Benefits Of Futures Trading
With so many types of asset classes and markets available to trade, it can be difficult for a new trader to settle on the right choice that fits their trading style and aspirations. It can also be challenging for active traders to select the right markets to help diversify their current portfolio.
Futures trading offers a robust combination of features and benefits that you cannot find anywhere else.
Let’s check the boxes on the benefits of futures trading and why it is a superior choice to help traders achieve their trading goals.
Reasons To Choose Futures And Diversify Your Trading Portfolio
No Shorting Restrictions Or Day Trading Rules
For futures traders, entering a short position is seamless and every future can be shorted, for any number of contracts and at any time. With other asset classes, traders are often limited by the inability to easily go short to take advantage of a downward trending market. In addition, unlike stocks which require traders to have a minimum account balance of $25,000 to make more than just a few day trades per week, futures do not have a pattern day trader rule.
Flexible trade sizing
Traders at all levels – from beginners to pros - can easily participate in the futures markets due to the choice of contract sizes to trade. Micro futures (1/10th the size of a standard E-mini futures contract) allow new futures traders to get started with less capital and the potential to reduce risk. This flexible trade sizing provides more control over exposure to the market and the ability to easily scale in and out of multi-contract positions. Additionally, Micro futures offer the same price discovery and liquidity as their standard-sized counterparts.
Increased Leverage
The leverage available through futures allows you to control a larger trading position with less capital or, put another way, a smaller account size. With futures, you can often put up less than 5% of the contract value to control a position. A note of caution, while the opportunity for potentially greater profits exists, so does the increased risk of greater losses. When trading leveraged futures, make sure you have a risk management plan in place including the appropriate trade sizing and are only risking a small amount of capital on any one trade.
Virtual 24-Hour Trading
Trading opportunities can happen at any time - especially in a global marketplace - and often occur while the stock market is closed. Futures markets are open nearly 24 hours a day, six days a week. While some other asset classes may offer similar trading hours, futures are recognized for usually having higher levels of liquidity throughout trading hours due to their global market participation. This elevated trading volume makes entering and exiting positions easier and delivers tighter bid/ask spreads.
Diverse And Uncorrelated Markets
Futures provide access to diverse markets that drive the international economy including major market stock indexes, bonds and foreign currencies, as well as vital commodities like gold, crude oil, coffee, and many others which may otherwise be difficult or impossible to trade. Many of these markets are uncorrelated and can offer greater price trend diversification than other types of highly correlated investments like stocks and forex. Additionally, this diversification allows futures traders to take advantage of many more unique trading situations and opportunities.
Fair And Transparent Price Discovery
Although often assumed by traders, a transparent marketplace is not a given for all asset classes. With futures, it is only you against the market. All futures traders see the same prices and have the same opportunity to place orders and get filled. In addition, volume data for all orders and transactions is visible in real time. There is no insider or dark pool trading and regardless of account size, all market participants trade on a level playing field.
Tax Advantages
Under IRS rule Section 1256, futures trading gains are split between long-term capital gains and short-term gains. This is a tax advantage for futures traders over short-term stock trading. In essence, 60% of futures trading gains are taxed as long-term gains regardless of the holding period and the balance of 40% is taxed as short-term gains. Keep in mind tax laws and capital gains tax rates are subject to change overtime. Always check with a tax advisor or accountant regarding your situation.
Mature and Regulated Industry
Futures trading and exchanges are highly regulated by the Commodities Futures Trading Commission (CFTC) and serve an important price hedging role for all types of industries. Futures exchanges, such as CME Group, serve as the clearing house for all trades, set the rules for margin and contract specifications, and match and guarantee all transactions whether cash settled or the contract is physically delivered. Additionally, Futures Commission Merchants are required to maintain all customer funds in a segregated account to ensure the protection of customer assets.
Develop The Trader In You
Get started on your futures trading journey with our exclusive video series. Watch an introduction to the basics along with actionable take aways to help you learn how to trade futures.
See Why Day Traders Are Adding Futures To Their Trading Portfolios
Whether you are a new trader or a seasoned veteran, you want to participate in a marketplace that provides a level playing field, substantial opportunity potential, and the widest variety of diverse uncorrelated markets to trade. Futures trading provides all this and much more, and we’ve made it easy to compare. See how futures trading measures up to other asset classes.
Futures vs. Stocks
Key advantages of trading futures over stocks include increased leverage, 24-hour trading, unrestricted shorting, tax advantages and trading on a level playing field just to name a few.
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Futures Vs. Forex and CFDs
Forex and CFD traders are discovering forex futures present a more efficient and effective trading choice featuring a well-regulated marketplace, transparent pricing and volume, and trading on a level playing field.
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Futures vs. Cryptocurrencies
Futures offer a more secure and flexible trading option than cryptocurrencies starting with a highly regulated trading environment where the safety of funds is paramount and transactions are guaranteed by exchanges.
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Futures vs. Stock Options
Compared to trading stock options, futures offer a straight-forward and transparent trading experience. To start, there only two trading options: buy and sell. This allows you to go long or short as needed.
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Global Futures Markets At Your Finger Tips
Futures products span the globe across index futures, currency futures and leading commodities. Explore the various futures contracts available to trade nearly around the clock including:
Experience The Benefits Of Futures Trading With NinjaTrader
Unlimited risk-free simulated trading is included with all accounts. When you’re ready for live trading, get started with Micro Futures contracts to access the popular index futures markets with reduced costs including only $50 margins.
Additional Tools And Services To Support Your Futures Trading Include:
- UNLIMITED simulated futures trading included
- UNFILTERED professional market data
- EXTENSIVE historical tick, min and daily data
- FREE 24-hour emergency trade desk
- AWARD-WINNING charting and analysis
- 100+ technical indicators
- 1000s of 3rd party trading apps available
- UNLIMITED support and daily training