As a type of financial derivative, futures hold a critical position in the global financial markets. Offering benefits such as hedging against price volatility and high leverage, futures trading brings significant advantages.

This article aims to define futures and explain their function, highlight the benefits of trading futures, and provide a comprehensive review of leading futures brokers such as Interactive Brokers, TradeStation, E*TRADE, and Charles Schwab.

These brokers have been selected based on their pricing structure, the types of futures they offer, and other criteria that have landed them on our list of top futures brokers for the year 2024. Let's delve into the world of futures trading.

How Did WikiFX Select the Best Futures Trading Brokers？

At WikiFX, our evaluation criteria for futures brokers primarily revolve around several pivotal aspects. Our initial and utmost selection criterion we underscore for the premier futures brokers is their regulatory status as we place significant emphasis on regulatory compliance. The advertising industry has a 4P theory, and our standards for judging brokers can also be expressed as 4P：price, product, platform, and professionalism.

The term ‘price’ implies the pricing model, inclusive of constituents that form the cost per contract. 'Product' represents the diversity of futures available for trading and if it serves an array of choices for the users. 'Platform' encompasses the types of trading platforms offered and whether they augment user trading with ease of use. 'Professionalism' concerns whether the data's source and support are credible and professional.

Comparison of Best Futures Trading Platforms in 2024 Overall

①Interactive Brokers

Interactive Brokers
Products	Access to trade 150+ global products.
Price	Starting at $0.85 per contract
Platforms	5 platforms: IBKR Trader Workstation, IBKR Desktop, IBKR Mobile, IBKR Client Portal, and IBKR API
Professionalism	An award-winning trading platform, subject to multiple regulations.

IG distinguishes itself as an award-winning top-tier trading platform, not only subject to multiple regulations but also recognized as the Best Forex Brokers With VPS Services and Best Forex Brokers for Beginners

by WikiFX. Those who follow WikiFX are likely familiar with its accolades and reputation in the industry.

Interactive Brokers is accessible to customers from over 200 countries and regions, offering the ability to trade a diverse range of 150 global products.

Traders can experience contract prices as low as $0.85 with Interactive Brokers, a significant 64% lower than competitors. Interactive Brokers employs a tiered commission model that lowers the cost per contract as the trader's trading volume increases. For example, executing 1,500 U.S. contracts within a month results in Interactive Brokers' execution costs as follows: 1,000 contracts at $0.85 per contract and 500 contracts at $0.65 per contract.

Interactive Brokers provides a selection of 7 trading platforms, including the following for futures trading:

• IBKR Trader Workstation

• IBKR Desktop

• IBKR Mobile

• IBKR Client Portal

• IBKR API

②TradeStation

TradeStation
Products	600+ futures and options
Price	Futures: $1.50/contract, Micro E-Mini: $0.50/contract
	New account promo: Up to 50% off futures fees
Platforms	Desktop, Web Trading, Mobile Apps
Professionalism	Data sources: CME, CBOT, NYMEX, COMEX, CBOE, ICE, MGEX

TradeStation offers real-time data access to over 600 futures and futures options products, drawing from reputable sources such as CME, CBOT, NYMEX, COMEX, CBOE Futures Exchange, ICE U.S., and MGEX (for non-tradable data).

Additionally, TradeStation provides the opportunity to trade popular futures with low intraday margins. Some of the featured futures contracts and their corresponding intraday margin rates include:

• E-mini S&P 500 (ES) at 10%

• Micro S&P 500 (MES) at 10%

• E-mini Dow Jones (YM) at 10%

• E-mini NASDAQ 100 (NQ) at 10%

• 10-Year Treasury Note (TY) at 10%

TradeStation's futures product fees come with a compelling offer for new accounts. Opening a new account using the promo code FUTRAFZT can get you up to a 50% discount on futures brokerage fees.

TradeStation's futures trading is marked by $0 commissions, with competitive rates of $1.50 per contract, per side for standard futures, and $0.50 per contract, per side for Micro E-Mini futures. Additionally, traders enjoy free access to real-time market data, enhancing the overall cost-effectiveness and insights offered by the platform.

Traders billed $40+ in futures commissions monthly enjoy waived market data fees. New futures clients receive a 90-day grace period with free data packages upon funding their account. After the grace period, those not meeting criteria are charged $20 per data package, totaling $40 monthly.

