What Is Futures Trading? A Comprehensive Beginner's Guide

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Futures trading allows you to speculate on the price movements of assets like indices, commodities, or cryptocurrencies without directly purchasing them. By utilizing leverage, you can start with a relatively small amount of capital and still access significant market opportunities.

This market is known for its diversity—you can trade futures contracts on stocks, oil, gold, and even Bitcoin. It's a dynamic, challenging environment full of potential.

In this guide, you will discover what futures trading is and learn how to get started step by step, from the very beginning and in a responsible manner.

How Do Futures Contracts Work?

To understand futures trading, you first need to know what a futures contract is. It is a legal agreement between two parties to buy or sell an underlying asset—such as stocks, commodities, stock indices, or cryptocurrencies—at a predetermined price on a future date.

These contracts belong to the derivatives market because their value depends on the price of another asset. Unlike some other financial instruments, futures are traded with the commitment to execute the transaction regardless of how the market price may have changed by the settlement date.

In short, futures trading involves speculating on the price movement of an asset without the need to own it physically. This is why it is popular among traders seeking leverage or looking to manage risk.

Now, let's delve deeper into this fascinating topic.

How Can You Make Money with Futures Trading?

Futures trading is a method of trading derivative contracts whose value is based on an underlying asset, such as a stock index, a commodity, or a cryptocurrency. Profit or loss arises from the difference between the price agreed upon in the contract and the actual price of the asset at the time of the trade.

When you trade futures contracts, you are speculating on whether the price of the asset will rise or fall in the future. Although the contract stipulates that the buyer must receive the asset upon expiration, in practice, many traders close their positions before expiration, realizing profits if the price has moved in their favor.

Originally, futures were used to set prices in the trade of commodities like wheat or oil. Today, these types of contracts are also used in global financial markets to trade stock indices, cryptocurrencies, currencies, and more.

In the next section, we will show you the most common types of futures contracts and the markets where you can start trading.

Types of Futures Contracts: Standard, E-mini, and Micro

One of the advantages of futures trading is the ability to operate in different markets with contracts tailored to various levels of capital. There are three main types of futures contracts based on their size: standard futures, e-mini futures, and micro e-mini futures.

Micro futures and e-mini futures are designed to facilitate access for traders with smaller accounts. Thanks to their smaller size, they allow you to trade futures with less capital while still benefiting from market leverage and volatility.

These mini and micro contracts replicate the behavior of major stock indices. Some of the most popular include:

These instruments are ideal for those who are just starting in the futures market and want to reduce their risk exposure while gaining experience.

Due to their volatility, micro futures are a great option to consider when trading.

Types of Futures Contracts by Underlying Asset

In futures trading, contracts are based on different underlying assets, allowing traders to diversify and operate in multiple markets. Below, we explain the most common types of contracts based on the assets they track.

Futures on Stock Indices

Trading futures on indices allows you to speculate on the direction of the market without needing to buy individual stocks. They are ideal for those seeking exposure to entire sectors or global economies.

The most commonly used indices in futures trading are:

These contracts are available in standard, e-mini, and micro e-mini versions, making them suitable for different levels of capital.

Crude Oil Futures

Trading crude oil futures provides access to one of the world's most liquid and volatile markets. Micro crude oil futures are an excellent option for trading with lower capital and high leverage.

Natural Gas Futures

Among the most popular contracts is the NYMEX Henry Hub Natural Gas Futures. It is one of the most traded energy futures contracts globally.

Currency Futures (Forex)

You can also trade futures on currencies, which is an alternative to the spot Forex market. These contracts allow you to trade currency pairs with greater transparency and without hidden spreads.

Currency futures are traded on centralized markets and are ideal for traders who want to trade forex with regulated contracts and defined leverage.

Cryptocurrency Futures

The growth of digital assets has led to the emergence of futures contracts on cryptocurrencies like Bitcoin or Ethereum. These instruments allow you to speculate on the future price of cryptos without the need to hold them in a wallet.

The versatility of futures is astounding!

Examples of Futures Contracts Available in the Market

Futures trading provides access to a wide range of financial assets through standardized contracts. These contracts allow you to speculate on the future price of almost anything, from raw materials to cryptocurrencies. Here is a list of the most common futures contracts:

Agricultural Commodities

These contracts are widely used for trading futures in the agricultural or livestock sector, especially due to their seasonality and volatility.

Energy Contracts

These are among the most traded contracts in the world due to their high liquidity and economic relevance. Many traders use energy futures for hedging or pure speculation.

Interest Rates

These contracts allow institutional investors to manage financial risks related to interest rates.

Precious and Industrial Metals

Ideal for those seeking exposure to safe-haven assets or industrial metals that follow global economic cycles.

Stock Indices

Contracts on indices are among the most popular in the financial futures market, especially in their e-mini and micro versions.

Cryptocurrencies

Cryptocurrency futures offer a regulated way to trade digital assets without the need for wallets or decentralized exchanges.

Futures Margins

When trading futures, you must meet a capital requirement to cover credit risk; this is known as margin. There are two types: Initial Margin and Maintenance Margin.

Understanding and managing your margin requirements is a critical part of risk management in futures trading.

