Are you wondering how to trade futures but don’t know where to start?

The futures market is one of the most popular to trade for beginners and experienced traders alike – this is because it allows you to make an educated bet on the price of an asset on a future date.

How to trade futures

By learning to trade futures, you’ll learn how to manage risk, hedge investments, or make a profit from market volatility. 

So, in this guide, we are going to break down the steps you need to take to trade futures in 2024 and give you the information and tools you need to get started and trade with confidence.

1. What Does It Mean to Trade Futures?

 When you trade futures, you are buying or selling a contract that compels you to buy or sell an asset at a certain price on a certain date in the future.

That ‘asset’ could be anything from a commodity such as oil or gold to an index (such as the S&P 500) or even a currency.

You don’t have to have the asset to trade it – you are, in fact, buying or selling a contract that tracks the asset’s price.

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That’s why you might choose to trade futures: to hedge risks or to profit from price changes.

– Benefits: Futures contracts are standardized and traded on regulated exchanges, offering transparency and liquidity.

 – Risks: Futures offer a leveraged investment, which means that profits can be magnified – but so can losses.

2. Why Should You Trade Futures in 2024?

 Futures trading is also still popular in 2024, as it remains a way to participate across multiple markets, including commodities and currencies, given the volatility of inflation and interest rates across the world. 

Additionally, with futures markets open 24/5, global opportunities are available to trade around the clock.

Why would anyone want to trade futures?

Well, for starters, the futures market allows you to take both long and short positions, thereby increasing the number of ways in which you can profit from markets that are rising or falling.

 – Big Market Access: Futures trade on every type of asset class, including commodities, indices, interest rates, and more.

3. Step-by-Step Guide: How to Trade Futures

 Now that you have some idea of why futures trading is attractive, here’s how to get started: 

1. Open an account with a clearing member of a futures exchange (also known as an introducing broker) or directly with the exchange itself (also known as a direct member). 

2. Decide which futures product you want to trade.

3. Deposit money with your futures broker. 

4. Place a trade for the futures contract.

5. Monitor the market and the progress of your trade.

6. Take profits or cut losses.

Step 1: Choose a Reliable Futures Broker

 In order to trade futures, you’ll need to open a brokerage account with a firm that allows you access to the futures exchanges. Look for a provider with low fees, an easy-to-use platform and, if you’re a newbie, some educational tutorials as well. 

 – Why Finxo?: Finxo Capital is an easy-to-use platform with powerful tools, the lowest fees, and unbeatable customer service. It also offers a demo account so that you can try your hand at trading futures without risking any money. 

Step 2: Understand the Margin Requirements

 Futures trading is highly leveraged – this means that you can control a large position with a relatively small amount of money. Brokers will ask you to put down a margin, which is a percentage of the contract’s value.

 – Caution: Your margin is always being monitored, and if it drops below the required level – a condition known as a ‘margin call’ – your position could be immediately liquidated at a loss.

Step 3: Study the Asset You Want to Trade

 Before you start trading futures, familiarize yourself with the asset that underlies the contract.

If you’re speculating on eurodollars, learn about the underlying eurodollar time deposit rates and the interbank lending markets – or on silver, the global supply-demand dynamics (and the seasonality and geopolitical factors that impact them).

Step 4: Choose Your Trading Strategy

 There are different ways to trade futures, depending on whether you day trade, swing trade, or use a long-term investing strategy.

 – Tip: Begin with something simple, such as a trend-following strategy, where you stick with the direction of the asset price, and adjust by scaling up as you become more experienced.

Step 5: Monitor Market News and Trends

 The price of futures is determined by thousands of factors, from economic reports to the weather. Stay on top of market news, read charts and indicators, and learn how global events affect the price of your chosen asset.

Step 6: Set Stop-Loss and Take-Profit Levels

 So, to manage risk you have to have stop-loss orders, which sell you out if the price moves against you by a certain amount, and take-profit levels if the price goes up to your target.

Step 7: Execute and Manage Your Trades

 Then, when you’re comfy, make your first futures trade. Check on your position regularly, watching for what the market is doing, and adjusting your position.

4. Best Trading Practices When You Trade Futures

 If you want to learn to trade futures, you should follow best practices in order to benefit your potential and mitigate risks.

Diversify Your Portfolio

 Don’t put all your capital into a single futures contract. If you diversify across markets (commodities, indices, currencies, etc), you minimize the risk of a serious loss of capital from a downward move in a single market.

Use Leverage cautiously.

 But leverage works both ways. It multiplies your profits, but also your losses. Trade only as much leverage as you are comfortable trading, with a sound risk management plan in place. 

Stay Informed

 The futures market is very volatile and can change on a dime – perusing the news on an hourly basis will help you better understand what is happening in the futures market and be on top of it.

The futures market is influenced by global events, economic reports, and geopolitical issues – stay up-to-date on what is happening in these areas as it pertains to your selected asset.

Risks Involved When You Trade Futures

 It’s possible to make money trading futures, but it can be extremely risky, in particular because of leverage. 

Leverage means that you can control large contracts with relatively little capital, but the downside is that losses can spiral if the market moves against you. 

Always have a risk management plan, including a stop-loss level and a contingency in case your position moves against you and you are called in for more money.

Why Trade Futures with Finxo?

 Finxo gives you access to a range of advanced tools, transparent pricing, and expert insights to help you trade futures with confidence. 

With Finxo, you can access global futures markets, benefit from competitive fees, and make informed decisions thanks to an extensive suite of educational material. Whether a beginner or veteran, Finxo is the platform to support your trading journey. 

5. Understanding the Key Benefits and Risks of Futures Trading

 While you can make a lot of money trading futures, you can also lose a lot of money.

 – Pros: Trading futures enable hedging of risks, speculation in price movements, and portfolio diversification. Futures are highly liquid, with ease of entry and exit.

 – Great Risk: The high leverage of futures trading can lead to large losses, and the price of futures can gyrate due to events totally separate from the futures contract, such as economic data or geopolitical events. Bad risk management can result in margin calls or liquidation.

6. Choosing the Right Markets to Trade Futures

 Futures include a wide array of assets: from commodities to financial instruments. Some futures markets to look at in 2024 are:

 – Commodities: oil, natural gas, gold, and agricultural products such as wheat and coffee. These markets are affected by geopolitical supply-demand factors.

 – Indices: Major stock indices, such as the S&P 500 and the Dow Jones, are traded, and index futures allow for speculation in the performance of a basket of stocks.

 – Futures: These include so-called forex futures, which allow you to trade currency pairs, and let you make money on fluctuations in exchange rates.

7. When Is the Best Time to Trade Futures?

Unlike the stock market, which is open only during fixed hours, five days a week, futures markets are open almost 24 hours a day, five days a week.

However, that doesn’t mean that there is always good liquidity. For instance, you would want to be trading commodities. futures (for example, oil) during the U.S. trading hours, whereas you might find more fun in currency futures during the overlapping session of the European and the U.S. markets.

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Learning to trade futures today will make you eligible to trade any commodities, indices, or financial futures in 2024.

After reading this guide, we hope that you now have a better understanding of how the futures market works, how to manage your risk and how to develop a trading strategy to trade futures.

Finxo provides the tools, resources, and support you need to trade futures with confidence.