How to Trade Futures

One of the key concepts in understanding futures trading is that, as leveraged investments, a relatively small amount of capital is used to control a much larger contract amount. While this leverage provides a highly efficient use of capital, it is also a double-edged sword, potentially amplifying losses far beyond the amount originally invested. 

In order to help protect against substantial loss, plan your futures trades carefully before you establish a position in the market. Identify both a profit objective and an exit plan, should the trade go against you.

Regardless of your trading objective, you'll need a brokerage account that's approved to trade futures in order to proceed with any strategy involving futures. Talk to a Schwab specialist at 888-245-6864 to learn more.

A good way to get started with futures is to focus on markets relevant to the companies, industries, or sectors you’re already knowledgeable about. For instance, if you’ve been a long-time investor in precious metal mining company stocks, gold futures may be a good candidate for your first trade. Keeping your focus on just one or two markets will increase the amount of time and attention available for following the commentary and news for those markets.

Now that you’ve picked a futures market, it’s time to form an opinion on its future price movement by studying the relevant fundamental and technical research, just like you would to evaluate a potential equity trade. Once you have researched the specific futures market and think you know where its price might be headed, you can then identify available futures contracts by size and month to see which might be suitable. 

With Schwab, futures traders get streaming futures charting and technical indicators plus in-depth research and commentary—all conveniently built-in to the trading platform.