Futures Trading

Simpli ed:
A New
Trader's
Guide to
Winning

Sean
Kozak
 Futures Trading Simpli ed: A New Trader's Guide to Winning

Table Of Contents

Chapter 1: Intro to Trading (Trading Vs Investing) 3

What is Trading? 3

Trading: The Pros and Cons 4

Investing: Balancing the Scales 5

Chapter 2: Foundations to Futures 6

Exchanges and Players in the Futures Market 7

Key Exchanges for Futures Trading: 7

Market Participants: 7

Popular Futures Sectors 8

Trading Hours and Sessions 8

Chapter 3: Futures Contracts 9

Understanding Futures Contracts 9

Key Terms in Futures Trading 9

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Chapter 4: Watchlists and Symbols 10

Futures Contract Symbols 10

Chapter 5: Trade Basics & Order Types 12

Trade Contracts Explained 12

Understanding Min Tick and Tick Value 12

Mastering Order Types 13

The Essentials of Trade Execution 13

Expiration and Rollover 13

Margins in Trading 14

Settlement 14

Trading Fees 14

Conclusion: Navigating the Future with Wisdom 15

Risks, Rewards, and Personal Strategy 15

Ready to transform your trading journey from

uncertainty to unparalleled success? 16

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Chapter 1: Intro to Trading (Trading Vs Investing)

What is Trading?
In the dynamic world of nancial markets, trading is the art and science of buying and selling
securities, leveraging cutting-edge strategies for optimal gain. It's not just about day trading;
trading spans a range of activities including short-term intra-swing trading and long-term position
trading. Here's what makes trading a unique endeavor:

Trading harnesses technical analysis to pinpoint high-probability, low-risk trade setups.

Advanced software and indicators are the trader's best allies in analyzing and managing
trades.
Trading is an active business, it’s about income extraction, not just percentage growth in
capital.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Trading: The Pros and Cons

Pros:

Versatility in market conditions: Pro t in both bullish and bearish markets.

Control over risks: Actively qualify and quantify risks.

High liquidity: Keep your assets uid.

Diverse strategies: Employ multiple methods for various market opportunities.

Independence: Make your own nancial choices.

Income-focused: Prioritize extracting income over mere percentage returns.

Cons:

Tax implications: Ensure proper corporate structure to mitigate tax liabilities.

Intensive decision-making: Requires active market involvement.

Mental agility: Quick decision-making is crucial for success.

Learning Curve: requires a signi cant time investment to understand markets and strategies.

Emotional Stress: Can lead to emotional decision-making, potentially undermining strategy.

Capital Risk: High probability of losing part or all of the initial investment due to market
volatility.

Overtrading: The temptation to make frequent trades can lead to higher transaction costs and
lower overall pro tability.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Investing: Balancing the Scales

Investing is a longer-term game, with its own set of advantages and challenges. It typically
involves holding positions over an extended period, seeking growth or income through capital
appreciation or dividends.

Pros:

Favorable taxation: Capital gains are often taxed advantageously.

Simpli ed decisions: Less frequent trading reduces decision-making pressure.

Cons:

Market dependency: Generally bene cial in bull markets but risky during downturns.
Limited exibility: Fewer strategies and setups compared to trading.
Long-term commitment: Assets are often tied up for extended periods.

In summary, trading and

investing are two sides of
the nancial world, each
with distinct strategies, risks,
and rewards. Understanding
both can empower you to
make informed decisions
that align with your nancial
goals and risk tolerance.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Chapter 2: Foundations to Futures

The futures market opens the door to a world of essential and highly sought-after commodities.
Here, traders can engage with a wide range of assets including precious metals like gold, energy
commodities such as oil, agricultural products like wheat and orange juice, alongside major
currencies and key nancial indices including the US Dollar, British Pound, Japanese Yen, Dow Jones,
Nasdaq, and the S&P 500. These assets are perpetually in demand, offering a dynamic trading
landscape.

