Looking into the future and accurately predicting its outcome has long held a top position among desirable super powers. If you can see what’s coming, you can adequately prepare and take advantage accordingly.
The stock market offers a glimpse into the future with “stock market futures” contracts, also called “equity index futures” or simply “futures”. To understand how these instruments work and how you can harness a financial superpower, continue reading to learn more.
What are Stock Market Futures?
Stock market futures, also called market futures, equity futures, equity index futures or stock futures, are contracts which track a specific benchmark index at a future point in time. They track indexes and are named accordingly:
- e-Mini Dow Futures
- e-Mini Nasdaq Futures
- e-Mini S&P 500 Futures
Stock market futures allow stock traders to trade the direction of the underlying equity index and can also assist with hedging equity positions you hold in your portfolio. They can help you by serving as a leading indicator for the stock market’s direction.
Futures represent a derivative financial contract, one which obligates you to transact an asset at some predetermined price and date in the future. They differ from options because you agree to execute this contract while options grant you exactly that: the option to transact.
If you buy a stock market futures contract, you agree to buy the underlying asset (like an equity index) at the set date and price, regardless of the current market price at expiration. Likewise, if you sell a futures contract, you must sell in accordance with the details of the futures contract.
Do Futures Predict the Stock Market?
To say futures might predict the stock market’s direction would be misleading. While stock market futures signal the intended direction of the market, they more so act as a bet on the direction the market will likely head in the future.
A futures contract acts as a commitment to buy or sell an underlying asset at a specified date and price. Counterparties think the market will go in one direction or another and attempt to use these futures contracts to align their financial risk/reward with this insight.
In short, futures contracts represent where investors see the market heading. But, because investing is zero sum, one investor’s loss (or locked-in, limited upside) is another’s gain.
Best Apps for Stock Market Futures Trading at a Glance
The best stock tracking app for you isn’t necessarily the perfect app for someone else. Your best choice is likely one of the following:
- Best desktop app for futures trading: TradeStation
- Best for funded futures trading, link to other brokers: TopStep
- Best for inspiration (social trading): Tastyworks
- Best mobile app for futures trading: TDAmeritrade
- Best futures app for professionals and margin rates: InteractiveBrokers
- Best futures trading app with options trading: eTrade
Let’s look deeper into the top picks and the pros and cons of each.
Best Apps for Stock Market Futures Trading
If you want to trade stock market futures, you will need an app which allows you to transact based on your research and inclinations. The following list of the best apps for stock market futures trading will allow you to place futures trades alongside other investing transaction types.
1. TradeStation: Best Desktop App for Futures Trading
- Price: $1.50 per Futures Contract; Free Stock/ETF Trades
- Sign up here
TradeStation provides market-leading technology with a full powerhouse of features that span across several platforms like desktop, web and mobile apps.
You can use the service for its Radar Screen feature (allows 335 customizable columns of data with real-time streaming quotes), Charting (almost 300 technical indicators), Scanner, Matrix (for ladder trading) and advanced strategy testing.
2. TopStep: Best for Funded Futures Trading, Linking to Other Brokers
- Price: $150/mo – $375/mo
- Sign up here
TopStep is a fintech firm that evaluates your trading performance with real-time simulated accounts. If you manage to pass the company’s evaluation, you can earn access to a funded account worth $30,000 – $150,000 which you can trade futures contracts using the firm’s capital.
Funded traders can trade futures contracts from Crude to E-mini S&P 500 and the most popular CME products. To get started, you can begin a 14-day free trial and then select the buying power that suits your style of trading.
You get to keep 100% of your first $5,000 and 80% of everything you make afterward.
You’ll need to prove profitability and how you manage risk over certain intervals established by the company. They provide these rules to instill good habits and think of them as a ticket to consistent profitability for buying investments that earn a great return.
They also offer a Trading Combine to prepare you for growing an account and managing risk when getting ready to trade the firm’s capital.
