A futures contract is an agreement to buy or sell a particular security or commodity at a future date. Futures markets were originally established to help farmers and other commodity producers hedge (offset or reduce) risk in the future. This is where the “futures” in futures markets comes from.
For our 2021 Review, we tested 11 different online brokers, five of which offer futures trading. To find the best futures trading platform, we compared pricing (e.g., contract charges and margin rates) and the platforms themselves, including trading tools, research, usability, and available order types.
Best Brokers for Futures Trading 2021
Here are the five best futures trading platforms for 2021.
- Interactive Brokers - Best pricing for professionals
- TD Ameritrade - Best desktop futures trading platform
- TradeStation - Great platforms and low commissions
- E*TRADE - Best web-based futures trading platform
- Charles Schwab - Balanced offering
Best pricing for professionals[promotion_interactivebrokers]
As our top pick for professionals in 2021, the Interactive Brokers Trader Workstation (TWS) platform offers a slew of trading tools and every order type under the sun (68 in total). Popular among the institutional community, including hedge funds, Interactive Brokers isn't beginner-friendly but does offer the lowest margin rates in the industry. Just beware, Interactive Brokers requires a $110,000 minimum deposit for margin accounts. Read full review
Best desktop futures trading platform[promotion_tdameritrade]
TD Ameritrade thinkorswim is our No. 1 desktop trading platform for 2021 and is home to an impressive array of trading tools. Highlights for futures trading include paper trading with virtual (fake) money, price alerts, plotting economic (FRED) data, charting social sentiment, candlestick pattern recognition, real-time scanning, and ladder trading, among many others. Read full review
Great platforms and low commissions[promotion_tradestation]
As a trading technology leader, TradeStation shines, supporting traders through its web-based trading platform as well as its desktop platform, which we rated No. 1 for Platform Technology. Both are excellent. Trading tools aside, TradeStation offers two pricing plans for futures trading, providing traders flexibility based on trade frequency and platform access. Read full review
Best web-based futures trading platform[promotion_etrade]
Built as a web-based platform, Power E*TRADE innovates and delivers speed, ease of use, and the tools needed for futures traders to succeed. Once again, in our 2021 Review, Power E*TRADE won our award, Best Web-Based Platform. While TD Ameritrade offers better education for futures trading, Power E*TRADE is an easier platform for beginners to learn. Read full review
Alongside the Charles Schwab website, Schwab offers customers access to two trading platforms: StreetSmart Edge (desktop-based; active traders) and StreetSmart Central (web-based; futures trading). While each trading platform has its highlights and lowlights, all in all, Schwab will satisfy most futures traders. Read full review
Best Futures Trading Platforms Comparison
|Desktop Platform (Windows)||Yes||Yes||Yes||No||Yes|
|Desktop Platform (Mac)||Yes||Yes||No||No||Yes|
|Watch Lists - Total Fields||494||514||335||95||130|
|Stock Trade Fee (per trade)||$0.00||$0.00||$0.00||$0.00||$0.00|
|ETF Trade Fee||$0.00||$0.00||$0.00||$0.00||$0.00|
|Mutual Fund Trade Fee||$14.95||$49.99||$14.95||$19.99||$49.95|
|Options Base Fee||$0.00||$0.00||$0.00||$0.00||$0.00|
|Options Per Contract Fee||$0.65||$0.65||$0.50||$0.65||$0.65|
|Futures (per contract)||$0.85||$2.25||$1.50||$1.50||$1.50|
|Broker Assisted Trades Fee||$30.00||$44.99||$50.00||$25.00||$25.00|
What is futures trading?
Wikipedia defines a futures contract as "a standardized forward contract, a legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other."
For an oversimplified example, farmer Bob operates a dairy farm. His dairy cows eat a mixture of corn and hay. Farmer Bob makes his own hay, but he buys the corn. When corn prices are low, Bob makes more money because it costs him less money to feed his cows, which produce the milk that he sells. Contrarily, when corn prices are high, Bob’s profit margins on the milk he sells shrinks. By using futures contracts, Bob can lock in the price of corn before the season starts to offset (hedge) the risk of a difficult growing season causing corn prices to spike.