TradeStation's trading platforms offer a comprehensive suite of features for traders. The desktop platform is equipped with advanced tools, including EasyLanguage, RadarScreen®, charting, backtesting, and efficient order entry. The web trading platform is user-friendly, requiring no download, and provides a simulated trading environment with extensive historical data and customizable indicators. On mobile apps, users can access on-the-go market analysis, set custom price alerts, execute detailed orders, and enjoy an intuitive interface, including the ability to trade futures from major exchanges like CME, CBOT, COMEX, and NYMEX.

③E*TRADE

E*TRADE
Products	Over 60 futures contracts
Price	$1.5 per contract
Platforms	Power ETRADE and Power ETRADE app.
Professionalism	- Futures Research Center: Daily insights from pros.
	- Heatmap with real-time quotes for price movements.
	- Automated technical pattern recognition for identifying price swings with detailed pattern information at a click.

E*TRADE offers a diverse selection of over 60 futures contracts, spanning market indices, energies, metals, interest rates, currencies, and Bitcoin futures.

In terms of fees, E*TRADE maintains a straightforward pricing model, charging $1.5 per contract for the futures contracts it provides. Notably, micro-futures contracts are available, sized at 1/10th or even 1/5th of standard contracts, providing traders with the flexibility to participate with reduced upfront capital.

For trading convenience, ETRADE provides two primary platforms – Power ETRADE and the Power E*TRADE app. These platforms offer user-friendly interfaces, catering to both desktop and mobile users, enabling traders to engage in futures trading with ease.

E*TRADE enhances the professional aspect of futures trading through its Futures Research Center, offering daily insights from experienced professionals. The platform also includes a heatmap with real-time quotes, allowing traders to monitor price movements effectively. Additionally, an automated technical pattern recognition tool is available to help identify developing price swings by populating charts with relevant technical patterns.

Beyond trading tools, traders can access guidance on trading futures in brokerage accounts or Individual Retirement Accounts (IRAs), ensuring they have the necessary knowledge to make informed and strategic trading decisions.

④Charles Schwab

Charles Schwab
Price	$2.25 per contract
Products	60+ diverse futures contracts covering indices, currencies, bonds, energy, metals, and agricultural commodities.
Platform	thinkorswim
Professionalism	Integration of thinkorswim's paperMoney feature for practicing and refining strategies in a simulated live market.

Charles Schwab offers a diverse range of over 60 futures contracts covering various financial and commodity categories. Their product lineup spans indices, currencies, bonds, energy, metals, and agricultural commodities.

Trading futures with Charles Schwab comes at a competitive cost of $2.25 per contract. This pricing positions Schwab favorably in the futures market, offering traders a cost-effective option compared to other brokers.

Futures trading on the thinkorswim platform is set to launch soon at Schwab. The thinkorswim platforms are already available, and futures trading capabilities are anticipated to be introduced in 2024. Until then, clients with futures approval can continue using the existing futures trading platforms.

Frequently Asked Questions (FAQs)

What is Futures Trading？

Futures trading involves buying and selling of futures contracts. A futures contract is a legal agreement to buy or sell something at a predetermined price at a specified time in the future. The “something” can be a commodity like gold, oil or wheat, or a financial instrument like a currency or an index from the stock market.

Traders use futures contracts to speculate on the future price of an asset. If they predict the price will go up, they buy a contract (go long), and if they predict the price will go down, they sell a contract (go short). Futures trading is generally a skilled form of investing and is often used for hedging risk, as well as making profit.

Futures & Options

Futures and options are both types of derivatives that can be used to make profits or to hedge against losses. However, they have some key similarities and differences:

Similarities:

1. Derivative Instruments: Both futures and options are derivative instruments, meaning their value is derived from an underlying asset such as a stock, commodity, or index.

2. Marketplaces: They are both traded in exchanges and hence are standardized contracts with clear specifications.

3. Risk Management: Both can be used as hedging tools to manage price risks in turbulent markets.

4. Leverage: Both futures and options provide leverage, meaning a small amount of capital can control a large asset.

Differences:

1. Obligation vs. Right: A futures contract is an obligation to buy or sell the asset at a predetermined price and time in the future. An options contract, on the other hand, gives the holder the right, but not the obligation, to buy (call) or sell (put) the underlying asset at a predetermined price before or on a specified date.

2. Risk Exposure: The risk in a futures contract is unlimited. If the market moves against the position, the losses could be substantial. In an options contract, the maximum risk for the buyer is the premium paid to enter the contract while the potential gain is unlimited. For the options seller, the maximum gain is the premium received, and losses could be substantial.

