A futures contract is one of the most complex and riskiest securities traded today. That’s because if you hold the wrong side of a futures contract, your losses aren’t capped by an up-front purchase price. Instead, your gains or losses are determined after the contract closes. This can set you up for big gains and big losses. Depending on your needs in the marketplace, one of the platforms reviewed below can help you make the most of this asset. A financial advisor can also help you decide if futures trading fits your investing strategy, timeline and risk profile. This is especially important if you’re a beginner investor or have large amounts of money to invest.
What Are Futures Contracts?
A futures contract is a promise to buy or sell an asset on certain terms. You fix the price and date in advance. If prices soar, futures buyers make money because they get to buy the asset for less than it’s worth. If prices fall, sellers make money by selling the asset for more than it’s worth. This structure means that the other side of the contract loses money. But unlike a stock or options contract, your potential losses can far exceed what you paid to invest.
Here are the five best platform options to trade futures contracts:
1. Interactive Brokers: Best Platform Overall
Interactive Brokers is all about data. When it comes to data, technical indicators and customization, this platform more than stand out. This is particularly valuable for futures trading, given the degree to which high-performing traders rely on technical data. The same is true when it comes to fundamental analysis, as Interactive Brokers provides outstanding sources for news and other real-world data.
When it comes to complexity, Interactive Brokers also brings one of the best sets of trading tools on the market. This platform offers more than 80 different tools for setting conditions, algorithmic and automatic triggers, building multi-step orders and other forms of complex trading. If you’re looking for a comprehensive, customizable platform, Interactive Brokers is probably the tool for you.
Interactive Brokers are, in a word, overwhelming. While experienced investors will find much to love about Interactive Brokers, this is a very complex platform. Inexperienced investors will find the program difficult to use. More importantly, they will find this program very difficult to learn.
If you’re learning how to invest, Interactive Brokers is more likely to get in the way than help you grow. However, a high-performing investor will really like this platform.
2. NinjaTrader: Best Platform for Dedicated Futures Traders
Here is what we wrote in our review of NinjaTrader: “NinjaTrader may be one of the most customizable trading platforms on the market. It is a terrific fit for specialty traders, since it’s about the closest you’ll ever get to building your very own trading platform.”
This flexibility makes NinjaTrader one of the best platforms on the market for serious futures traders.
One of the most distinctive things about futures, and the related options market, is its breadth. You can trade in assets ranging from precious metals and agricultural products to stocks and cryptocurrency. This makes every dedicated trader’s needs different, and NinjaTrader is the best platform to meet their needs.
You can build NinjaTrader around the data sets, presentation and trading tools that meet your personal needs. Whether you’re trading gold, real estate or oil futures, NinjaTrader is the right platform for you.
No matter who you are, NinjaTrader has the tools that you need and the flexibility to build your platform around it. But at the same time, no matter who you are, NinjaTrader almost certainly has more tools than you need. This platform comes with an enormous range of tools, and sifting through them can be a chore as much as value.
This is also not a cheap platform. NinjaTrader’s exact costs depend on your contract, but the brokerage requires a $400 minimum account to trade futures and options contracts can often cost between $1.29 and $2.58 to trade. These prices go down if you purchase the NinjaTrader platform for $1,099.
3. thinkorswim by TD Ameritrade: Best Platform for Ease of Use
Calling thinkorswim easy to use is a misnomer. This is by absolutely no means an intuitive platform. In fact it is one of the more complex platforms on the market today, with a wealth of data and tools that can meet the needs of just about any trader. However, in the context of futures trading, this platform is one of the best choices available for investors who want a streamlined trading experience.
In addition, thinkorswim is designed with the user clearly in mind to a degree that many high-performance platforms neglect. There is a very real degree of tension when it comes to making a platform like this clean and accessible. Balancing that against the sheer number of tools that a sophisticated trader needs means that the user experience will often lose.
This is why thinkorswim stands out. Investors who trade futures need sophisticated products. You can’t operate in this market with a budget platform, and often that can mean spending as much time struggling with your trading tools as using them. thinkorswim makes that experience much easier while retaining all the complexity.
This is not a dedicated product. Don’t get us wrong, thinkorswim is an outstanding investment platform. However, it is an outstanding platform for sophisticated investors across the board. This tool has not been built with Dow futures trading (or any kind of futures trading) in mind, and as a result, it fails to provide many of the benefits that more specialized tools can offer. It does not have the same degree of data and customization that you will find in some of the other products on this list.
If you’re looking to add futures as an element of your portfolio, that shouldn’t be a problem. But dedicated traders will likely notice the difference. It should be noted that Schwab has purchased TD Ameritrade, which runs thinkorswim, so it’s important to keep an eye out to see if that platform will survive. At the time of writing this, they have announced that it will keep operating.
4. TradeStation: Best Platform for Price
For a sophisticated futures platform, TradeStation offers some of the best prices around. Understanding the pricing scheme of TradeStation can take some doing. This product sets its prices based on its many different products and account types, meaning that what you pay can be highly individual.
For futures traders, contracts can be priced as low as $1.50 per contract. While its desktop product, TradeStation Select, requires a $2,000 minimum balance, the web-based TradeStation Go has none. These are some of the best prices on the market for futures traders, and they are packaged with a smart trading platform.
TradeStation is best for highly active investors, which often may cut against a futures trader’s business model. If you are someone who executes frequent trades then you might find a lot to love in this product. Its prices are built into a highly responsive platform that helps volume traders work well.
However, if you are someone who trades weekly or monthly (as many futures traders do), then this may not be the right platform for you. The prices offered by TradeStation will matter less to someone who trades slowly and infrequently.
5. Lightspeed: Best Platform for High-Speed Traders
This is one of the fastest trading platforms on the market. In addition to a wide, if standard, range of technical indicators and data sets, Lightspeed Trading also offers tools to help you build your trades around speed. Investors can select their own trading venues and markets as they build each transaction, all with the purpose of maximizing speed and profits.
At the same time, this service offers terrific volume-based pricing. While Lightspeed’s standard prices are middle to high from $1.29 to $1.79 per side for futures contracts, highly active traders can expect to pay as little as $0.20 – $0.60 per contract. This makes it a fantastic deal for traders who can keep up enough volume.
Lightspeed requires a high minimum balance of $10,000 for its web client and $25,000 for its desktop software. This is orders of magnitude more than most comparable platforms.
At the same time, Lightspeed’s tools are highly specialized. This is not a platform for fundamental analysis or long-term thinking. Lightspeed has built its trading environment for data-driven, high-volume technical analysts. Anyone who would like to move more slowly, trade fewer assets or make decisions based on anything other than market data should look elsewhere.
We have not included a “Best Platform for Beginner Futures Traders” section. That’s because futures carry an outsize risk of loss disproportionate to many other assets. In other words, this is not a good asset for beginners. Experienced investors, meanwhile, have several good choices. The right platform for you will depend on a number of things such as cost, history of success, ease of use and overall personal fit with the platform itself.
Tips for Investing
- Most retail investors don’t trade in futures contracts for good reason. These are risky products with a very real potential for catastrophic losses. It’s important to get expert advice when investing in things you’re not familiar with. A financial advisor can give you excellent guidance on whether futures make sense for you. SmartAsset’s matching tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- One way you can get a quick and relatively accurate overview of your investing is by taking advantage of a free, easy-to-use investment calculator.
Photo credit: ©iStock.com/FatCamera, ©iStock.com/Dilok Klaisataporn, ©iStock.com/piranka