissa Askew on Unsplash

 

Day trading and Futures day trading.

Day trading is a style of trading where positions are only held for the current day. A day trader will stop trading at the end of each day and will have a account each night 100% in cash. Futures day trading has some advantages over stock day trading. Stock traders have a greater minimum account sizes and trade with more restriction than futures trading.

All trading has risk and easier to trade does not mean easier to make money. That is why we created this service to help day traders find success in day trading fast and less painful.

Each day trader is encourage to develop there own style of trading however we will help educate you to be able to maximize your results. We provide a screen share with a chart tool showing when it is a favorable condition for a trade.

 

Futures today can be traded as easily as buying and selling stocks, all with the click of a mouse to buy and one more to sell. Many day traders trade there market many times an hour, we however keep trading much more simply and look to place 1 to 4 trades in a day.  We look for the good trades that have a large move potential. Trades that do not match or system we do not take.

There are other Futures products that have nothing to do with commodities, but have been made available to be traded using the Futures market place.  These are the major cash indices like the Dow Jones or the S & P 500.  This gives you as a trader the opportunity to trade these indices by using Futures.  They do not include an actual deliverable product so they are what is called cash settled.

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Futures Contracts

 

For the purpose of this explanation, will focus the ES (S&P 500 mini index).

 

ES is traded in 4 contracts each year (some futures are monthly,  like oil) and each contract month uses a letter to indicate what quarter the trader is looking at.

 

The following is the letter codes for each month and in red/bold are the 4 that the ES uses.

Futures Trading month details: January = F, February = G, March = H, April = J, May = K, June = M, July = N, August = Q, September = U, October = V, November = X, December = Z.

When trading futures we keep all our trading in the contract that has the highest volume.

 

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Futures Trading Leverage

One more important fact of futures trading is the leverage factor.  Leverage can be a great thing, however can also be very hurtful, so respect it and follow your rules!  Each contract of ES you control around $100,000.00 of value (current ES price x $50.00 = value of contract), and you do this with about 20 times less cash in the trade.  This is why every 25 cent move in the Es you gain or lose $12.50 in your account.

 

After all is said and done in explanation of futures, the simple thing to remember is to set your trading rules, and stick to them! When it is time to buy or sell you just have to click your mouse just like trading a stock.  And if it was wrong, it is best for you to get out of the trade.  If it was right,  collect your increase into your trading account, just like stock trading.

If you are interested in trading with us you can visit our Products page.You can also find out more about futures trading details by visiting https://www.investopedia.com/terms/f/futures.asp.

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