There are several differences between trading futures and trading other markets that traders should be aware of when making the switch. We recommend that all traders new to the futures markets spend some time familiarizing themselves with the basics. We also strongly encourage anyone new to futures to start trading very small position sizes until they feel comfortable.
Regulated Brokers & Markets
We work with a regulated broker to ensure that all trades in a Live Funded Account go to a centralized, regulated exchange and are filled with true market liquidity from genuine third parties. Futures markets are highly regulated and centralized, resulting in consistent quotes and fills for traders across all platforms and brokers. Working through a regulated broker, we are able to give our traders security and peace of mind when trading the futures markets.
Contracts & Leverage
Leverage when trading futures works a bit differently than forex or crypto. Each futures product has a set minimum tick value and price per tick. A ‘tick’ is the smallest increment of price movement on the underlying product. For example, The ES Mini (the S&P 500 futures product) has a minimum tick of $0.25, and a tick value of $12.50. This means that, for each $0.25 of movement in the value of the ES, each contract will have a corresponding move of $12.50, for a leverage ration of 50 ($12.50/$0.25 = 50).
Each futures product has a specific minimum tick value, value per tick, and behavior. It is imperative that futures traders understand the movement, ratios, and values of the products they are trading. Every trader has a maximum position size (described on the evaluations page) and will not be allowed to open a cumulative position larger than the limit.
Every futures product is traded in multiples of a contract, representing a set amount of the underlying product. All trades are taken in multiples of a contract, with no fractional shares allowed.
Contract Rollover
Every futures contract has a specific expiration date, unlike stocks or currency pairs that trade in perpetuity. Each month has a corresponding code, which gets attached to the symbol of the instrument. These contracts expire, and volume and liquidity shift to the most current, “front-month” contract. As an example, the ES (S&P 500 futures product) has quarterly contracts that expire in March (ESH), June (ESM), September (ESU), and December (ESZ). Further, the last digit of the year is appended to the contract name to keep the years separate, for example ESH2 was the ES contract that expired in March 2022.
Traders should always trade the contract with the most volume, which is typically the most recent, front-month contract. The CME Group has a search tool that traders can use to look up futures products, their open interest and volume, and expirations. For more details on contract rollover, click here.
Commissions & Fees
When trading futures products, commissions and fees are charged per contract, per side. For example, our traders can expect to be charged commissions and fees equaling $2.79 per ES contract, per side. That means for a round-trip trade (both a buy and a sell), the total fees and commissions are $5.58. These fees would be multiplied per contract. Traders can find a full list of tradable products, as well as the one-way fees per contract, here.
Conclusion
It is always the responsibility of the trader to make sure that they understand the rules, details, and intricacies of any products they are trading. The CME Group and other websites have tremendous resources available for traders to use to familiarize themself with any products they are interested in trading.
