How to Trade Futures

How to place your first futures order

There are two order actions in futures trading: a buy order and a sell order. Once you place an order, it is sent to the applicable futures exchange which serves as the centralized electronic market place for futures trading.

Before placing your first order, you need to determine the order price and the type of order you would like to enter in the futures market. Let’s take a look at some futures order entry basics critical to learning how to trade futures.

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The Fundamentals Of How To Trade Futures

For each order you place, you will want to understand the core fundamentals of the market you are trading, including the size of the contract, the expiration months, and the required margin.

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Order Types

Before placing a trade, you have to decide on the order type you would like to submit to the exchange. You can control under what conditions and at what price an order will be filled using one of the three basic order types.

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Contract Specifications

Contract specifications are the terms and conditions that govern the way a particular futures contract is traded including the size of the contract, the expiration month and more.

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Margin in Futures

Futures margin refers to the initial amount of money a trader is required to put up as a good faith deposit before entering a position. The margin requirement varies contract by contract.

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Futures Symbology

Each futures contract traded has a futures symbol which is comprised of three elements: the symbol root, the expiration month and the expiration year.

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Build A Futures Trading Plan To Start Your Journey

As you learn how to trade futures, creating a trading plan that includes the futures markets you want to trade along with a risk management strategy can help you build a consistent trading approach.

Tips to create your first futures trading plan

A well-defined trading plan can help traders stay focused and disciplined, helping reduce the risk of emotional decision-making. As you learn how to trade futures, creating your futures trading plan can serve as your foundation including the strategies you want to test, how to test them, and documentation of your goals and trading outcomes. Your futures trading plan should include:

  • The markets you want to trade
  • A trading strategy with clear entry and exit criteria
  • A risk management structure
  • And more
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Find the futures contracts right for you

A futures contract, also known as a “future”, is an agreement to buy or sell an asset or security for a set price at a set date in the future. Futures allow traders to keep a finger on the pulse of various markets and potentially profit from making accurate estimations of how much an asset will be worth in the future.

With a lower initial investment to trade similar markets on Wall Street, futures can be a good fit for traders that want to trade in and out of positions intraday.

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Define your risk management strategy to protect your futures account

Effectively managing risk is often the difference between success and failure and can also help reduce stress when trading futures. 

Determining how to trade futures without jeopardizing your lifestyle, savings or retirement means understanding considerations such as diversification and appropriate trade sizes. 

It is also critical to keep up with the ever-changing market environment, which often is sensitive to news both big and small. Tools that empower you to predefine targets and stops to close out a position are just one example of risk management in action. 

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Discipline and patience impact your ability to follow a trading plan

In futures trading, as in any profession, it is important to be aware of the role that psychology and behavior can play in your success or failure. As markets change, traders need to evolve their trading decisions with reason and strategy instead of emotion and impulse. Developing this technical futures trader mindset matters as you gain insight into how to trade futures.
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Learn how to trade futures with industry pros

Join our free livestreams as we prepare, analyze and target live futures trade setups in real-time.

Watch our industry pros trade the futures market open every weekday at 9:15 am ET and the market close at 3:00pm ET using NinjaTrader’s award-winning charting and analysis tools.

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Use NinjaTrader Platform Tools To Target Futures Market Opportunities

Our video library highlights steps to get started with the platform basics along with quick tips to customize your NinjaTrader platform to fit your trading style. Topics pertaining to how to trade futures include:

  • Creating your first chart and using Chart Trader
  • Opening and using the SuperDOM and understanding the ladder display
  • Saving and loading personalized workspaces
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