An agreement to acquire or sell a specific security or commodity at a later time is known as a futures contract. The initial purpose of futures markets was to assist farmers and other commodity producers in hedging (offsetting or reducing) future risk. The “futures” in futures markets originate from here.
Five of the 15 online brokers we reviewed for our 2022 Review provide futures trading. We analyzed pricing (such as contract fees and margin rates) and the platforms themselves, including trading tools, research, usability, and available order types, in order to identify the top futures trading platform.
2022’s Top Futures Trading Platforms
The top five futures trading platforms for 2022 are listed below.
The most affordable brokerage for professionals is Interactive Brokers
The best desktop futures trading platform is TD Ameritrade.
TradeStation: Outstanding platforms and affordable commissions
The best website for trading futures is E*TRADE.
Balanced offering from Charles Schwab
What is trading in futures?
Trading futures contracts is a way to make predictions about how much a security or commodity will cost in the future. An investor can buy or sell an item using a futures contract at a predetermined price and time.
Let’s examine the activities at Old MacDonald’s dairy farm as an illustration. His cows consume a combination of hay that MacDonald farms on his own and maize that he must purchase. Old MacDonald makes more money when corn prices are low as it costs him less to feed the cows that generate the milk he sells. The profit margins for MacDonald Farm milk, however, decline during periods of high corn prices.
Farmer Mac can, however, lock in the price of corn from his suppliers via futures contracts before the corn growing season even begins. This enables him to balance out or “hedge” the risk of a challenging growing season that would drive up maize prices and his bovine feeding expenses.
Investors can trade futures contracts on a wide range of things outside of a corporate environment, including market indexes (like S&P 500 futures), commodities (including crude oil, natural gas, corn, and wheat), metals (like gold and silver), currencies (like bitcoin), treasuries, and more. Although institutional investors trade futures the majority of the time, ordinary investors can also speculate utilizing a futures trading platform. The National Futures Association is the U.S. regulatory agency in charge of monitoring futures trade (NFA).
How much does trading futures cost?
For the majority of commodities, futures trading costs are less than one dollar, but they can reach as high as $10 per contract when trading bitcoin futures. Before choosing a futures trading platform, it’s crucial to take all costs into account. In addition to commission, some brokers also charge monthly platform fees and market data fees.
To trade futures contracts, a separate minimum deposit is needed with each online broker. The minimum deposit for the majority of online brokerages is lower than $1,000. Prior to engaging in futures trading, you must submit an application for clearance to engage in margin trading.
Which trading platform for futures is best?
We examined the trading features and costs of each platform to identify the top futures broker. Although Interactive Brokers has the most affordable prices, their platform is complicated and designed for professionals. TD Ameritrade, on the other hand, offers a superb downloadable trading platform, but its pricing is more expensive. TradeStation is a winner because it offers arguably the best combination of pricing and tools.
What is a futures trade?
Futures trading calls for a funded online broker account with approved margin. Once everything is set up, do your research to choose the contract you want to trade, fill out the order ticket, and then execute the transaction.
More information Remember that the margin requirements for each futures contract vary. Additionally, make essential to understand whether the contract is physically delivered or settled in cash when it expires. If you keep your position until the contract’s expiration date for contracts with delivery upon expiration, you may be responsible for paying the entire trade value (plus delivery costs).
