How To Trade Futures Contracts [Full & Live Explanation] | Trading Tutorials

We cover all of the basics on getting started in trading the futures market! Stick around until the end of this trading tutorial to see LIVE futures contract price action.

00:00 – Intro
01:25 – How the Futures Market Works
03:52 – Why the Future?
08:43 – How WE Use Futures Markets
13:12 – Understanding Points & Ticks
15:05 – Common Symbols & Sizes
19:48 – Real Examples of Point & Tick Values
22:54 – Contract Naming
24:22 – Futures Margin Requirements
38:46 – Futures Commissions & Fees
41:17 – Futures Tax Advantages
42:34 – LIVE Futures Price Action

If you are brand new to the futures market and want to learn how to trade futures, this is the crash course for you. In this trading tutorial, we will talk through the basic futures market concepts.

The futures market came into existence for people doing business to keep their future costs predictable. It was simply a way for both parties doing business to hedge against future market fluctuation. This actually required that both parties involved in the trade fulfill their end of the obligation when entering into a futures contract agreement. This is what makes futures contracts different than options contracts. The other key difference is that futures contracts are tied to underlying commodities and NOT stocks or companies.

In todays day and age we use the financial (or commodity) futures market to trade against index prices, currency pairs and even interest rates. We are not looking to ever actually take delivery of the product that we are trading, instead, just keep the difference in the contract price should we be correct about the future direction in prices. If you think the price of the commodity is going to go up in the future you want to become a buyer or go long the contract. If you think it will go down then you want to do the opposite and be a seller of the futures contract.

Understanding how futures is priced is a key component as well. They are not directly tied to a dollar value. Instead they are tied to a point and tick value. Futures points and ticks are going to change on a per contract basis. Its very important that you understand the size and value of a tick on the given contract that you are trading. There are a few common ones that most traders should know. The /ES E-Mini S&P 500 being the most popular.

Contracts are also named in a very specific convention. Because we know futures contracts will expire at a certain date, they have a month and year attached to the symbol that represents the commodity. The letter in the middle will always represent the month of expiration and the numbers at the end will always represent the year of expiration.

Futures margin can be an intimidating thing, but fear not, it's simpler than it may seem. Day margin for futures is the amount in your account that is needed to initiate a new position. We are only putting up a fraction of the notional value of the futures contract to be able to trade it. We are borrowing the rest from the broker.Day margin applies from 9:30 to 4:30 EST. Initial margin is the amount required to hold a futures position after the 4:30 bell. This amount is usually much higher than the day margin rate because the broker needs to use this cash to settle up with the exchanges. If you do not meet this requirement, you will likely get whats called a margin call, asking to close the position or deposit more money into the account. Maintenance margin is the amount of capital required to hold the position against any drawdowns after initial margin has been met in the extended hours. Each futures broker will also charge different commission rates so be sure to look into those before choosing who to go with.

Something thats not often talked about is the fact that there are actually tax advantages to trading futures over stocks, options and forex. You will be taxed in a 60/40 structure where the majority of your futures contract trading gains will be taxed more favorably as longer term capital gains as opposed to the 40% being taxed as short term capital gains. As always please consult a tax professional for you own unique situation.

DISCLAIMER: The information provided in this video is for informational purposes only. It should not be considered financial or legal advice. I am not a Registered Investment Advisor. Buying and selling financial instruments is highly speculative and carries risk.

[justinquinney]

i love your videos. look forward to and learn so much from every one. just a heads up around 20 min mark there's a little mistake on screen, you wrote 3835 - 3850=85 instead of 3735-3850=85. doesn't really matter just wanted to give a heads up.

[franklincrumbs]

Now I have a fundamental knowledge. Other channels can’t or don’t give you such a succinct comprehensive explanation.

[MrDirector]

I’m a year late and this is still the most informational and in-depth explanation I’ve seen on the internet, and it’s completely free. It’s broken down and explained perfectly. Thank you so much.

[jefes]

Terrific training! A free YouTube video equal to a $100 seminar. Thank you!

[studio]

Finally! Margin explained in a simple and easy way that makes total sense.

[hhh]

Bro. Seriously, you just gave the best breakdown on futures I've come across on here. Thank you very much for putting this out there.

[baker]

Dude I've been learning futures on my own and found myself stuck in a rut about a few things. Mainly margin requirements. Couldn't figure it out for the life of me and no content creators seemed to prioritize it much until I came across this video. Thanks so much for that information it helped me out a ton! The tax breakdown was an added bonus for me as well. You've got a new subscriber! Thanks man!

[SuperEagle]

Thank you for taking the time to make this video. This was a very helpful tutorial. Comprehensive and yet easy to understand. Must still review to soak in all the nuances.

[naturalbrwnbean]

What an awesome video!!! I’ve been looking for a breakdown of the value of future contract and this is hands down the best explanation I’ve seen. Thank you so much!

[shihabrahman]

Wow, I’m speechless 😊 I was looking for this video for ages. Futures always so confusing for me and you broken down the complex stuffs to newbie like me to understand futures. Thanks a lot ☺️

[jamespaul]

19:48 Real examples of point and ticks. FINALLY - a clear and concise definition of Points and Pips COMBINED with chart examples and the calculations required to determine the dollar value of a move., Thanks Trade Brigade.

[keishfx]

For those of us transitioning from Forex to Futures, this comprehensive video is a must-watch! It's ageless and priceless. Thank you!

[mattarmbrister]

Great introductory video, Matt. I’m constantly amazed at how well you write and draw during your videos.

[mikemeilleur]

Such a great video. You are very good at explaining things in consumable bites. Thanks, sir! 👍

[_Manimal_]

most dont do well teaching, idk why they even have youtube channels, you do an exception job teaching, teaching is skill that most dont have
thank you for the good work

[LucidSoundz]

Wow. Thanks so much for this video. I love the layout and the way you taught it. It was like being in a class. Futures always confused me but now you made it way more understandable for me.

[mlg]

This is the best video I have watched about futures basics so far. Very thorough and well presented! Thanks!

[elroyblackbean]

Great content, well executed, professionally delivered, nice visuals and terrific voiceover. This is some of the best YouTube financial/trading content out there. Very well done -- you've made learning about Futures much easier.

[feynstein]

Best video about futures I've ever watched. Very comprehensive, well-explained and easy to follow. My only regret is that I have but one like to give 😊

[ishantdoshi]

Thank you so much for this video. The best video I have ever seen on this topic. You explained everything I wanted to know in the most perfect way !