Whether you're transitioning from stocks, options, or forex trading,

or you're stepping into the trading arena for the first time,
the futures market serves as an excellent primer
on the fundamentals of market trading.

Trading in the futures market shifts the focus from the intricacies of individual companies to the
broader market of fundamental commodities and nancial instruments. Instead of analyzing a
corporation's management or market longevity, traders in the futures can directly engage with
commodities like crude oil, appreciating its perpetual demand and market presence.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

The Landscape of Futures Exchanges

Think of futures exchanges like big online marketplaces, but instead of buying and selling things
like phones or shoes, traders buy and sell contracts for stuff like gold, oil, or even nancial
instruments in the future. Some of the most famous "shops" in this market are the CME (Chicago
Mercantile Exchange), ICE (Intercontinental Exchange), and Eurex. Each one is a bit different - they
open and close at different times and sell different types of contracts. It's like shopping at different
stores that specialize in various goods and have their own hours.

Exchanges and Players in the Futures Market

Key Exchanges for Futures Trading:
Chicago Futures Exchange (CFE/CBOE) & Chicago Board of Trade (CBOT): Historic centers for
commodities trading.
Chicago Mercantile Exchange (CME): The largest futures exchange, offering a wide range of
commodities.
Intercontinental Exchange (ICE) & New York Mercantile Exchange (NYMEX/COMEX): Key
platforms for energy and metals.
Minneapolis Grain Exchange (MGEX) & Kansas City Board of Trade (KCBT): Specialized in
agricultural commodities.
OneChicago (ONEX) & NYSE Liffe US: Innovative markets for nancial futures.

Market Participants:

Exchanges & Brokers: The platforms and intermediaries facilitating trading.

Regulators & Educators: Ensuring market integrity and trader education.
Producers & Consumers: Direct stakeholders in commodity markets.
Speculators: From individual traders to hedge funds, driving market liquidity.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Popular Futures Sectors

Agriculture Corn, wheat, soybeans, and more.
Energy Crude oil, natural gas, and gasoline.
Metals Gold, silver, copper and platinum group metals.
Livestock Cattle, hogs, etc.
Soft Commodities Sugar, coffee, cotton, and orange juice.
Financials Stock indices, interest rates, and currencies.

Trading Hours and Sessions

Futures trading spans almost 24/7, offering exibility across global market sessions—allowing
traders to engage in fast-paced markets like the US and Europe or the more gradual pace of the
Aussie and Asian markets.

U.S. Market Session The primary trading hours for a wide range of commodities and
nancial futures.
Aussie & Asian Session A quieter trading window, ideal for those looking to engage with
markets outside of U.S. hours.
European Session A bridge between Asian and US markets, offering early trading
opportunities in various commodities and nancial futures.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Chapter 3: Futures Contracts

Understanding Futures Contracts
Buying a futures contract means you're agreeing to purchase an item at a future date, for a set
price, based on an asset's expected value. Conversely, selling a futures contract implies you're
committing to sell an item at a future date, for a predetermined price, rooted in the asset's
anticipated value.

Essentially, futures contracts are agreements between buyers and

sellers to trade an asset at a future date, with the terms of this
exchange speci ed upfront.

When a futures contract reaches its conclusion, one party ful lls the contract by either buying or
selling the agreed-upon asset, while the other ensures its delivery, in line with the contract's terms.

Key Terms in Futures Trading

First Notice Day (FND): This is a crucial date in a futures contract indicating when the buyer might
start taking physical delivery of the asset. The speci cs of FND are outlined within the contract's
details.

Physical Delivery: In certain futures contracts, the actual asset is delivered on the speci ed delivery
date, rather than settling the contract with offsetting trades.

E-Minis: These are smaller-sized futures contracts traded electronically. "E" stands for electronic
trading, and "Mini" signi es that these contracts are a fraction (typically 1/5) of a standard
contract's size. E-minis offer quicker transactions and potentially better pricing than their full-sized
counterparts.

