Futures trading is buying or selling standardised contracts that commit you to buy or sell an asset (a stock index, oil, gold, Treasury bonds or a currency) at a set price on a future date. Traders rarely hold to delivery. They profit from price changes while the contract is open. Futures trade on regulated exchanges like the CME, nearly 24 hours a day, with leverage through margin, and micro contracts let small accounts take part.
Futures were invented so farmers and manufacturers could lock in prices. Today most futures volume comes from speculators and hedgers trading stock indexes, rates, energy and metals. They're popular with active traders for three reasons: nearly 24-hour trading, deep liquidity, and capital efficiency. Leverage makes them dangerous for anyone who doesn't size carefully.
What a futures contract is
A futures contract is a standardised agreement, traded on an exchange, specifying:
- The underlying asset, e.g. the S&P 500 index, crude oil or gold.
- The contract size, e.g. $50 × the S&P 500 index for the E-mini (ES).
- The expiration month, e.g. December (Z).
- Settlement: cash (most index futures) or physical delivery (many commodities).
Buying (going long) profits if price rises. Selling (going short) profits if it falls. Shorting futures is as simple as buying, with no borrowing needed.
Every contract is cleared through the exchange's clearinghouse, which guarantees both sides of the trade. That's a key difference from OTC products like spot forex or CFDs.
Tick size and tick value
Futures move in minimum increments called ticks, and each tick is worth a fixed dollar amount per contract:
| Contract | Symbol | Tick size | Tick value | Point value |
|---|---|---|---|---|
| E-mini S&P 500 | ES | 0.25 | $12.50 | $50 |
| Micro E-mini S&P 500 | MES | 0.25 | $1.25 | $5 |
| E-mini Nasdaq-100 | NQ | 0.25 | $5.00 | $20 |
| Micro E-mini Nasdaq-100 | MNQ | 0.25 | $0.50 | $2 |
| E-mini Dow | YM | 1.00 | $5.00 | $5 |
| Crude oil (WTI) | CL | 0.01 | $10.00 | $1,000 per $1 |
| Gold | GC | 0.10 | $10.00 | $100 per $1 |
So a 10-point move in ES is $500 per contract, and $50 in MES. Micro contracts are one-tenth the size, which is why they've become the standard starting point for small accounts. See Dow futures and copper futures for more contract specs.
Score the Setup Before You Take It
TRADZY's Void Engine rates any setup 0–100 across 12+ variables: structure, trend alignment, volume, momentum and key levels.
Score a Setup Free →Margin and leverage
You don't pay the full value of a futures contract. You post margin, a performance bond:
- Initial margin: set by the exchange, required to open a position overnight.
- Maintenance margin: the level your account must stay above. Drop below it and you get a margin call.
- Day-trading margin: many brokers set much lower intraday margins for positions closed before the session ends.
An ES contract controls a notional value of $50 × the index level, several hundred thousand dollars, for a margin deposit that's a small fraction of that. That's powerful and dangerous. Size by your stop, not by the margin available. A low day-trading margin tells you nothing about how much you can afford to lose.
Expiration and rollover
Equity index futures expire quarterly (March, June, September, December). Active traders roll to the next contract around a week before expiration, when volume shifts. Your platform usually shows the front month by default. Check you're trading the contract with the volume.
Commodity futures have their own monthly cycles, and physical delivery rules. Retail traders should always exit or roll before first notice day on physically delivered contracts.
When futures trade
CME equity index futures trade Sunday 6:00 p.m. to Friday 5:00 p.m. ET, with a daily one-hour break (5:00–6:00 p.m. ET). The busiest periods are the US cash open (9:30 a.m. ET) and major data releases. Overnight sessions are thinner, and moves can be sharp around European opens and Asian data.
What people trade
- Equity indexes: ES/MES, NQ/MNQ, YM/MYM, RTY/M2K.
- Rates: Treasury futures (ZN, ZB) and SOFR.
- Energy: crude oil (CL/MCL), natural gas (NG).
- Metals: gold (GC/MGC), silver (SI), copper (HG).
- Currencies: euro (6E), yen (6J), pound (6B).
- Volatility: VIX futures (VX). See VIX futures explained.
- Crypto: CME Bitcoin and Ether futures.
Taxes in the US
Most US futures are Section 1256 contracts: gains are taxed 60% as long-term and 40% as short-term capital gains, whatever the holding period, and positions are marked to market at year-end. For active traders this is often more favourable than short-term stock trading. Check with a tax professional for your situation.
Futures vs stocks vs forex
| Futures | Stocks | Spot forex / CFDs | |
|---|---|---|---|
| Venue | Exchange with central clearing | Exchange | OTC with a broker |
| Hours | ~23 hours on weekdays | 9:30–4:00 ET plus extended | 24 hours on weekdays |
| Shorting | Simple | Needs a borrow | Simple |
| Leverage | High (margin) | Limited | High, capped for retail in UK/EU |
| Pattern day trader rule | Never applied | Eliminated in 2026 | Never applied |
Risks to respect
- Leverage: a normal move against an oversized position can wipe out an account quickly.
- Gaps: overnight news can move futures before the cash market opens.
- Limit moves: some contracts have daily price limits that can stop you getting out.
- Liquidity: stick to front-month, high-volume contracts.
Getting started
- Learn one contract, usually MES or MNQ, and its tick value.
- Practise on a simulator. Most futures platforms include one. See paper trading.
- Go live with one micro contract, with a hard stop and a daily loss limit.
- Many traders later use futures prop firm evaluations. See how to pass a prop firm challenge.
TRADZY's TradLog handles futures (ticks, points and R-multiples), and its prop firm tracker monitors trailing drawdown and daily loss against your evaluation rules.
FAQ
How much money do you need to trade futures?
Micro contracts make it possible to start with a few thousand dollars, and some brokers allow less. What matters is that one contract's stop-loss risk is a small percentage of your account.
Are futures riskier than stocks?
The leverage makes them riskier if you oversize. Sized properly, with micro contracts and hard stops, the risk per trade can be the same as a stock trade.
Do you have to take delivery of futures?
No, not if you close or roll before expiration. Equity index futures are cash-settled, and retail brokers usually force-close physically delivered contracts before delivery.
What is the best futures contract for beginners?
Micro E-mini S&P 500 (MES) is the most common choice: very liquid, relatively smooth, and $5 per point.
Did the pattern day trader rule apply to futures?
No. The PDT rule only applied to stocks and options in US margin accounts, and it was eliminated in 2026 anyway.
Put This Into Practice
- Score your next setup 0–100 with the Void Engine before entering
- Log the trade and tag the setup in the TradLog
- Review weekly: keep what pays, cut what doesn't
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Educational content, not financial advice. Trading involves substantial risk of loss.