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Here are some of the many ways futures can help you achieve your trading goals.
Say Goodbye to Shorting Restrictions and Day Trading Rules
In futures, entering a short position is easy—every future can be shorted for any contract, anytime. Plus, unlike stocks, futures do not have a pattern day trader rule.
Select the Best Contract Size for You
No matter what your level of experience, you can trade futures. Choose from a range of contract sizes to help limit your financial exposure. New traders can get started in futures with less capital and the potential to reduce risk by trading Micro futures, which are 1/10th the size of a standard E-mini futures contract.
Trade With More Leverage
With futures, you can control a larger trading position with much less capital. Futures traders should note that along with the opportunity for potentially greater profits comes increased risk of greater losses. This is why you should always have a risk management plan in place that includes appropriate trade sizing and minimum capital risk on each trade.Â
Trade Virtually 24 Hours a Day
Trading opportunities can happen anytime, even when the stock market is closed. You can trade the futures markets nearly 24 hours a day, six days a week. Additionally, due to their global market participation, futures usually have higher levels of liquidity during trading hours, making it easier to enter and exit positions.
Diversify Your Portfolio
Access diverse, uncorrelated markets that drive the global economy, including major market stock indexes, bonds and foreign currencies, as well as essential commodities like gold, crude oil, coffee and others. Many of these markets have greater price trend diversification than other similar investments like stocks and forex.
Trade on a Level Playing Field
In futures trading, everyone sees the same prices and has the same opportunity to place and have their orders filled, with real-time volume data for all orders and transactions.
Futures Trading Comes With Unique Tax Advantages
Futures trading gains are split between long- and short-term capital gains, offering traders a tax advantage over short-term stock trading. No matter the holding period, capital gains and losses are calculated at 60% in the long term and 40% in the short term.
Futures Are Mature and Regulated
The Commodities Futures Trading Commission (CFTC) regulates all futures trading exchanges, which serve as clearinghouses for all trades, set all margin and contract specification rules, and match and guarantee all transactions (cash settled or physical delivery). Additionally, futures commission merchants (FCMs) must protect customer assets by keeping all customer funds in segregated accounts.
How Does Trading Futures Compare to Other Asset Classes?
Stocks
Advantages of futures over stocks include increased leverage, 24-hour trading, unrestricted shorting, tax advantages, and fair and transparent trading.Â
Forex and CFDs
Forex futures benefit from a well-regulated marketplace and transparent pricing and volume, allowing for more efficient and effective trading.
Cryptocurrencies
Futures offer a highly regulated trading environment, where the safety of funds is of highest importance and exchanges guarantee all transactions.
Stock Options
Futures trading is much simpler and more transparent than stock trading, with just two trading options: buy or sell.
Open a free simulated trading account today.
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