3. Tastyworks ($200 bonus)
- Free stock value: $200
Tastyworks is an award-winning, self-directed brokerage started by the original founders of the famous thinkorswim trading platform (now owned by TDAmeritrade).
The service offers competitive commissions on the usual suspects: stocks and ETFs, but also on options ($1/trade on stock and ETF options) and cryptocurrencies (1% commission on trade volume up to a $10 cap).
The platforms offers the chance to experience cutting-edge, game-changing technology that anticipates next generation needs from futures traders.
The service aims to fix “trader’s block,” or the trader’s equivalent to writer’s block. It offers the ability to track traders on the platform and engage in video-feeds with other people to discuss all things markets. The service also partners with tastytrade, a financial news network entirely focused on talking shop about trading.
The services, when combined, say they can “transform you from a timid beginner to a confident, everyday trader.”
4. TDAmeritrade: Best Mobile App for Futures Trading
- Available: Sign up here
- Price: $2.25 per futures contract; Free Stock/ETF trades
A more traditional broker, TDAmeritrade offers a powerful trading platform for stock market futures.
The company’s thinkorswim platform contains a large array of investing tools, including paper trading, Earnings Analyzer, charts with almost 500 indicators (like customized candlestick patterns), backtesting and historical market replays.
The service offers a desktop and mobile experience to trade stock futures among many other asset classes.
5. InteractiveBrokers: Best Futures App for Professionals and Margin Rates
- Available: Sign up here
- Price: $0.85 per futures contract; Free Stock/ETF trades
I used Interactive Brokers for a number of years as my main investing platform. It offers access to the most order types of any of the brokers listed.
This expansive array or order types allows you to place any and every trade, whether manual or in alignment with algorithm orders you set up.
Many institutions choose Interactive Brokers and retail traders love it for the best margin rates in the industry. This app focuses on professionals and has a high minimum deposit for margin accounts: $110,000.
- Available: Sign up here
- Price: $1.50 per futures contract; Free Stock/ETF trades
e*Trade doesn’t have a standalone desktop platform like these others. Instead, it offers a web-based trading application alongside a mobile app.
The app doesn’t perform quite as well as the others in terms of day trading tools nor customization, but it does offer fantastic functionality for trading options.
Trading Futures Costs
When evaluating which stock market futures app you will want to use for placing your trades, you will want to consider the types of fees you will pay to trade on these platforms. Below, we highlight some of the most common fees and commissions you will face using the apps highlighted above.
→ Brokerage Commissions/Order Routing Fee
After Robinhood entered the scene, many brokers had to change their fee and commission schedules to remain relevant. The company slashed trading commissions to $0 and monetized other revenue streams, namely through the sale of order flow.
Their Payment for Order Flow (PFOF) provides hundreds of millions of dollars in revenue to the company each year, something many retail brokerages have had to follow to remain relevant.
While we found this to be problematic when apps like Robinhood got caught by their clearing house for needing additional funds on deposit to meet regulatory compliance during the GameStop market mania.
Therefore, paying brokerage commissions might sound bad on the surface, but it should also keep your orders private from bigger stock market players.
→ Futures Clearing Merchant Fee
To trade futures contracts, your broker must register as a Futures Commission Merchant (FCM). These entities play essential roles in enabling customers to participate in futures markets.
These entities solicit or accept the purchase and sale of orders for futures or options on futures in exchange for the payment of money, otherwise known as earning a trading commission. FCMs also must collect margin interest from customers and ensure delivery of assets after future contract expiration.
→ Exchange Fee
Per the Chicago Mercantile Exchange, exchange fees for clearing and trading CME Group products vary. Depending on different memberships or incentive programs, CME, CBOT or NYMEX/COMEX Exchange trades will incur exchange fees based on product, volume traded venue and/or transaction type.
→ National Futures Association Fee
While minor, this fee amounts to $0.02 per side and is payable by the Futures Clearing Merchant. The fee gets assessed on both exchange-traded and dealer options.