Advantages of Futures Trading

If you are evaluating whether it is worth engaging in futures trading, it is important to know the benefits that make it one of the most popular ways to trade in financial markets. Below, we share the main advantages of the futures market:

Speculation Without Owning the Asset

One of the biggest advantages is that you can speculate on the price of assets like gold, oil, or stock indices without having to physically purchase them. This allows you to take advantage of market movements without incurring logistical or storage costs.

Leverage with a Smaller Initial Investment

Leveraged futures trading allows you to control large positions with a fraction of the capital required in other markets. This amplifies potential profits (though also risks), making it ideal for traders with defined strategies and good risk management.

Nearly 24/6 Availability

Futures contracts can be traded almost around the clock, from Sunday evening to Friday night (U.S. time). This high availability gives you the flexibility to trade when it best suits your schedule.

Transparent and Centralized Markets

Unlike the over-the-counter (OTC) market, the futures market is centralized. This ensures that all participants have access to the same price, volume, and transaction information, increasing transparency and efficiency.

High Liquidity

Futures contracts on popular assets—such as the S&P 500, oil, or currencies—have high trading volumes. This results in fast execution, lower spreads, and less slippage, which is key for active traders.

How to Trade Futures: A Step-by-Step Guide to Getting Started

There are five fundamental steps you will need to put into practice to trade futures.

1. Continuous Learning

Trading involves learning different strategies and constantly staying aware of world events. Keeping mentally active will allow you to understand market dynamics and their impact on futures.

Furthermore, because futures contracts derive their value from their underlying assets, this opens the door for even more options linked to these assets in the future, as happened with cryptocurrencies. Therefore, you must stay updated and understand innovations in the financial market.

2. Develop Analytical Judgment

Being aware of your trading activity is fundamental. Understanding whether what you are doing is working or not will give you insight into your development as a trader; you must analyze every move and even your way of thinking.

Analytical judgment encompasses everything from your knowledge to your mindset when trading. The latter is often referred to as trading psychology.

3. Create a Trading Strategy

The strategy you implement should be developed according to your personal goals; it is also advisable to adapt a strategy that has already been tested and that fits your conditions as a trader.

The purpose is to have a clear trading plan that guides you through your operations. It should include your capital budget, the time you are willing to devote to trading, why you are trading, and how far you want to take it.

4. Practice Trading

Using simulators and techniques like backtesting are options that allow you to test your trading knowledge without any risk.

Before trading in the real market, it is advisable to practice and familiarize yourself with market behavior; the ideal is always to avoid risking your money if you lack experience. 👉 Explore practical trading simulators to test your strategies in a risk-free environment.

5. Create a Trading Account

To trade, you will need an account with a reliable broker, who acts as the intermediary between your operations and the market.

How to Get Started in Futures Trading?

Remember that all trading activities require you to train first. However, theory alone will not be enough to ensure your performance in the trading world: you will need to practice everything you have learned.

An excellent way to start implementing your trading strategy is to practice on a simulator. A simulator is a representation of how the market behaves, allowing you to trade without using real money. Therefore, starting this way is a great option for trying out different strategies and checking how well you are performing.

It is essential that you keep a record of your actions while practicing. Understand how different variables impact the market and how various strategies affect your profits or losses.

Later, if you have noticed improvements through the goals you have set, you can consider starting to trade. To begin, you will need to create an account with a broker.

Finally, here are some of the characteristics you should consider when choosing a broker: simulation capabilities, historical data, technical support, charting tools, indicators, commissions, and customer service. Do your analysis and choose the one that best suits your needs.

Futures Trading Strategy

There are three basic strategies you should learn to implement in futures trading:

  1. Short Position: This implies that a futures contract will decrease in price.
  2. Long Position: This implies that a futures contract will increase in price.
  3. Spread Trading: This involves taking both sides of a position.

Furthermore, another important aspect to consider in your strategy is how you will execute your trades in terms of frequency and market movement.

Start Trading Futures Today

What do you think of this introduction to futures trading? It is undoubtedly a surprising financial asset with many possibilities. As you have seen, you can trade everything from metals to stock indices; additionally, mini and micro futures allow you to explore even more options.

If you want to improve your economic situation through trading, you will have to study constantly to be able to operate efficiently. Consistency and the right mindset will be two keys to your development.

Frequently Asked Questions

What is futures trading?

It is a financial activity that involves buying and selling futures contracts, which are agreements to exchange an underlying asset at a fixed price on a predetermined future date.

How does futures options trading work?

It involves trading contracts that give the buyer the right, but not the obligation, to buy or sell a futures contract at a specific price before its expiration date.

Is futures trading profitable?

Yes, it can be profitable, but it depends on the trader's experience, market knowledge, and risk management skills.

What is better, Forex or futures?

It depends on the trader's profile. Forex offers high liquidity and flexibility, while futures are ideal for those looking to trade specific assets with greater leverage and transparency.

How much money is needed to trade futures?

The initial capital varies, but some platforms allow you to start with $500 or $1,000. However, it is advisable to have more capital to manage risks effectively.

What are the main types of futures contracts?

The main types include commodities, stock indices, currencies, interest rates, and cryptocurrencies. Each type allows speculation on the behavior of a specific market.