A futures contract is a standardized, exchange-traded agreement to buy or sell something at a set price on a future date. You post margin instead of paying the contract's full value, and gains and losses are settled into your account every trading day, so a small price move costs real money quickly and losses can exceed your deposit. Micro contracts make sizing easier: one Micro E-mini S&P 500 (MES) moves $1.25 per 0.25-point tick, one tenth of the E-mini (ES). Learn the contract specs, practise in simulation, size every trade from the stop, and trade only money you can afford to lose.
Contract details checked against CME Group's contract specifications on October 1, 2026, with tax and risk points from the IRS and CFTC. This rewrite removes invented market statistics, out-of-date margin figures, win rates for example strategies, a forex program listed as a futures broker, a tax-savings calculation and an incorrect claim that physical delivery never affects retail traders.
What Is a Futures Contract?
The CFTC defines a commodity futures contract as “an agreement to buy or sell a particular commodity at a future date” (CFTC futures market basics). The “commodity” can be crude oil or gold, but also a stock index such as the S&P 500. Five features matter most to a new trader:
- Standardized terms: the exchange fixes the contract size, minimum price move (tick), trading hours and expiration months.
- Exchange trading and central clearing: the contracts in this guide trade on CME Group exchanges, and a clearinghouse stands between buyers and sellers.
- Margin: you deposit a performance bond, a fraction of the contract's value, rather than paying for it outright.
- Daily settlement: accounts are adjusted to each trading day's closing value, so losses leave your account as they happen.
- Expiration: every contract has a last trading day. Some settle in cash; others end in physical delivery.
Going short is as simple as going long: you sell a contract first and buy it back later. CME's E-mini Nasdaq-100 page notes there is no uptick rule or special requirement for selling short.
Popular Contracts and What One Tick Is Worth
| Contract | Symbol | Contract size | Minimum tick | Settlement |
|---|---|---|---|---|
| E-mini S&P 500 | ES | $50 × S&P 500 Index | 0.25 point = $12.50 | Cash |
| Micro E-mini S&P 500 | MES | $5 × S&P 500 Index | 0.25 point = $1.25 | Cash |
| E-mini Nasdaq-100 | NQ | $20 × Nasdaq-100 Index | 0.25 point = $5.00 | Cash |
| Micro E-mini Nasdaq-100 | MNQ | $2 × Nasdaq-100 Index | 0.25 point = $0.50 | Cash |
| WTI crude oil | CL | 1,000 barrels | $0.01 per barrel = $10.00 | Physical delivery |
| Micro WTI crude oil | MCL | 100 barrels | $0.01 per barrel = $1.00 | Cash |
| Gold | GC | 100 troy ounces | $0.10 per ounce = $10.00 | Physical delivery |
| Micro Gold | MGC | 10 troy ounces | $0.10 per ounce = $1.00 | Physical delivery |
Sources: CME Group contract specifications for ES, MES, NQ, MNQ, CL, MCL, GC and MGC.
Each micro is one tenth of its full-size contract, so the same price move is worth one tenth as much. That is why micros are the usual starting point: they let you match position size to a stop in smaller steps. For a deeper look at the S&P 500 contracts, see how to trade emini futures.
How Margin and Daily Settlement Work
Futures margin is a good-faith deposit, which CME calls a performance bond, not a loan or a down payment. The initial margin is what you need to open a position and the maintenance margin is the level your account must stay above. If losses take the account below maintenance, your broker issues a margin call or closes positions. CME Clearing sets minimum margin levels that vary by product and volatility, and brokers can require more, so check the current figure with your broker rather than an article.
Margin is small next to the exposure it controls. For example, at an index level of 7,700, one ES contract represents $385,000 of S&P 500 exposure and one MES $38,500. A 1% move, 77 points, is $3,850 on one ES and $385 on one MES. In crude oil, each $1 change in the price per barrel is $1,000 on one CL and $100 on one MCL.
Because gains and losses are settled every day, a losing position draws on your cash immediately. The CFTC warns that many individuals “lose all of their money, and can be required to pay more than they invested initially.”
