Futures Trading

How futures trading works

Futures trading works similarly to CFD trading, but each futures contract has an expiry date. You can close your position at any time or you can let the contract close at expiry. If you would like to maintain your position after the expiry date, you can open a new position in a futures contract with a later expiry date. Futures contracts are updated frequently with new expiry dates and the expiry date for each futures contract is indicated by the symbols suffix. For example, DJ.H24 is a Dow Jones futures contract that expires in March 2024. SP.N24 is an S&P 500 futures contract that expires in July 2024.

Bid and ask prices

Each futures contract is quoted with two prices, the 'Bid' price and the 'Ask' price. The bid price is the price at which you can sell the indice. While the ask price is the price at which you can buy it. The ask price is always higher than the bid price and the difference between these prices is called the 'Spread'.

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The basic idea is to buy (go long) when you think the futures will appreciate in value and sell (go short) when you think it will depreciate in value. Just like buying something at a lower price and trying to sell it at a higher price to profit. You can trade futures long or short, meaning that you can trade rising as well as falling prices.

Futures are traded in lots

When trading futures, trades are placed in terms of lots. Check our contracts specifications page to learn more about futures lot sizes.

Futures trading involves leverage and margin

Futures trading involves using leverage, which allows you to place trades of a much larger value than the amount you have in your trading account. For example, trading with 100:1 leverage would allow you to buy 1 futures contract at only 1% of its current market value. Leverage can magnify potential profits but it also increases risk and speeds up losses.