Index Futures Trading Tips

Think index futures trading may be a good strategy for you to pad your investment account? Then check out below for some index futures trading tips. And to learn more about the benefits and risks of this investing strategy.

This site focuses on information for those who are relatively new to investing. So, if you’re looking for super complex, pro-level tips on trading index futures, the below isn’t for you. But, if you’re just starting out, we have some easy-to-follow, and very important tips.

Know What You’re Doing

Before you even think about trading index futures, you need to know what you’re doing. You should know what and index is, how futures trading works, etc.

If you don’t, just stick to plain old “normal” investing and come back to futures down the line when you have some more investing experience.

When you’re first starting out with futures trading, do a lot of research before you get started. And, before you put any money on the line, consider doing some “paper” trading. That’s where you make pretend trades and see how they work out for you.

Once you’re comfortable to put real money on the line, only use money you can afford to lose.

With that all said, let’s look at a tip for a basic, simple strategy to get you started with index futures trading.

Trading Strategy for Index Futures

This strategy involves the E-Mini S&P, which is a small futures contract for 50 shares of the S&P 500. When the market is in a downturn, you buy a long-term futures index contract at the current market price. Then, assuming the market comes up out of the downturn, you can sell your futures contract at a nice profit.

Easy, straightforward, simple. That’s the way to start out if you’re going to get into futures trading.

What Are Index Futures?

Futures contracts have been around for a long time. But mainly for commodities such as wheat, oil, etc. With index futures, they are related to the price of a market index, such as the S&P 500.

With a futures contract you agree to buy a certain number of shares of the index, at a set price, at a certain date in the future.

If the index price goes above the price set in your futures contract, then you can sell your contract for a nice profit. If it goes below, you’ll have a loss that you’re obligated to cover.

So basically you’re betting on the change in price of the market index. And that brings a lot of risk, especially as you get into some of the more complex day trading strategies.