First, what is a future?

A futures contract is a highly leveraged investment vehicle in which the owner guarantees they will either sell the contract or buy the stock/commodity on a certain future date. Most likely, you will never hold a futures contract through that date.

Instead, you will use the 10 or even 20x margin to try to maximize your profits. Here’s how:

Say a stock trades at $100 and you have $1000 to trade with. You can buy 10 shares and if it goes up a couple points you might be able to cover the commission of that trade with your $20 profit. Or you could buy a futures contract on 100 shares. Then when the stock goes up a couple points you make $200 on your initial $1000, a cool 20%. This is hhappy_traderow leverage works. Instead of controlling a measly 10 shares, you control (and assume the gains/losses of) 100 shares. This represents 10x margin because for every point the stock moves, it affects your account 10 times that much.

Futures are great because of the high leverage they offer. You can use a low amount of money to make a big money trade. Of course, with this kind of fast action, you must be well versed in risk management.

At TickerTank we trade futures for profit, but they can also be used as a hedge, which will be explained to you in our live trading room. One key aspect of every futures trade we make is that we do a full pre-analysis of each trade, so you know when to cut losses or let gains run for bigger gains.

Futures trading is included in our Day Trading system. Learn more about our different membership options.

Open a thinkorswim by TDA account today!