Until about 15 years ago, futures markets were dominated by trading in the ‘pit’ — the physical trading floor. Pit traders yelled out their buy/sell orders to find a fellow floor trader to assume the counterpart. Known as ‘Open Outcry,’ this was a very authentic (and fun) process though it represented a very slow, manual and error-prone order matching mechanism. Improvements in computer technology and competition from various futures exchanges has changed futures trading quite a bit. The futures marketplace has become electronic and the bulk of trading activity has now ‘migrated to the screen.’ The Chicago-based CME Globex is the world’s leading electronic platform for trading futures where sell/buy orders from around the world are matched electronically in a very efficient and cost effective way. Trading liquid futures through the CME Globex platform allows for electronic trading nearly 24 hours per day across the globe. Wherever you live and during whatever time you want to trade, your trading can benefit from the global markets by choosing from a variety of liquid futures across different asset classes. If you are not trading futures already, here are the top ten reasons why you should consider it:
My focus of attention is the ‘Liquid Futures’ contracts which are traded on the CME Globex exchange. They can be traded electronically basically around the clock independent of the time zone you live in from more than 150 countries. Also, with only a short trading break at 5pm (EST), there are no pronounced disruptions so price action is smooth & flowing. This fact alone opens up the market to a broad spectrum of trading styles where traders can choose to use long-term systems, swing systems, day-trading or even quick scalping — at any time of the day/night. My current trade universe is composed of 21 different futures contracts which offer high trading volume and tight bid/ask spreads.
Through a global platform, traders can access all major asset classes such as Equity Indexes, Metals, Energies, Interest Rates and others (such as the VIX, USD Index or Bitcoin). The systems I trade are trend-following in nature. Having the flexibility to choose from multiple asset classes and timeframes allows traders to pick the trends which offer the best potential trading opportunities.
The timeframes available to futures traders range from very short-term (15 second, 1 minute, or 5 minute bars) to medium-term (15 minute, 60 minute and 240 minute bars) to longer-term charts such as the daily, weekly or even monthly. Usually, I trade intraday or swing positions on the 5, 15, 60 and 240 minute charts during the open market hours. If I want to do something else during the day, however, I can still trade, just at a different time. Or if I am in a different time zone, I can trade futures at times that are convenient for me.
Having this flexibility for many different futures contracts (see various Asset Classes above) and nine different timeframes opened my trading up to many opportunities. The systems I trade help condense all of those opportunities to a handful of tradable charts because the systems’ trades require a strong trend in a higher timeframe.
The Globex platform is one of the most liquid electronic markets in the world. Thus transaction costs (including bid/ask spreads) are very low due to benefits from economies of scale.
It is worth noting that since the late 2000, CME Globex implemented an ‘open access policy.’ This allows market actors instant & direct participation in the trading process via communications hubs located in various parts of the world that are then connected to local brokers. This results in an efficient order execution within milliseconds for any trade size at any time and from any place in the world. Thus, whether you are a retail trader, an institution or a large corporation, you have access to the same prices on equal footing.
One of the advantages of liquid futures markets is the ability to trade them in very low timeframes (e.g. 15-second, 1 minute or 5 minute charts). The lower the timeframes you trade; the more potential trade opportunities you will encounter in a given time period. This applies especially to the 5 very liquid US Equity Index markets which can be traded on timeframes well below the 5 minute charts (some of the students from my last futures workshop have focused their trading game on this kind of very short-term trading.)
I absolutely enjoy trading market traps that lure in countertrend traders. Once they enter into a bad bet, they become trapped and need to exit their position — often in a panic. Traps always involve a lot of emotional pain for trapped traders as they are caught on the wrong foot and proven wrong immediately.
Low-risk trading systems involving a market trap (or price failure) do capitalize on ‘fishing for other peoples’ stops’. The futures market specific price action allows traders to reap this edge repeatedly in various different ways allowing for entire trading systems to be built upon. The result of countertrend traps is extended stop-run moves that usually develop a strong price momentum in the direction of the prior trend. It is always better, and definitely more fun, to trade a market trap in your favor instead of getting caught with the crowd.
When a day-trade develops well and provides excellent long-term potential, then it can be transitioned into a swing trade. Because liquid futures markets trade practically 24h a day, you can hold a position over night without running the risk of it gapping at the opening bell like stocks can do. Thus a core position of the initial day-trade, e.g. with a 15-minute chart entry, could be converted into a swing trade on the 60 minute chart and then the 240 minute chart and even potentially the daily chart by following a specific swing exit algorithm. These type of swing trades do not occur every day, but once they do big R multiple results are not unusual.
The CME Globex Futures exchange relies on the CME Clearing House (the largest in the world). It represents the intermediary between the seller & buyer of every transaction thus guaranteeing futures contracts and ensuring the integrity of all trades. As a result, a central clearing house centralizes the real-time price data as well and leaves no price ambiguity. As a central exchange, the CME is fully regulated by the CFTC (Commodity Futures Trading Commission) which ensures competitiveness, efficiency and integrity of the futures markets at all times.
Not considering futures as a trading vehicle with the opportunity to trade various Asset Classes might put you into a disadvantage in comparison to other traders (who might have done so in recent years). The futures markets offer another opportunity to make money trading long or short. As an example, there were lots of great low-risk trading opportunities during the last bull (until 2011) & bear market since then in Gold (GC), or, the 8-year bull market run (since 2010) in the US Equity Indexes (such as the ES or the YM contracts). The Bitcoin futures contract is already providing new opportunities. Once the 2-year cryptoasset bear market (with already more than 80% decline) ends and the overall uptrend eventually resumes, we might see again great trading opportunities in various timeframes for the years to come going long Bitcoin.
Trading liquid futures on the global electronic platform is an ideal marketplace to start trading futures. Why?
Small traders need not fear being at a disadvantage as they get the same prices transacted at low costs in the same efficient way. Neither need big traders fear slippage because the major futures markets are so liquid. In addition, with the market being opened basically 24h a day, you do not need to worry much about gap risks during the week. This leaves you the flexibility to transition a day-trade into a swing trade. Traders can go long or short at any time without restrictions. Trading futures on margin allows you the opportunity to benefit big from small moves in small timeframes (trading only intra-day will provide you additional flexibility as intra-day margins are even lower).
Even before the Globex platform was available, I was trading futures very early on in my career and can say with confidence that there is no easier and no more cost effective way to learn to trade futures now — wherever you live, at whatever timeframe or time of the day you might want to choose.
Liquid futures offers a level playing field for a wide variety of market participants — be it newbies or veterans, small or large accounts, full-time or part-time traders. Futures trading allows you to choose what fits you best: your time of the day, your preferred holding period, your trading style and your account size.
Overall, liquid futures offer you lots of flexibility and a large number of trade opportunities in an environment in which the risks, and your potential trading mistakes, are limited.
An ever increasing number of futures contracts are made available to be traded 24h a day. As of 2006 NYMEX, CBOT and CBOE futures were listed on Globex. As well, several local futures exchange have already integrated their product offering into the Globex platform such as the futures on the Japanese Nikkei or the British FTSE stock indexes. In addition, other futures exchanges, such as the European Exchange, have just recently decided to expand their trading hours: the EUREX family of futures can now be traded 21 hours a day, being seven hours longer than before – and I would not be surprised to see this to be expanded to a 24-hour cycle soon.
New asset classes are being added — most recently Cryptocurrencies. The CME launched a Bitcoin Future at the end of 2017 which trades 24h a day — and talks are about an Ethereum Future to come soon.
Given this short, but powerful list, why aren’t you trading futures already?