Futures contracts offer swing traders leverage, liquidity, and access to markets beyond just stocks. From stock index futures to commodities and currencies, futures provide opportunities around the clock. In this guide, we explain how swing trading futures works and what you need to know to get started.
What Are Futures?
A futures contract is an agreement to buy or sell an asset at a predetermined price on a specific future date. Unlike stocks, futures have expiration dates and use margin, which means you control a large position with a relatively small amount of capital.
Key difference from stocks: With futures, you can control $100,000 or more worth of an asset with just a few thousand dollars in margin. This leverage amplifies both gains and losses.
Why Swing Trade Futures?
- Leverage: Control large positions with less capital
- Nearly 24-hour trading: Most futures trade almost around the clock, Sunday evening through Friday afternoon
- Tax advantages: Futures may have favorable tax treatment (60/40 split between long-term and short-term gains in the US)
- Liquidity: Major futures contracts have excellent liquidity and tight spreads
- Go long or short equally easily: No uptick rule or borrowing requirements for shorting
- Diverse markets: Trade indices, bonds, commodities, currencies, and more
Popular Futures for Swing Trading
Stock Index Futures
- ES (E-mini S&P 500): The most liquid futures contract. Tracks the S&P 500. One point = $50.
- NQ (E-mini Nasdaq 100): Tracks the Nasdaq 100. More volatile than ES. One point = $20.
- RTY (E-mini Russell 2000): Small-cap index. Highest volatility among index futures. One point = $50.
- MES, MNQ, M2K: Micro contracts (1/10th the size) for smaller accounts.
ES Futures Swing Trade Example
ES is at 4500 and you see a bullish pullback setup:
- Entry: Buy 1 ES contract at 4500
- Stop: 4475 (25 points x $50 = $1,250 risk)
- Target: 4575 (75 points x $50 = $3,750 reward)
- Margin requirement: Approximately $12,000-15,000 per contract
- Risk-reward ratio: 3:1
Commodity Futures
- CL (Crude Oil): Highly liquid, volatile. One tick ($0.01) = $10.
- GC (Gold): Safe haven asset. One tick ($0.10) = $10.
- SI (Silver): More volatile than gold. One tick ($0.005) = $25.
- NG (Natural Gas): Very volatile, weather-dependent.
Currency Futures
- 6E (Euro FX): Euro vs US Dollar
- 6J (Japanese Yen): Yen vs US Dollar
- 6B (British Pound): GBP vs US Dollar
Bond Futures
- ZB (30-Year Treasury Bond): Interest rate sensitive
- ZN (10-Year Treasury Note): Popular for rate speculation
Understanding Futures Margin
Margin in futures is not a loan like stock margin. It is a good faith deposit to hold a position. There are two types:
Initial Margin
The amount required to open a position. This varies by contract and broker. ES might require $12,000-15,000 initial margin per contract.
Maintenance Margin
The minimum amount that must be maintained in your account. If your account falls below this level, you will receive a margin call and must deposit more funds or close positions.
Margin warning: Unlike stocks where you can only lose what you invest, futures losses can exceed your account balance. Always use stop losses and appropriate position sizing.
Swing Trading Strategies for Futures
1. Trend Following
Futures trend well because they are driven by large institutional flows and macroeconomic factors.
- Use moving averages to identify the trend (50 and 200 SMA)
- Enter on pullbacks to support in uptrends
- Hold for days to weeks as the trend develops
- Trail your stop using the 20-day moving average
2. Breakout Trading
Futures often consolidate before making large moves. Trade the breakouts:
- Identify consolidation patterns (triangles, ranges, flags)
- Enter when price breaks the pattern boundary with volume
- Set stop inside the pattern
- Target the measured move of the pattern
3. Mean Reversion
When futures become overextended, they often snap back:
- Wait for price to move 2+ standard deviations from the mean
- Look for reversal signals (candlestick patterns, RSI divergence)
- Enter counter-trend with a tight stop
- Target a return to the mean (20 SMA)
Crude Oil Swing Trade Example
CL (crude oil) has been consolidating for two weeks:
- Range: $75.00 to $78.00
- Price breaks above $78.00 with high volume
- Entry: Buy 1 CL contract at $78.20
- Stop: $76.80 (inside the range) - Risk: $1.40 x 1000 = $1,400
- Target: $81.00 (measured move) - Reward: $2.80 x 1000 = $2,800
- Risk-reward ratio: 2:1
Contract Rollovers
Futures contracts expire. As a swing trader, you need to understand rollovers:
- Expiration: Most contracts expire quarterly (March, June, September, December)
- Rollover: Close your position in the expiring contract and open a new one in the next month
- When to roll: Usually 1-2 weeks before expiration when volume shifts to the new contract
- Continuous charts: Most charting platforms offer continuous futures charts that adjust for rollovers
Risk Management for Futures
Because of leverage, risk management is even more critical in futures:
- Position sizing: Risk no more than 1-2% of your account per trade
- Always use stop losses: The leverage in futures can amplify losses quickly
- Account for volatility: Commodities can make large overnight moves on news
- Weekend risk: Holding over weekends exposes you to gap risk when markets reopen
- Margin buffer: Keep extra cash in your account beyond minimum margin requirements
Micro Futures for Smaller Accounts
If you are new to futures or have a smaller account, micro contracts offer the same exposure at 1/10th the size:
- MES: Micro E-mini S&P 500 ($5 per point vs $50)
- MNQ: Micro E-mini Nasdaq 100 ($2 per point vs $20)
- M2K: Micro E-mini Russell 2000 ($5 per point vs $50)
- MCL: Micro Crude Oil
- MGC: Micro Gold
Start with micros: Trade micro contracts until you are consistently profitable. The reduced size lets you learn without risking too much capital.
Track Your Futures Trades
Pro Trader Dashboard helps you analyze your futures trading performance. See which contracts and strategies work best for you.
Getting Started with Futures
- Open a futures-approved account: Not all brokers offer futures. You need a specific futures account.
- Learn contract specifications: Understand tick values, margin requirements, and trading hours for contracts you want to trade.
- Start with paper trading: Practice on a simulator before risking real money.
- Begin with micro contracts: Get comfortable with the mechanics before scaling up.
- Develop a trading plan: Document your strategy, risk rules, and entry/exit criteria.
Summary
Futures offer swing traders leverage, liquidity, and access to diverse markets including indices, commodities, currencies, and bonds. The nearly 24-hour trading and favorable tax treatment are additional benefits. However, leverage cuts both ways, making risk management essential. Start with micro contracts to learn the mechanics, always use stop losses, and never risk more than you can afford to lose. With proper education and discipline, futures can be a powerful addition to your swing trading toolkit.
Continue your education with our guide on swing trading forex or review the fundamentals in our swing trading basics guide.