Free tool: look up tick sizes and work out profit, loss and risk per contract with our futures tick value calculator.
What is futures trading?
Futures trading is buying or selling a standardized contract that obliges you to buy or sell an asset, such as a stock index, crude oil, gold or a currency, at a set price on a future date. Most retail traders never take delivery. They open and close contracts before expiry to profit from price changes, using a fraction of the contract value as margin.
Futures trade on regulated exchanges such as CME Group in the US. Every contract has the same size, tick value and expiry calendar for everyone, which is what makes them easy to compare and trade. This guide covers how contracts work, how profit and loss is calculated, and the risks a beginner should understand first.
How a futures contract works
Every futures contract is defined by a contract specification published by the exchange. The key parts are:
- Underlying asset: what the contract tracks, for example the S&P 500 index or a barrel of crude oil.
- Contract multiplier: the dollar value of a one-point move in price.
- Tick size and tick value: the smallest price increment and what it is worth in dollars.
- Expiry: the month the contract settles. Equity index futures follow a quarterly cycle of March, June, September and December.
- Settlement: either physical delivery of the asset or cash settlement. Equity index futures are cash settled.
When you buy (go long), you profit if the price rises. When you sell (go short), you profit if the price falls. Shorting a future is as simple as buying one, with no need to borrow anything first.
Popular futures contracts for beginners
Many new traders start with equity index futures because they are liquid and trade nearly around the clock on weekdays. CME also lists Micro contracts that are one tenth the size of the standard E-mini, which makes them more practical for small accounts.
| Contract | Symbol | Value per 1.00 point | Tick size | Tick value |
|---|---|---|---|---|
| E-mini S&P 500 | ES | $50 | 0.25 | $12.50 |
| Micro E-mini S&P 500 | MES | $5 | 0.25 | $1.25 |
| E-mini Nasdaq-100 | NQ | $20 | 0.25 | $5.00 |
| Micro E-mini Nasdaq-100 | MNQ | $2 | 0.25 | $0.50 |
Always check the exchange's current contract specifications before trading a product you have not traded before, since details such as trading hours can change.
Worked example: profit and loss on MES and ES
Suppose you buy one Micro E-mini S&P 500 contract (MES) at a hypothetical price of 5,000.00 and sell it at 5,010.00.
- Price move: 5,010.00 minus 5,000.00 = 10 points.
- Ticks: 10 points divided by 0.25 = 40 ticks.
- Profit: 40 ticks x $1.25 = $50, which matches 10 points x $5.
The same 10-point move on one full E-mini (ES) is 10 x $50 = $500. If the trade had gone 10 points against you, the loss would be the same size. Commissions and exchange fees come off both outcomes.
Now look at exposure. At 5,000.00, one MES controls 5,000 x $5 = $25,000 of the index, and one ES controls 5,000 x $50 = $250,000. The margin your broker asks for is only a small part of that, which is why futures are leveraged products. A 1% move in the index (50 points) equals $250 on one MES and $2,500 on one ES.
To size a trade from risk instead of from hope, decide your stop first. A 6-point stop on MES is 24 ticks x $1.25 = $30 of risk per contract. If you are willing to risk $90 on the trade, that is three MES contracts. The position size calculator can help you run these numbers before you enter.
Margin and daily settlement
Futures margin is a good-faith deposit, not a down payment or a loan. There are two levels to know:
- Initial margin: the amount required to open a position.
- Maintenance margin: the minimum balance you must keep while the position is open. Fall below it and you face a margin call or forced liquidation.
Exchanges set these amounts and change them when volatility changes. Many brokers also offer lower intraday margins for positions closed before the session ends. Because requirements move, check your broker's current figures rather than relying on a number you read once. Our leverage and margin guide explains the general concepts, and the margin calculator shows how much capital a position ties up.
Futures accounts are also marked to market every day. Gains and losses on open positions are credited or debited to your account at each daily settlement, so a losing position reduces your cash balance before you close it.
Expiry and rolling contracts
Each contract has a last trading day. If you want to hold a position beyond it, you roll: close the expiring contract and open the same position in the next contract month. Most volume shifts to the next contract shortly before expiry, so day traders usually trade whichever month is most active, often called the front month. Check that your platform shows the correct contract so you do not end up trading a thin, expiring one by mistake.
Futures vs forex and CFDs
Futures are exchange-traded with centralized volume data and published fees. Spot forex and CFDs are typically traded over the counter with a broker, priced in spreads, and sized in lots. Neither is better for everyone. Futures suit traders who want transparent volume and a fixed contract size, while forex and CFDs offer more flexible position sizes. If you are comparing markets, our forex trading for beginners guide covers the other side.
How to get started
- Learn the contract you plan to trade, including its tick value and trading hours.
- Write down your entry, stop and target rules in a plan before risking money.
- Practice on a simulator until you can follow your plan consistently.
- Open an account with a futures broker. Our broker comparison lists providers that offer futures access.
- Start with Micro contracts and risk a small, fixed percentage of your account per trade.
Some traders also use futures prop firms, which give access to a funded account after an evaluation. Read what a prop firm is and compare current rules on our prop firm comparison page before paying for a challenge.
Common beginner mistakes
- Trading full-size contracts on a small account, where one normal move wipes out a large share of capital.
- Ignoring the tick value and not knowing what a stop is worth in dollars.
- Holding through expiry or trading the wrong contract month.
- Treating margin as the risk. The risk is the full price exposure, not the deposit.
- Trading without a stop loss. Read our risk management basics lesson before going live.
Trading futures involves substantial risk of loss and is not suitable for every investor. Leverage means losses can exceed your initial margin. This guide is educational only and is not financial advice. Read our full risk disclaimer.