How to Start Out in Futures Trading
The futures market is attractive to traders because the market offers a high degree of leverage and active, liquid trading. Contracts are traded on commodities like grains and coffee, energy products, stock indexes and interest rates. Futures trading is done through specialized brokers. Beginning futures traders need to understand how the market works and the procedures for placing and closing trades. Futures trading is a high-risk, high-reward arena, and new traders need to be sure they understand how futures work and how to trade for profits.
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Instructions
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Call and interview some futures brokers concerning their training and their help for new traders. Futures brokers are typically more directly involved with their customers than other stock brokers. A futures broker must be registered with the Commodities Futures Trading Commission--CFTC.
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Download the recommended trading software from the broker you select. A broker's representative should help you set up the software for the type of trading you plan to do. The broker should also provide or recommend some online training and seminars to learn beginning trading techniques.
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Practice trading using a simulated money account. The trading software should be set up to trade using simulated money so you can learn how the system works and practice your trading strategies. Most brokers will let you try a practice account for 30 days, or an unlimited amount of time if you first fund a real money account.
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Continue to practice trading, and develop your personal trading strategy, until you are consistently profitable in your simulated account. Read and watch as much free futures trading information as you can find. You should not try real-money trading until you can show weekly profits for six to eight straight weeks.
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Start futures trading using real money for trades. Your initial trades should be for a single futures contract. Trade with a single contract until you are confident in your trading skills and strategy.
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Tips & Warnings
Keep a trading log of all of your trades and the results.
Futures brokers provide a lot of free information about trading. Use these resources before paying for DVDs or books on trading.
A large part of successful trading is controlling your emotions and working your trading plan. Control your losses and manage the size of your trades to prevent a large reduction in your trading capital.
Traders have to be prepared to suffer severe financial losses. The CFTC requires that brokers provide traders with a disclaimer, warning that traders can lose a large amount of their trading capital.
