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What is a Futures contract?
The term ‘Futures’ refers to a legal contract between two parties aiming to buy or sell a particular asset or security at a predetermined price and date.
Futures contracts are the most common way that Commodities like Gold, Soy beans, Crude Oil, Corn, and more are traded. However, Futures contracts are also popular among currency, Cryptocurrency, interest rate, and Index traders.
What are micro and e-mini Futures contracts?
Micro contracts are fractional Futures contracts, and they first gained popularity when standard Futures became too expensive for average traders.
Thus, by trading a fraction of a Futures contract, traders get market access for a fraction of the upfront financial commitment.
Similarly, micro e-mini Futures, which are smaller versions of standard e-mini Futures, were introduced in 2019 as traditional mini contracts grew more expensive.
Using micro e-mini Futures, investors are able to trade against the broader stock market, because these types of Futures are priced in a way that entices ordinary investors. Moreover, micro e-mini Futures are also considered more liquid and accessible than traditionals contracts.
On TradeSniper, you’ll be able to trade micro and e-mini Futures on instruments like the Dow Jones Industrial Average Index, Forex pairs like the EUR/USD, and many more.
Here’s an example of how one of these contracts works:
A Dow e-mini Futures contract provides exposure to 30 blue-chip stocks tracked by the Dow Jones Industrial Average (DJIA). The micro e-mini Dow Futures contract represents 1/10 of the original Micro Dow Jones Industrial Average Contract. Therefore, traders can trade with a mere fraction of the upfront financial commitment.
However, while e-mini Futures are affordable and accessible, they can also be volatile.
How to trade E-mini Futures
In order to trade e-mini Futures, you need to have sufficient funds to cover the margins and fluctuations resulting from day trading. The initial margin may differ between brokers; on TradeSniper’s platform, for example, traders may start with as little as a $100 initial deposit.
Furthermore, this type of Futures contract typically has the lowest intraday margins which is what makes a position leveraged.
How to trade Futures
Futures are the legal agreement between two parties to buy or sell an asset at a predetermined price and time. Traders can trade Futures contracts on Commodities, Cryptocurrencies, Indices, interest rates, and more.
These contracts are traded in order to speculate on the price of the underlying asset or hedge it in the future. You’ll be able to use technical or fundamental analysis trading strategies to hone your trading on this type of contract.
However, it is important to come up with a trading plan which includes risk management methods and exit strategies. TradeSniper, for example, provides you with “Take Profit” and “Stop Loss” risk management tools to help minimize your risk exposure.
What are the different types of
There are different types of Futures contracts available on TradeSniper. These include the following main categories: agriculture, Crypto, e-mini, Forex, metals, and Indices Futures, as well as many more. While these types of contracts differ in many ways, the idea behind all of them is the same. All Futures contracts are legal agreements between two parties to buy or sell an asset within a predetermined price and time frame.
What is margin?
In a Futures contract, the margin is the amount of money you need to have in your account in order to keep your position open. A contract’s margin usually represents a smaller percentage of the notional value of the Futures contract.
Margin is what enables Futures traders to trade instruments whose value is greater than the amount needed to open a position. This mechanism is called leverage. While leverage increases the potential profits from trading, losses can be amplified as well.
When it comes to margin, you’ll need to be aware of the distinction between intraday and full-day rates.
The intraday margin is the initial amount of money needed to open a Futures position. Via intraday margin, you can open larger positions than the capital in your account would normally allow. This type of margin is considered relatively low-cost, and it is what makes the position leveraged.
When the closing bell rings, however, a full-day margin is required by the exchange in order to keep your position open, as the intraday margin is no longer applicable.
Intraday margin rates range between $30 for micro e-mini contracts and $2000 for standard Futures contracts. Nevertheless, the margin rates can vary and change depending on the type of contract, time, and instrument.
If a Futures contract’s price leads to a losing position in the open Futures contract, then a “margin call” will be issued. Once the margin call has been issued, the client must deposit enough funds to make up the difference between his account’s equity and the margin requirement, or the position will be liquidated.
At what time does the Futures market open and close?
Broadly speaking, Futures contracts usually start trading on Sunday at 6 p.m. ET, and close on Friday between 4:30 and 5 p.m. ET. On a daily basis, Futures contracts typically start trading at 5 p.m. ET and close the next day at 4 p.m. ET.
Depending on the type of Futures contract and the underlying instrument, opening times may vary.
As a whole, the Futures market is accessible during most hours of the day. This is also considered one of its main advantages as it allows trading to flow smoothly most days of the week.
What are the differences between stock trading and Futures trading?
In contrast to stocks, which essentially represent a fraction of a company, with Futures, you are not investing in a corporation. Instead, you are actually buying a contract to gain exposure to physical assets, ranging from corn and soybeans, to coffee and oil, and even stock market Indices and Cryptocurrencies.
In addition, Futures contracts, unlike stocks, derive their value from exposure to a financial asset, such as an Index or a Commodity, and can be used to access a wide range of financial instruments, including Indices, currencies, and Commodities, for lower margins than those required for stocks.
Compared to stocks, Futures may be an ideal vehicle for those looking to hedge and manage risks.
Despite their differences, both stocks and Futures are likely facilitated through a broker, like TradeSniper, and are facilitated through an exchange like the Chicago Mercantile Exchange for Futures or the London Stock Exchange.
Why trade Futures?
There are many factors that may make Futures contracts tempting for day traders, like their characteristically high liquidity and high trading volumes.
Futures are generally also highly leveraged, and typically have relatively low commission fees.
Nevertheless, traders should keep in mind that Futures can also be volatile and that losses can be incurred if their predictions aren’t borne out by the market.