Full-Size Contracts: These larger contracts cater to signi cant traders and institutions, often traded
in traditional open pits and offering greater leverage. They're primarily utilized for substantial
trades due to their liquidity requirements.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Chapter 4: Watchlists and Symbols

Building Your Watchlist

Creating a watchlist is like making a shopping list before you hit the market. It helps you keep
track of what you're interested in buying or selling in the futures market. Your list might include a
variety of items - commodities like wheat and copper, stock indices, or nancial futures. By keeping
an eye on economic news and market updates, you can adjust your list based on what's happening
in the world, just like you might swap out items on your grocery list if you nd a recipe you want
to try.

Futures Contract Symbols

Futures contracts, similar to stocks, have unique identi ers or tickers. Unlike stock tickers, which
are usually four letters, futures symbols can include a combination of letters and numbers. These
symbols vary by exchange and trading platform, even for similar contracts.

Stock Market Indexes

ES S&P 500
NQ Nasdaq 100
RTY Russell 2000
YM Dow Jones
FDAX DAX Index

Currency Futures
6A Australian Dollar
6B British Pound
6C Canadian Dollar
6E Euro
6J Japanese Yen
6M Mexican Peso
6N New Zealand Dollar

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Energy Futures
CL Crude Oil
HO NY Harbor ULSD/Heating oil
HU Unleaded Gas
NG Natural Gas
RB RBOB Gasoline
ITCO/BRN Brent Crude

Treasury/Debt
ZT 2-Year T-Note
Z3N 3-Year T-Note
ZF 5-Year T-Note
ZN 10-Year T-Note
TN Ultra 10-Year T-Note
ZB T-Bond
TWE 20-Year T-Bond
UB Ultra T-Bond

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Chapter 5: Trade Basics & Order Types

Trade Contracts Explained
Futures contracts are agreements to buy or sell a particular asset at a predetermined price at a
speci c time in the future. These contracts are characterized by several key elements:

Contract Size/Value: This refers to the amount of the asset covered by the contract.
Tick Increments: The smallest movement in price that a futures contract can make.
Dollar Value Per Tick: How much each tick movement represents in dollars.
Dollar Value Per Point: Dollar amount associated with one-point move in the futures
contract.

Understanding Min Tick and Tick Value

Min Tick: The smallest price movement recorded for a trading instrument.

For example, if the Min Tick is 0.01, it means the smallest price change noted will be in increments
of 0.01. For instance, if an oil futures contract (denoted as CL) is priced at 67.01 today, the price can
either increase to 67.02 or decrease to 67.00, showcasing a Min Tick of 0.01.

Tick Value: It indicates the monetary value of each tick movement.

For the oil futures contract (CL) with a contract size of 1000 barrels, a tick value of 0.01 results in a
tick value of $10, calculated as 0.01 (tick size) * 1000 (contract size).

This information is vital for choosing the right contracts to trade based
on one's risk tolerance and account size. For smaller accounts, contracts
like NQ or YM might be suitable due to their lower per point/tick dollar
value. Larger accounts might opt for contracts like CL or ES, which have
higher dollar values per point/tick.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Mastering Order Types

When venturing into the world of trading, understanding the basics is crucial for beginners. Let's
simplify some key terms and concepts that are fundamental in the trading market.

Understanding order types is crucial for effective trading. Let’s demystify the most common ones:

Market Orders: Immediate execution at the current market price. Ideal for fast-
moving markets when quick entry or exit is key.
Limit Orders: Set your price, and the order executes only when the market hits that
price. Perfect for precision entries and exits.
Stop Orders: A trigger for action. Convert to market orders when a speci c price is
hit. Useful for managing risk and protecting pro ts.

