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Futures Trading Education

Learning How To Trade Futures

Part of trading is utilizing your capital in the most efficient way and if you’re a day trader, futures markets are one of the best ways to go. So what are futures when they’re at home? A future is a contract to buy or sell something of a certain specification at an agreed price and date. Depending on the specific instrument, futures contracts can be settled by delivery of the underlying product or in other cases they can be cash settled. Depending on the instrument, a futures contract has a different number of set contract expiry dates per year. Many products have quarterly or monthly contracts, but there are also other schedules too. US treasury futures have a different cycle to silver futures for example. The thing to remember is that in the majority of cases, market participants won’t ever take delivery of the underlying product. This means that for the most part, futures contract positions will be closed out before the contracts expire by taking the opposite trade to an open position and leaving the net account position at zero.

At Premier Trader University we offer in-depth training taking you through everything from the ideal futures market selection, to a fully developed trading system that can be utilized on multiple different currency pairs.  Some of our favorite futures markets for trading include:

Crude Oil Futures, Unleaded Gas Futures, Silver Futures, Sobyeans, Wheat, Russell e-Mini Futures, Dow e-Mini Futures, Dax Futures, Heating Oil Futures and others.  This is just some of the favorites inside the University.

An excellent video on how you can Day Trade Futures is presented here… 

The History Of Futures Trading

Briefly, the origin of modern futures stems from rice traders in Japan and subsequently farmers in the US Mid-West. Farmers wanted to protect their incomes from extreme fluctuations in prices and so would agree a price for their crop in advance of the harvest. They realized that they could trade a position to capitalize on the subsequent movement of prices and with the advent of centralized exchanges, liquidity amongst other things allowed them to do this more easily. Today futures markets are available for a far broader range of products. Commodities, stocks, bonds, forex and precious metals are widely traded types of futures markets. They are traded throughout the world on many different exchanges – CME, EUREX, LIFFE, OSE and many more. And because of this there are many different types of market participant. But the reality is that there are fundamentally only two kinds of player – the hedger (the farmer) and the speculator (the trader).

Something For Everyone

Of course there are many intricacies to trading the different products – trading crude oil futures is quite different to trading E-mini S&P 500 futures. Depending on the type of strategy you use, your trading capital and even your personality, you’ll be more drawn to certain markets than others. Some markets are quick and aggressive, whilst others are slow and plodding. Knowing that you have someone to turn to with the experience to understand how these different markets trade can save you a lot of time and effort. The Premier Trader University (PTU) provides just that – a place where not only the coaches have a wealth of knowledge, but also the members too. Whilst the Premier Trader University (PTU) system provides a fantastic fit, day trading futures has benefits which extend across many different strategies and traders. Some of the advantages of trading futures I’ve already outlined in “Futures Trading LLC”. Trading futures is very scalable because of the liquidity of many markets, they also offer fantastic leverage, they have highly regulated and centralized exchanges and with an incremental commission rate structure they are cost effective to trade.

Futures Trading Basics – Getting Started

If you’re not already familiar with the different products and how they trade, the first small step is to take a look. Many futures brokers offer a free trial of a simulated account with live market data for a number of different platforms. I suggest that in order to find products which trade with good liquidity (and not all markets do), you take a look at the margin or commission list from the broker. If you then look at the exchange website for a particular product, you can then see how much it trades each day and what the current front month contract is (contract closest to expiration that is trading the most volume). Ideally you’ll be looking for a minimum of 50k contracts a day but this can vary significantly from instrument to instrument. As a starter the codes for some good products to trade are ES, NQ, TF, ZN, CL, FDAX, FGBL – but there are many, many more. By taking the time to look and get a feel for what’s out there, you’ll soon see just how simple futures markets make it to trade. Once you take that first small step, your eyes will open and you’ll never look back.

There of course are a number of factors that will contribute to your potential success trading futures.  One key is Discretionary Trading vs System Trading.  The difference?  Discretionary is more typically thought of as “subjective” while System is consider “mechanical.”  We see the Discretionary Trading vs System Trading debate resolved by actually combining what is best about both.  We say 90% mechanical plus 10% subjective or “Art of Trading” is the ideal mix.

For example, how would you figure out how to deal with range bound markets?  A range bound market might arguably be traded systematically waiting for a breakout above the highs or a breakdown below the lows.  Or perhaps discretionary – only after a breakout and only after some news might drive it forward.  A better approach to a range bound market is to ensure your futures trading system works in all market conditions – not just trending, not just range bound markets.

A suggestion is to attend one of our Live in the Market System Demonstrations and Question and Answer sessions – just click here to see our next upcoming live trading webinar and grab your spot.

Trade well.