How to Place a Futures Trade

Placing a futures trade may seem daunting at first, but it becomes straightforward once you understand the steps. This guide will walk you through selecting a futures contract, choosing to go long or short, using order types like market and limit orders, and managing the trade from entry to exit. We’ll also touch on why contract specifications (tick size, margin, expiration) matter and share practical tips on timing and risk management. By the end, you’ll have a clear roadmap for placing your first futures trade, all in a platform-neutral way suited to NovaBloom’s range of futures (stock indices, crypto futures, and commodities like gold or oil).

Step 1. Selecting a Futures Contract

The first step is choosing which futures contract to trade. Futures are available on many markets – stock indices (e.g S&P 500), commodities (oil, gold), cryptocurrencies (Bitcoin), and many more. Pick a market you understand and that aligns with NovaBloom’s offerings.

Check the contract’s specifications before trading. Each futures contract has specific parameters, including the underlying asset, contract size, tick size, tick value, margin requirements, and expiration date. These details are important because they tell you how the contract trades and what you need to prepare for:

• Tick Size and Value: The tick size is the minimum price movement of the contract, and the tick value is how much one tick is worth in dollars. For instance, an E-mini S&P 500 future moves in 0.25-point ticks worth $12.50 each. So there are 4 ticks per point, making this contract worth $50 per point. Knowing this helps you gauge profit or loss per any price move. If you’re not familiar with a contract’s tick size and value, you risk trading a position that’s too large or too small for your comfort, and it becomes hard to measure your P/L properly.
• Margin Requirement: Unlike stocks, you don’t pay the full value of a futures contract up front. Instead, you post an initial margin – a fraction of the contract’s value – as a good-faith deposit. This margin is typically much smaller than the contract’s notional value, which means futures are leveraged instruments whereby small capital controls a large asset. Be sure you have enough funds for the initial margin and know the maintenance margin (the minimum equity to keep the position open).
• Contract Expiration: All futures have an expiration date (for example, a March 2026 contract expires in March 2026). This is when the contract must be settled – either by cash or physical delivery of the underlying. As a new trader, you’ll typically close or roll over your position before expiry to avoid dealing with settlement. Still, note the expiry date upfront so you’re not caught by surprise. You can always close a futures trade before it expires – you don’t have to hold until expiration day.
• Liquidity and Volatility: Especially for beginners, it’s wise to choose contracts that are liquid (high trading volume) and not overly volatile. Major index futures (like the S&P 500 E-mini or its Micro version) and well-known commodities tend to have deep liquidity. Some markets are more volatile than others – e.g. a tech stock index future might swing more each day than gold. Make sure the market’s typical volatility suits your risk tolerance. 
• Practical tip: If you’re unsure where to start, many beginners focus on one of the popular futures like the E-mini S&P 500 or Micro E-mini S&P (which is one-tenth the size). These contracts are widely traded, making it easier to enter and exit positions. Always read the contract specs (often provided by the exchange or broker) for details like tick size, trading hours, and margin requirements – this information is publicly available on exchange websites or trading platforms.

Step 2. Choosing to go Long or Short (Buy or Sell)

Next, decide your trade direction – are you going long or short? In futures trading, going long means you buy a contract now because you expect the price to rise, while going short means you sell a contract now because you expect the price to fall. One major appeal of futures is that going short is as straightforward as going long; there’s no special requirement to short – you simply place a sell order to open a short position, and you can profit if the market drops.

• Long Position (Buy): If your analysis (fundamental or technical) suggests the asset’s price will increase, you would typically enter a long position by buying futures. For example, if you believe the oil price will go up, you’d buy an oil futures contract. Profits accrue if the price rises after you buy (you can later sell at a higher price), but if the price falls, a long position will incur losses.
• Short Position (Sell): If you think the price will decrease, you would typically take a short position by selling a futures contract now (even if you don’t “own” it – in futures, selling to open is normal). For instance, expecting a stock index to drop, you could sell an index futures contract; later, you’d buy it back at a lower price to close the trade and realize a profit. If the price rises instead of falls, your short position loses money. Shorting futures is easy – a sell order can open a new short or close an existing long, so beginners can take advantage of downtrends as readily as uptrends.

Remember, because futures are leveraged, a wrong guess can cost you quickly with magnified losses that can exceed your initial investment. Always trade with a risk management plan (more on that shortly) so that if the market moves against your position, you know how you’ll limit the damage.