3. Cost: Buying an options contract requires the payment of a premium, representing the cost of the option. In contrast, futures contracts do not require an upfront premium but do require a margin deposit.

4. Execution: Futures contracts are often executed, meaning the physical commodity or cash equivalent is delivered at expiration. Options, however, are often not executed, particularly if they are out of the money by their expiration date.

Uses for Futures（Hedgers and Speculators）

Futures are primarily utilized for hedging risk in volatile markets and for speculation. The two main players in any futures market are the hedgers who seek to reduce potential price risk, and the speculators who assume this risk in anticipation of making gains.

1. Hedging: Hedging involves taking a position in the futures market that is opposite to a position held in the physical market. It mitigates against potential risks associated with unfavourable price movements.

For instance, a farmer fearing that the price of his produce may fall before the harvest can sell futures contracts commensurate with his expected production to lock in a certain price level.

Equally, an airliner fearing that the price of fuel might rise can buy futures contracts to hedge against the potential cost increase.

1. Speculation: Speculators are market participants who try to profit from interim fluctuations in the futures contract price, even if they may not have any intention to make or take compulsory delivery of the underlying asset. Speculators often follow trading strategies based on trends and commodity-specific news. They take on risk to profit from expected price movements.

How Much Does It Cost to Trade Futures？

Plunge into the world of futures trading—a realm marked by diversity, liquidity, and potential for significant returns. As intriguing as they are, understanding the dynamics of futures trading costs is crucial to a trader's success. Various factors contribute to these costs, which range from commissions to regulatory fees. Let's take an in-depth look at these elements:

1. Commissions: This is generally the primary expense of trading futures. Commissions are fees charged by brokers on each trade execution, which can vary widely depending on the broker and the specific futures contract being traded.

2. Bid-Ask Spread: This is the difference between the price buyers are willing to pay and the price sellers are willing to accept. A larger spread represents a higher transaction cost.

3. Regulatory Fees: These fees are levied by regulatory agencies such as the Commodity Futures Trading Commission in the US.

4. Data and Platform Fees: Some brokers charge for access to market data or for using their trading platforms.

5. Margin Requirements: While not a direct trading cost, futures trading requires a margin deposit, which is a small percentage of the total contract value.

   What Is the Best Way to Trade Futures？

Whether to focus on short-term or long-term trading futures largely depends on your trading strategy, risk tolerance, and market understanding.

Short-term trading or day trading involves entering and exiting positions within a single trading day. It requires the ability to act quickly on market fluctuations and usually demands more focus and time. Day traders try to make profits from small price changes in highly liquid futures contracts. Strategies for day trading include scalping, swinging, and high-frequency trading.

Long-term trading, on the other hand, involves holding positions for weeks, months, or even years. Longer-term traders typically rely more on fundamental analysis, studying things like economic data, earnings reports, and market trends. They usually have larger capital reserves and are more tolerant of temporary market fluctuations.

Both short-term and long-term trading have their own risks and rewards and require different skill sets and strategies. Day trading can result in quick losses if not managed properly, while long-term trading exposes you to overnight and weekend market risk.

How Is Margin Calculated for Futures Trading？

Margin in futures trading refers to the amount of money that you must deposit with your broker as collateral to open a position in the futures market. This is not a down payment, but more of a security deposit to protect against potential losses.

The margin is calculated based on risk. It is usually a fraction of the total value of the contract and varies with the market's perception of the future volatility of the underlying asset. There are two types of margins, initial and maintenance margin.

1. Initial Margin: This is the equity required to initiate a futures position. This is a type of performance bond or good faith deposit (typically 5% - 15% of the contract value) to ensure against a loss on the position.

2. Maintenance Margin: This is the minimum amount that must be maintained on deposit at all times. If the equity in the margin account falls below this level due to price moves against the position, a margin call would be issued to the account holder.

Initial Margin Calculation Formula:

Initial Margin=Contract Size×Contract Price×Margin Percentage

For example, if you want to buy a gold futures contract at 1,500 per ounce and one contract is for 100 ounces, the total cost of the contract would be 150,000($1,500 X 100 ounces).

Now, if the initial margin requirement is 5%, you need a margin deposit of 7,500(150,000 X 5%).

This margin calculation can vary hugely with the commodity being traded and the market conditions.