The Essentials of Trade Execution

Trade execution goes beyond just clicking a button. It's about timing, strategy, and understanding
market dynamics. Here’s what you need to know:

Slippage Price changes between order placement and execution. Minimize it

with careful timing.
Liquidity: Crucial for smooth entry and exit. High liquidity means tighter
spreads and less slippage.
Execution Speed: In fast markets, milliseconds matter. High-speed execution can make
the difference between pro t and loss.

Expiration and Rollover

Each futures contract has an expiration date, usually falling on the third Friday of the contract's
expiration month, marking the end of trading for that contract. The rollover period, occurring in
the week leading to this Friday, is when traders move their positions to the next active contract to
avoid the delivery process. It's advisable to shift to the next active contract a couple of days before
the current one expires. Many trading platforms facilitate this transition smoothly, and rollover
schedules can typically be found on your broker's website.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Margins in Trading
Margin in trading is akin to a security deposit required to open and maintain positions in futures
contracts. It's crucial to understand the different types of margins:

Initial Margin: The minimum amount needed to open a trade.

Maintenance Margin: Minimum amount needed to keep a trade open. Falling below the
amount can lead a broker to liquidate the position without notice.
Day Trading Margins: Set by brokers for entering trades during market hours, which revert
to initial margin requirements after the market closes.

A Margin Call occurs when an account's value falls below the maintenance margin, potentially
leading to the liquidation of positions to cover the shortfall.

Settlement
The settlement process completes a futures contract. While some contracts settle in cash using an
external reference point, others require physical delivery of the asset. Equity indexes, for instance,
settle in cash based on the index's closing price on the settlement date. Conversely, commodities
like corn, oil, and gold may require physical delivery upon settlement.

Trading Fees
Trading involves various fees, including:Here’s what you need to know:

Commissions: Paid to brokers for executing trades.

Exchange/Clearing Fees: Paid to the exchanges hosting the nancial products.
NFA Fee: For regulatory compliance, paid to the National Futures Association.
Transaction Fees: Additional charges by some rms on top of commissions.
Maintenance Fee: For account inactivity, potentially waived with minimum trading.
Data Fee: For accessing real-time market data.
Wiring/Transfer Fee: Associated with moving funds to and from trading accounts.

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

Conclusion: Navigating the Future with Wisdom

Risks, Rewards, and Personal Strategy
The world of trading futures is a landscape lled with both vast opportunities and notable risks.
Understanding the foundations of futures trading, the dynamics of futures exchanges, and the
mechanics of trading hours, futures contracts, key terms, and order types equips you with the tools
necessary to embark on this venture. However, knowledge alone does not guarantee success; it's
the application of this knowledge with wisdom and caution that de nes your trading journey.

This world offers signi cant pro t potential, but it's not without its risks. Leverage, while powerful,
can swing both ways, magnifying gains and losses alike. Your journey into futures trading should
begin with a clear understanding of these risks and a realistic assessment of your risk tolerance.

Every trader's situation is unique, and there's no universal strategy that ts all. Recognizing this is
the rst step toward developing a trading plan tailored to your personal goals and limits. Keep in
mind, success in trading isn't just about the strategies you employ; it's also about how well you
know yourself and the market. Continuous learning and adaptability are key. Set realistic goals,
manage your emotions, and always have a well-thought-out plan.

In conclusion, approach futures trading with both enthusiasm and caution. Educate yourself, plan
carefully, and trade wisely. This balance will help you navigate the complexities of the market and
increase your chances of success. Remember, it's not about avoiding risk, but understanding and
managing it to your advantage.

Here's to a successful trading journey ahead.

Sean Kozak
NeuroStreet CEO & Managing Partner

Futures Trading Simpli ed: A New Trader's Guide to Winning

 Futures Trading Simpli ed: A New Trader's Guide to Winning

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from uncertainty to unparalleled
success?
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expertise, guiding you through the maze of nancial markets with ease
and con dence. Whether you're venturing into stocks, options, futures,
forex, or crypto, our beginner-friendly programs are designed to make
you pro cient without the complexity.

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Futures Trading Simpli ed: A New Trader's Guide to Winning