Step 3. Using Order Types: Market vs Limit (and Stop Orders)

Once you know what you want to trade and in which direction, you need to choose how to enter the market – that’s where order types come in. The two primary order types are market orders and limit orders, and there’s also the stop order, which is essential for managing risk or for certain entry strategies. Here’s a quick rundown:

• Market Order: This order tells the broker/exchange to execute your buy or sell immediately at the best available price. It’s the fastest way to enter or exit a futures position A buy market order will fill at the current best ask (offer) price, and a sell market order will fill at the current best bid price. Use a market order when you want to ensure you get into (or out of) a position instantly. The trade-off is you accept whatever the prevailing price is, which can involve slippage if the market moves or if the bid-ask spread is wide. For example, if the S&P 500 futures are quoted 4500.00 bid / 4500.25 ask, a buy market order would likely fill around 4500.25 at that moment. Pros: Speed and certainty of execution. Cons: Price is not guaranteed – you might get filled a few ticks higher or lower than you anticipated in a fast market.
• Limit Order: A limit order lets you specify a price at which you’re willing to buy or sell, and it will only execute at that price or better. In other words, a limit order is conditional – it sits in the market’s order book and will fill only when the market price reaches your limit price (or goes beyond it in your favor). You would use a buy limit order to buy below the current market price (you set the highest price you’re willing to pay), or a sell limit order to sell above the current market price (the lowest price you’re willing to accept). For instance, if gold futures are trading at \$2000, you might place a buy limit at \$1995 – if the price dips to \$1995 or lower, then your order executes (buying at your target price or better). Limit orders are great for entering on pullbacks or at specific target levels, and for taking profits at a set price. Pros: You control the price – you won’t get a worse price than your limit. Cons: No guarantee of being filled – if the market never reaches your limit price, your order remains unfilled (you could miss the trade if price runs away).
• Stop Order (Stop Market Order): A stop order becomes a market order once a certain stop price is hit. Stops are commonly used as stop-loss orders to exit a position if the market moves against you beyond a certain point, but they can also be used to enter positions on breakouts. For example, if you are long a futures contract at 1500, you might set a sell stop at 1480 – if price drops to 1480, your stop order triggers and sells at the next available price, closing your position to cap the loss. Conversely, if you wanted to enter on a market breakout, you could place a buy stop above the current price, which triggers a market buy if that higher price level is reached. A stop order, once triggered, will execute at the market price (whatever that may be). Important: A stop does not guarantee the exact stop price if the move is sharp (there could be slippage), but it does ensure the order will get filled and get you out (or in). Use stop market orders rather than stop-limit for protective stops, because a stop-limit might not fill if the price gaps through your level.

For beginners, understanding these order types is crucial. A market order gets you in or out now, a limit order lets you name your price (useful for patience and discipline), and a stop order is your safety net to prevent runaway losses or to automate entries/exits at predefined levels.

Using Stop-Loss Orders: Always consider placing a stop-loss order once you enter a trade (or have an exit plan in mind). Futures can move quickly, and having a stop in place means you’ve predefined the worst-case loss you’re willing to take. Many experienced traders highly recommend using stops and limit orders to manage risk on every trade. A stop-loss will automatically close your position if the price moves to a less favorable level than your entry (beyond your pain threshold), while a limit (take-profit) order can automatically close your trade at a profit target. For example, if you bought a crude oil future at $75.00, you might place a stop at $73.00 (to risk no more than $2 per barrel) and a limit sell at $78.00 to take profit. This way, you’ve bracketed your trade with a predefined exit for both loss and profit. Setting these orders in advance enforces discipline – you won’t have to make a split-second emotional decision in the heat of the moment.

Quick recap: Market orders = instant execution, Limit orders = conditional on a target price, Stop orders = trigger if price hits a threshold (often for stops losses). As a new trader, start by mastering these basic order types. They let you control how you enter and exit trades under various conditions and are often a crucial part of risk management..