Size Every Trade From the Stop
Decide the most you will lose on a trade, place the stop where the trade idea is proven wrong, then work out how many contracts fit. Dollar risk per contract is the stop distance in ticks times the tick value. Round down, and if the answer is zero, there is no trade. With a $200 risk budget, before costs:
| Contract and stop | Risk per contract | Contracts |
|---|---|---|
| ES, 4-point stop (16 ticks) | $200 | 1 |
| ES, 10-point stop (40 ticks) | $500 | 0: no trade |
| MES, 10-point stop (40 ticks) | $50 | 4 |
| MNQ, 25-point stop (100 ticks) | $50 | 4 |
| MCL, $0.40 stop (40 ticks) | $40 | 5 |
The free ES futures calculator runs this math for ES and MES. A stop order can fill beyond its price in a fast market or after a gap, so a stopped-out loss can be larger than planned.
When Futures Trade
- Equity index futures (ES, MES, NQ, MNQ): CME Globex, Sunday 6:00 p.m. to Friday 5:00 p.m. ET, with a daily maintenance break from 5:00 to 6:00 p.m. ET.
- Crude oil (CL, MCL): Sunday to Friday, 5:00 p.m. to 4:00 p.m. CT, with a 60-minute break each day from 4:00 p.m. CT.
- Gold (GC, MGC): Sunday to Friday, 6:00 p.m. to 5:00 p.m. ET, with a 60-minute break each day from 5:00 p.m. ET.
- The stock market session: the NYSE core session runs 9:30 a.m. to 4:00 p.m. ET, and many index futures traders treat it separately from the overnight session.
- Scheduled news: the BLS releases the jobs report at 8:30 a.m. ET and FOMC statements are released at 2:00 p.m. ET; prices can jump in seconds around both.
- Price limits: CME applies price limits to equity index futures, and a halt can leave you unable to exit until trading resumes.
Expiration, Rolling and Delivery
ES, MES, NQ and MNQ are listed for March, June, September and December and stop trading at 9:30 a.m. ET on the third Friday of the contract month, settling in cash. To keep a position, you roll: close the expiring month and open the next one. Check which month your platform shows before you trade.
CL and GC are physically delivered. CL stops trading three business days before the 25th calendar day of the month before the contract month, and GC on the third-last business day of its contract month. Many retail brokers do not let customers make or take delivery and may close positions ahead of the delivery period, so know your broker's policy and exit or roll early. Micro WTI (MCL) settles in cash; Micro Gold (MGC) is deliverable.
What It Costs to Trade
- Commissions and exchange, clearing and regulatory fees on every contract, in and out. The NFA assessment fee is $0.01 per side per contract until it returns to $0.02 on July 1, 2027; the rest depends on your broker.
- Market data and platform fees, which vary by provider and by whether you need depth of market.
- Slippage: one tick of slippage costs $12.50 per ES and $1.25 per MES. Small-target, high-frequency trading is the most sensitive to it.
Opening an Account, Simulation and Prop Firms
US futures brokers are registered with the CFTC and are members of the National Futures Association. Before sending money to any firm or person, look them up in NFA's BASIC database. Most futures platforms offer a simulated account; use it to learn order entry and to test a written plan before risking money.
Prop firm evaluations are a different product: you pay a fee to trade a simulated account under strict drawdown and session rules. Topstep, for example, reports that 16.8% of the Trading Combines started in 2025 were completed. If you go that route, compare the rules first in our prop firm comparison.
Order Types You Will Use
- Market: fills now at the best available price, which can be worse than the last price in a fast market.
- Limit: fills only at your price or better, and may not fill at all.
- Stop (stop-market): becomes a market order when the stop price trades; used to exit losing trades, with possible slippage.
- Stop-limit: becomes a limit order at the stop price; it controls the fill price but may leave you in a losing position.
- Bracket (OCO): attaches a stop and a target to an entry, and cancels one when the other fills. Set it before entry.
Futures vs Stocks
| Futures | Stocks | |
|---|---|---|
| What you hold | A contract with an expiration date | Shares with no expiration |
| Money up front | Margin, a fraction of the contract value | The full price, or part of it borrowed in a margin account |
| Trading hours | Nearly 24 hours, Sunday evening to Friday afternoon | Core session 9:30 a.m. to 4:00 p.m. ET, plus extended hours at some brokers |
| Going short | Sell to open, as easily as buying | Requires borrowing shares, and short-sale rules apply |
| US tax treatment | 60% long-term, 40% short-term under section 1256 | Based on how long you held the shares |
| Worst case | Losses can exceed your deposit | In a cash account, you can lose what you invested |
Tax details: IRS Publication 550 treats regulated futures contracts as section 1256 contracts, marks open positions to market at year end and reports them on Form 6781. Talk to a tax professional about your situation.
