Futures trading with online brokers

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This refers to an order to execute a specific trade at a set price and date. In other words, this will be some time in the future, hence the name. As a day trader, you are essentially seeking profits from price shifts in the market. This can happen at any point from the execution of the buy / sell contract to the closing of the position. Overall, there are usually two types of traders who use futures contracts - speculators and hedgers.

In most cases, futures contracts revolve around underlying assets such as:

  •     Precious metals - gold, silver, platinum, aluminium, copper, steel and even uranium (less commonly traded).
  •     Oil
  •     Alternative energy
  •     Food

The idea of futures is to reduce uncertainty and risk for traders. For example, if you knew you would produce 1 tonne of maize next year, you could sell the maize at the market price.  However, there is always the possibility that the price of maize will fall over the next year and the market price will drop.

The correct Idea

In this case, a fixed price will help you with your day trading strategy as you can sell your maize at that price . Contact us now!  In this way, you secure a certain profit. As far as financial markets are concerned, futures trading works in a similar way. Essentially, it is an agreement to buy or sell a financial product at a later date using an agreed-upon date and a fixed price.

In layman's terms, you predict that a certain index will reach a certain level at a later date. Financial products or instruments include, for example, foreign currencies, certificates of deposit and treasury bills - to name but a few. Interestingly, the market value of financial futures tends to move in a different direction than interest rates. This makes it a perfect day trading strategy!

There are a few other things to think about when day trading the futures market:

  •     Futures capital: futures require less capital compared to stock market trading. Trading experts recommend that you start with at least a few thousand pounds in futures. Different futures contracts require different amounts of capital.
  •     Futures Flexibility: Whilst futures markets offer a degree of flexibility, depending on the futures markets. Contract markets can change. Always make sure you are out of positions before you stop trading that particular futures contract. It is possible to trade in futures premarket and post-market due to the high volatility and volume of trading sessions in the US, Europe and Asia. 
  •     Narrow Futures Contracts: Since people who trade in the futures market often focus on a specific futures contract, you won't find much variety in day trading. If you are pursuing volume and volatility as well as diversity, it may be better to trade in a different market.

Simply put, if you want to start trading energy in, commodity or oil markets, you will probably find futures or CFD in metatrader 4 (mt4) tempting. Just remember that you will probably have to limit your attention to a few futures contracts and a minimum capital is required.

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Many broker platforms offer traders the opportunity to trade options markets. The option contract or agreement allows you to sell or buy an asset within the parameters of the exercise date (predetermined date).

The most popular types of option categories are stock call options and stock put options.

  •     Stock call option: The holder can buy shares from a seller at a specified price as long as they are within the expiration date. If the price of the underlying stock rises, the value of the call option also rises.
  •     Stock option: With this category of the options market, the holder can sell a share at a previously agreed price. This must also be before a certain date. If the price of the underlying share falls, the value of the put option also falls.

All in all, each of the markets discussed above is suitable for day trading.  Regardless of which market or markets you wish to include in your daily trading strategies, it is important that you become thoroughly familiar with the respective industry.