One of the trading opportunities that a broker can offer you is access to futures through their platforms. Futures are similar to options that allow you to buy or sell an underlying asset at a certain date and price. These futures can be based on various underlying assets like commodities, stocks, forex currency pairs, and indices. In this article, we present a list that covers the best futures trading platforms and all you need to know about them.
Where Can I Trade Futures?
Trading platforms can be used to trade futures. So, if you register with a well-regulated broker, you can buy, sell, or hold futures and manage your portfolio. The platform usually has live quotes, special tools, news or alerts that will keep you informed. Below, we have curated a shortlist that features the best broker platforms where you can easily access futures contracts.
What is a Futures Trading Platform?
Futures contracts are agreements between the seller and the buyer to trade the assets at a predetermined future date and price. Futures contracts can now be derived from almost any type of asset, including commodities, such as wheat, currency, bonds, stock indices, and more.
For instance, futures can be used by farmers to decrease the risks associated with their harvest. For example, the farmer would close a contract that mentions the date, price, and the amount to be sold before the actual crop harvest.
Futures contracts are considered derivative or hedging instruments. Once you close the contract that will take place in the future, you accept a so-called “side bet”. If you agree to sell the asset at a higher price than the market price at the time, you make a profit. On the other side, if you sell the asset at a lower price than the market, the benefit is that you will still receive a sum that covers your expenses and some profit.
A futures trading platform is where you can buy or sell a futures contract. It is usually offered by a broker, which gives you access to the assets or the financial contracts you want. The platform should be regulated by financial authorities to ensure that you trade in a safe environment.
Three Ways You Can Benefit from a Futures Trading Platform
Futures trading can bring financial benefits to both parties. First, it is possible to speculate in such a way that you buy low and sell high, depending on your position. It is only a matter of knowledge and understanding in which direction the market will go in the future.
Secondly, futures, along with other derivative instruments, are used by traders to manage or mitigate their investment risks. Futures contracts can be placed so that losses in an asset correlate with gains in a derivative.
Finally, futures trading is also associated with high liquidity. In other words, you can enter or exit the market with ease.
How to Trade and Invest through a Futures Platform
Open a Trading Account
Once you have selected a futures trading platform, you need to open an account by clicking on the registration button. You will be required to fill in personal information like number, email, name, and password. You will also need to verify your identity and address by providing an ID to comply with KYC (Know Your Customer) norms.
As soon as your account is verified, you can make your initial deposit. Some brokers ask for a minimum deposit. You can also check the payment methods to see which one suits you best, including e-payments, bank wire transfers, credit cards, or debit cards. Now, select the futures that you wish to trade. Consider historical prices and volatility when selecting a suitable futures contract.
Place Your Trade
Once your account is complete, it’s time to use the available balance to invest in your futures contract. Monitor the trade regularly and adjust your position if required. Stay informed of news and developing stories that might affect your assets’ pricing.
What Are the Advantages of Using a Platform for Future Trading?
- Investors can speculate on the price movements of the underlying asset on the futures contract, which can result in high rewards.
- Futures can be used to reduce the risk of a price drop in the future.
- Futures market is very liquid, so you can easily manage your position.
- You can use futures to decrease the overall risk of your entire portfolio.
- Futures are leveraged investments, so your earnings can be higher than investing in other assets without actually having to tie up the capital.
- Commissions are usually very low and only charged when you close your position.
- The futures market is considered fair and more efficient because it is very difficult to trade on inside information.
What Are the Disadvantages of Using a Platform for Futures Trading?
- Using margin or leverage can also multiply losses.
- Speculation may be risky, especially if the market goes against you.
- Although trading futures via a platform is considered safer than other assets, the decreased risk may also come with decreased returns.
- Futures trading can be quite complicated, especially for new investors.
Expert Tip On Selecting Futures Trading Platform“ It is important to have a great base knowledge of the underlying asset, its historical performance, and how it might react in the future. Also, make sure you have a diversified portfolio and only invest risk capital. ”- Mauricio Carillo
How To Choose the Best Platform for Futures Trading?
If you want to add futures to your investment portfolio, it’s crucial to choose the best futures trading platform. Below, we have covered some of the essential points you should consider before opening an account.
Is the Broker Regulated?
A regulated broker is supervised by a financial authority to ensure that your funds are safe from bankruptcy, fraud, and money laundering. This also means that your platform is legit and secure.
What Fees and Charges Apply?
Fees and charges depend on the broker. It is important to look at these to know when you will have to pay them. See if the broker charges low commissions, what their spreads are, check the deposit or withdrawal methods, and more.
What Payment Methods Are Accepted?
This will depend on the broker, but they are usually credit cards, debit cards, bank wire transfers, and e-payments. Some brokers allow specific national payment methods depending on your country.
What Are the Available Assets to Trade?
Brokers can offer many assets such as bonds, futures, commodities, stocks, forex, ETFs, indices, and more. However, futures contracts have the following underlying assets: stocks, commodities, forex currency pairs, interest rates, and bonds.
Is There a Demo Account?
A demo account is always a good idea for both experienced and beginner traders. It allows you to practice with virtual money while using real-time quotes.
What Is the Account Minimum?
This depends on the broker, the platform, and the account type. The minimum amount for different account types will vary since they are created to fit different needs.
What Educational Resources Are Available?
Educational resources are key if you are a beginner. You should check if your selected broker has sufficient information to remove the guesswork when it comes to trading and using their platform.
Is There Help and Support Available?
If you have an emergency or a question, you might need immediate customer support. You should see if there is a live chat, a phone number, or an email address available.
Is There a Mobile Platform or App?
For clients who like to trade on the go, it is important to check if the broker has apps for Android or iOS. Some of these can also be simply accessed via your browser.
Frequently Asked Questions
Most futures trading platforms nowadays have very low fees. For instance, eToro does not charge you any commissions per transaction. Make sure you check the terms and conditions before creating an account or depositing your money.
It will depend on your needs and goals, but look for a platform with a good educational section and even a demo account to help you get started.
Usually, most platforms provide technical analysis tools, which will help you gain better insight into the market. It includes charts and indicators. It may also provide recent news and other information related to your assets.
Opening a trading account will not take long. However, some brokers may need more time to verify your information, such as several business days.
A futures trading broker makes money via fees and commissions. These might be related to your trades, withdrawals or money deposits, and others. You should check the terms and conditions before opening an account to find a full breakdown of these costs.
Futures trading platforms are offered by regulated brokerage firms that ensure the safety of their users. When choosing the right provider for your needs, you should check what security technology they use and, ideally, verify regulation compliance. Usually, you can check at the bottom of the page and look for disclaimers or notations.