A Starter Plan for Your First 30 Days
- Week 1, learn the instrument: pick one micro contract, write down its tick value, hours, expiration and the scheduled releases that move it. Open a simulated account and practise bracket orders until entry and exit are automatic.
- Weeks 2 and 3, test one written setup: define the context, trigger, stop, size and exit so someone else could follow them. Our ES futures strategy guide has two examples to test. Log every simulated trade, including the ones you skipped or broke rules on.
- Week 4, review honestly: subtract commissions and at least one tick of slippage per side, then calculate expectancy: (win rate × average win) minus (loss rate × average loss). A high win rate with large losses can still lose money.
- Set your limits before any live trade: a maximum loss per trade, a maximum loss per day after which you stop, and the account size you can lose without harm.
Simulated results have limits: CFTC rules require advisors who show them to warn that they do not reflect actual trading and benefit from hindsight (17 CFR 4.41). Treat a good simulation month as permission to keep testing with one micro contract, not as proof of an edge.
Common Beginner Mistakes
- Trading full-size contracts too early: one ES is ten MES; if a logical stop on one ES exceeds your risk budget, the answer is a micro or no trade.
- No stop, or moving it: decide invalidation before entry and never widen it to avoid a loss.
- Trading straight into scheduled releases without a plan for the spike and the slippage.
- Forgetting expiration: an unrolled position can expire or enter delivery.
- Ignoring costs: fees and slippage turn many small wins into losses.
- Revenge trading: adding size after a loss to win it back is how daily losses grow. Our futures trading psychology guide covers this.
Futures Risk Warning
Futures use leverage, so losses can build quickly and exceed the amount you deposit. Use only money you can afford to lose, confirm margin, liquidation and delivery policies with your broker, and remember that simulation cannot reproduce every live fill, gap or emotional reaction.
Futures Trading for Beginners FAQ
How much money do I need to start trading futures?
There is no fixed amount. CME Clearing sets minimum margins that change with volatility, and your broker can require more. Micro contracts need far less margin than E-minis, but the better question is how much you can afford to lose, because futures losses can exceed the money you deposit.
What is the best futures contract for beginners?
There is no single best contract, but many beginners start with micro contracts such as the Micro E-mini S&P 500 (MES), which is one tenth of the E-mini (ES) and moves $1.25 per 0.25-point tick. Smaller contracts let you size a trade to your stop in smaller steps.
Can you lose more than you invest in futures?
Yes. The CFTC warns that many individuals lose all of their money and can be required to pay more than they invested initially. Accounts are settled to each day's closing prices, and a fast move or gap can push losses past your stop and your deposit.
How do you calculate profit and loss on a futures trade?
Multiply the number of ticks the price moved by the tick value and by the number of contracts. For example, a 10-point move on ES is 40 ticks of $12.50, or $500 per contract; on MES it is $50 per contract. Commissions, fees and slippage come out of that.
What happens when a futures contract expires?
Cash-settled contracts such as ES, MES, NQ and MNQ settle to a final index value, with trading ending at 9:30 a.m. ET on the third Friday of March, June, September and December. Crude oil (CL) and gold (GC) are physically delivered, so traders close or roll positions before the delivery process begins.
What hours do futures trade?
CME equity index futures trade on CME Globex from Sunday 6:00 p.m. to Friday 5:00 p.m. ET, with a daily break from 5:00 to 6:00 p.m. ET. Crude oil and gold follow almost the same weekly schedule with their own daily breaks, and all markets have shortened hours on some holidays.
How are futures taxed in the US?
Regulated futures contracts are section 1256 contracts. The IRS treats open positions as sold at year end and splits gains and losses 60% long-term and 40% short-term regardless of how long you held them, reported on Form 6781. Rules differ outside the US, so ask a tax professional.
Should a beginner use a prop firm instead of a brokerage account?
A prop firm evaluation limits each attempt's cost to the fee, but it is a simulated program with strict rules and recurring or repeat costs, not a brokerage account. Many evaluations end without a pass. Learn the contract mechanics and practise in simulation first, then compare firms' rules against your own trade log.
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