Learn To Trade Futures

Last updated on June 22nd, 2015



Trading futures online has become more and more popular in recent years and although the standards available to the internet retail trader have dramatically increased in this time, there are still potential pitfalls. Additionally there are many considerations that a trader must make that many have had to learn by experience alone. Here are some of them to give you a head start.


If you want to trade futures you’ll need an Introducing Broker (IB) or a Futures Commission Merchant (FCM) (and a clearer), in order to trade. A broker is really just the middleman but in some cases the services that they offer do justify the slightly higher commission rates that they tend to charge. When you setup your account with an IB, you’ll also have to fill out forms for a clearer too.

Trading and Charting Platforms

There are many different charting and trading platforms out there that offer a plethora of features to the modern trader. More and more it’s commonplace to see a combination of the two. Some are built for functionality, some are built for speed, some are built for reliability and some are built for cost. Some cost a lot of money, some are more reasonable and some are offered ‘free’ (though generally there’s a levy on commissions for no cost platforms). It’s also important to note that many vendors (software and data) who charge for their products do give a discount for services paid for in advance (normally up to a max of 1 year). But it’s really important that you think very carefully about what exactly it is that you require for your style of trading.


Not all data is made equal. The issue that data providers have is that the greater the amount of data and the higher the accuracy of this data, the higher the overhead on their servers and the greater the bandwidth required to deliver this data is. So you tend to get two different types of data. The first is typically a “broker feed” which is the data your broker provides in order for you to trade. This can often be filtered (meaning you won’t actually see every trade) as the most important factor is that it keeps up with live prices. It typically won’t provide you with much historical data and often won’t be especially accurate (although in some cases these feeds are dramatically improving). The second type is a pure data vendor. These types of data feed tend to give you much more historical data and be more accurate (although this is variable in extent). Your charting platform must support your chosen feed whichever way you go and you must have a feed with order routing if you intend to trade through it.

Trading PC & Internet Connection

People often think it’s a good idea to fire up their family pc and internet connection to trade with. But this isn’t necessarily a great idea I’m afraid. The chances are you’ll have many programs installed and a cluttered up operating system. Your internet connection might not be the best either. And the truth is that latency is an internet-based retail trader’s nemesis. If the market is moving faster than your trading platform can keep up, you could end up making trading decisions that are costly ones. Traders can also run strategy orders with some software, where their platform generates orders based on market data and for many platforms these orders are generated client side – meaning trades are placed based on the data coming into your PC. If this data is lagging behind the market to a great extent then you could have a problem.

What can go wrong will go wrong

It’s not just latency that’s a concern though. You need to have a plan for what you’ll do if your PC fails you. Then what would you do if your internet connection goes down in the middle of a trade? How will you handle a power outage during the trading session? Then there’s also the possibility that your data provider has outages. Market volatility can massively spike causing latency issues for your platform. There are so many things that can go wrong with trading online and as you trade more you’ll inevitably come across these issues from time to time.

Self-Starting and Taking Responsibility

Trading futures involves a high degree of risk and this is perhaps even more relevant when trading futures online. Trading online means you need to have strong motivation and be a self-starter as there are many things you need to do in order to give yourself the best chance of success in this business. Taking responsibility for your trading decisions is a really important factor that when you’re trading in this isolated way, can seem like a difficult task. But it’s also important to take responsibility for situations like for example where your internet goes down in the middle of a trade. If you haven’t planned for this possibility and don’t have a backup connection or the number for the trading desk at your broker, then any loss because you couldn’t access your platform is down to you and you alone.

Online futures trading is a booming business. Many firms offer access to exchanges and futures products throughout the world. The level of sophistication of the products on offer is rapidly improving and the standard of internet connectivity available to a retail customer far exceeds what it once was. If you’re a day trader, futures are a fantastic way to trade and it’s an industry which is ever-evolving. If you’re interested in futures trading, take a look at some of the ways you can trade them with Netpicks.



The following two tabs change content below.