Farmers aside, investors trade futures contracts as a way to speculate on the future price of a security or commodity. As one can imagine, futures are traded mostly by institutional investors, but retail investors can also speculate by using a futures trading platform.
With futures trading, investors can trade everything from market indices (e.g., S&P 500 futures) to commodities (crude oil, natural gas, corn, and wheat), metals (e.g., gold and silver), currencies (including bitcoin), treasuries, and more. The regulatory body in the US that oversees futures trading is the National Futures Association (NFA).
How much does it cost to trade futures?
Futures trading commissions can range from less than one dollar for most commodity futures to as high as $10 per contract when trading bitcoin futures. Commission aside, some brokers also charge monthly platform fees and market data fees, so it is important to consider all costs before selecting a futures trading platform.
Each online broker requires a different minimum deposit to trade futures contracts. For most online brokerages, the minimum deposit is less than $1,000. Before you can trade futures, you must apply for margin trading and futures trading approval.
Which futures trading platform is best?
To find the best futures broker, we compared each platform’s trading tools and pricing. Interactive Brokers offers the lowest pricing, but its platform is built for professionals and not easy to learn. On the other hand, TD Ameritrade provides an excellent downloadable trading platform; however, its pricing is more expensive. For perhaps the best balance of both pricing and tools, TradeStation is a winner.
How can I trade futures?
Trading futures requires a funded online broker account with margin and futures trading approval. Once set up, research and determine which contract you want to trade, fill out the order ticket, then place your trade.
More details: Remember, each futures contract has different margin requirements. Also, be sure to know whether the contract is cash-settled or physically delivered upon expiration. For contracts with delivery upon expiration, if you hold your position until its contract expiration date, you can become liable for payment of the entire trade value (plus delivery costs).
Do I need a margin account to trade futures?
Yes, a margin account is required to trade futures with an online broker. The margin requirements will vary depending on the instrument being traded. For example, the S&P 500 e-minis are the most popular futures contracts traded (alongside the most liquid) in the United States, so margin requirements are lower, on average.
How is margin calculated for futures trading?
First, you must ensure you have enough capital available to meet any margin requirements (i.e., initial and maintenance margin) before your position is open. The margin requirement is typically a percentage of the value of the underlying asset that each contract controls.
Example: If you wanted to speculate on a price increase of the March 2021 Wheat contract (Globex ticker code: ZWH1), you would create a buy-to-open order to go long one Chicago SRW Wheat Futures contract. Checking the contract specification shows that one contract controls 5,000 bushels of wheat (136 metric tons), which cost $6.53 per bushel as of January 6th, 2021.
The underlying 5,000 bushels multiplied by the price per bushel ($6.53) equals $32,650 for the total trade value. 5% of the trade value or $1,650 is the margin requirement needed to open this position. A sell-to-close order allows you to exit your existing long position.
More details: If the price of wheat changes drastically, there can be variation margin, where you must post additional collateral or else risk having your trade closed early. Overall, trading as a speculator is different than trading as a hedger or producer of the commodity, as hedgers remove risk by transferring it to you as a speculator.
Is futures trading risky?
Yes, futures trading is risky and not suitable for everyone. Not only does it involve the use of leverage (margin) and potentially volatile assets, there is also the possibility to incur an obligation to make or accept delivery of the underlying asset and be responsible for settling the total trade value.
As long as you close your position before expiration, you avoid the need to physically deliver or cash settle the trade value.
What brokers allow futures trading?
While there are over 334 brokers regulated with the CFTC, the vast majority are not set up for retail investors. For our 2021 Review, we found five futures brokers that support everyday investors: Interactive Brokers, TD Ameritrade, TradeStation, E*TRADE, and Charles Schwab.
Can you trade futures with Fidelity?
Fidelity does not currently offer futures trading. Investments provided by Fidelity include stocks, fractional shares, OTC stocks, options, mutual funds, and bonds. Futures, forex, and crypto trading are not available.
To recap, here are the best online brokers for futures trading.
Explore our other online trading guides:
- Best Online Brokers
- Best Online Brokers for Beginners
- Best Brokers for Day Trading
- Best Brokers for Penny Stocks
- Compare Online Brokers
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