→ Miscellaneous Fees
You may face other fees from your broker depending on the type of trade, volume placed, type of trade or other contributing factors.
How Are Futures Different from Stock?
Futures differ from stocks by serving a fundamentally different purpose, despite having many elements in common. Futures specify a date and price at which you agree to transact in the future.
Stocks, on the other hand, represent a proportional ownership share of a company. They do not expire or have a temporal component unless the stock gets acquired by another firm, you dispose of it, or the underlying company files for bankruptcy and discharges your ownership.
How Do I Choose a Stock Market Futures App/Broker?
When choosing the stock market futures app best suited to your needs, you will need to consider a number of factors. You will need to understand the basic lingo before diving into futures trading or you’ll quickly get lost trying to differentiate between the terms.
Because stock prices move rapidly due to changes in corporate profitability and shifting investor sentiment for future earning expectations. Stock futures move for many different reasons outside of a company-specific event or action.
They can move for natural disasters, economic data points, political outcomes, or any number of reasons.
You will need to focus on the best customer support options, reliability and the security you can expect for your funds. Without a doubt, if your futures broker charges fees like $0.25 to cover these needs, those become well worth the price paid.
The right futures broker will match you with your level of expertise in terms of systems support, trading strategies and execution. As you grow your skills, your broker may consult with you to determine the best solution for your needs.
What Are the Best Futures to Trade?
When trading futures, you want to identify those opportunities which have the small spreads and a lot of liquidity.
Which Online Stock Trading Apps are Best to Use?
When considering which stock trading app you want to use for placing trades, you want to review a number of considerations. These relate to price, fees, tradeable asset classes, customer support, trading windows and more.
If you want a discount brokerage and only focus on cost, you will want to consider the best free stock trading apps to place your trades.
Also consider pairing your stock trading app with one of the best stock picking services to hone your search and get the most of your investments.
For more sophisticated investors, you should look at the stock research and analytical tools that come with your brokerage. Many provide real-time trading data, stock market news and developments, customer support, training resources, back-testing, screeners and more.
What Account Minimums Do Futures Traders Need to Meet?
Depending on what level of activity you want for your futures trading, some accounts start with no minimums if you wish to paper trade while others can start below $500.
Because many allow you to trade futures contracts on margin, you will need some minimum account equity to begin trading.
Why Paper Trading Futures is a Good Way to Start
As with all trading strategies you want to test, consider paper trading apps like Webull, TDAmeritrade’s thinkorswim or others. This de-risks your trading, allows you to test strategies in a risk-free way and builds your experience.’
You can also use Level 2 Advance quotes to get better insight into depth-of-market and market flows.
What Research and Analysis Tools Are Available?
To aid in your futures trading, consider enlisting the help of several stock research websites and software packages.
Some of the most useful recommendations include:
Can I Trade Stock Market Futures on Margin?
In most cases, yes. Day trading or trading futures requires discipline. You need to have a trading system to protect against wrong decisions and limit your losses. Likewise, you need to learn when to close a position to lock in a gain as market movements happen quickly and you should not operate purely on fear or greed.
Some brokers allow you to trade on margin with as little as $500, but the amount required can vary drastically based on your stock futures broker. For example, when trading the E-Mini S&P 500 Futures contract, exchanges require initial margin at $11,000.
But these amounts vary by product:
- SP 500 MATERIALS SEL SECTOR SYNTH: $5,200
- SP 500 ENERGY SLCT SEC SYNTH: $4,000
- SP 500 FINANCIAL SLCT SEC SYNT: $7,500
- SP 500 – INDUSTRIAL SEL SECTOR SYNT: $6,700
- E-MINI SP500 CONS DISCRET SYNTHETIC: $9,500
- EMINI RUSSELL 2000 VALUE IND MARKER: $7,500
To learn more about these maintenance margins, I suggest visiting the CME Group’s margins page as they can change regularly.