Step 4. Placing the Trade (Order Execution Process)

Now that you’ve decided what to trade, which way to trade it (buy or sell), and what type of order to use, it’s time to place the order. This is the moment where you’ll input the trade on your trading platform. While interfaces differ, the general process is the same across platforms:

a. Input the Order Details: Select the futures contract you want (e.g. the December Mini Nasdaq contract), choose the number of contracts (position size), and set the order type (market, limit, etc. with the price if it’s a limit or stop). Double-check everything: symbol, expiry month, buy vs. sell, quantity, and price levels if applicable. Mistakes in order entry (like buying when you meant to sell, or adding an extra zero to the quantity) can be costly, so take a second to review before submitting.

b. Submit the Order: When you send the order, it goes out to the marketplace for execution. Futures trade on centralized exchanges, so your order is forwarded to the exchange’s electronic order book to be matched with a counterparty. For every buy order, there must be a seller, and vice versa – the exchange’s matching engine pairs your order with an opposite order from another trader. This is usually very fast (fractions of a second). If you placed a market order, it will execute almost immediately at the best available price. If you placed a limit order, it will sit in the order book pending until the price conditions are met (or until you cancel it). You may see it as an open order on your screen.

c. Confirmation of Position: After execution, you’ll see confirmation that your order got filled (fully or partially). At this point, you now have an open position in the futures market. For example, you are long 1 Gold future at $2,950, or short 2 Bitcoin futures at $90,000 – whatever trade you did. Your account will now reflect the position and will show unrealized P&L (profit or loss) as the market price moves. Also, the required initial margin for that trade will be locked up from your account balance.

Once the trade is live, make sure any stop-loss or take-profit orders are in place,(if you didn’t place them as bracket orders simultaneously. A bracket order is a trading strategy that combines an initial entry order with two pre-set one-cancel-other orders: one to take profit at a set price and another to stop loss at a different price.If not, you can manually place a stop order and limit order now, linked to your open position. Setting those now is wise so that you’re protected in case the market moves quickly while you step away.

Step 5. Managing the Trade: Monitoring and Risk Management

After your trade is placed, the work isn’t over – now you manage the position. This phase is about executing your plan and being disciplined. Here are key aspects of managing a futures trade:

• Keep an Eye on the Market: Monitor the price movement of your futures contract. You don’t necessarily have to stare at the screen all day (especially if you’ve set automatic stops and targets), but you should be aware of what the market is doing. If the trade is very short-term (day trade or scalp), you’ll be watching actively. If it’s a swing trade over multiple days, you’ll typically check in periodically. Ensure you know when any major market-moving events (earnings, economic data releases) might occur during your holding period – unexpected news can cause sharp moves.
• Stick to Your Plan: Ideally, before entering, you had a trading plan: an entry point (already done), a stop level, and a profit target or exit strategy. Now is the time to follow that plan. Avoid the temptation to deviate due to emotions. For instance, if the price goes in your favor, you might trail your stop to lock in some profit, which is a sensible adjustment. But avoid impulsively doubling down or removing your stop on a losing trade out of hope. Beginners often struggle with this; maintaining discipline separates successful, long-term  traders from the rest.
• Risk Management in Action: Continually manage your risk while the trade is on. Ensure your stop-loss is active (and adjust it if you have a good reason, but never widen it to tolerate more risk than you planned). A common guideline is to risk only a small percentage of your capital on any single trade (for example, 1-2% of your account). This way, no single bad trade can wipe you out. Also be aware of your daily loss limits for your chosen account – if you hit a certain amount of losses in one day, step back and stop trading for that day. This prevents emotional “revenge trading” which can exacerbate losses.
• Watch Your Margin: As the trade progresses, your account equity will fluctuate with the trade’s P/L. If the market moves against you, the loss will eat into your free margin. Make sure you maintain above the maintenance margin.
• Be Aware of Time (Expiry and Trading Hours): If you intend to hold a position for more than a day, remember to check how far out the contract’s expiration is. If expiry is approaching (say within a week or so), decide if you will exit the trade or roll it to the next contract. Rolling means closing the current contract and re-entering in a later-dated contract to maintain the position. Also, note that futures markets have specific trading hours (even though many trade nearly 24 hours on weekdays). Markets often have a daily break (for example, some futures pause trading for an hour in late afternoon to clear trades). Liquidity can also thin out during late-night hours for certain contracts. You might prefer to actively manage trades during the more liquid sessions (e.g., U.S. daytime for stock index futures) and be cautious about holding large positions during off-hours when price swings can be erratic on low volume. The good news is futures trading offers flexibility – you can trade part-time in evenings or mornings if that suits you, since the markets are almost 24/5. Just adjust your strategy to the time of day and volatility.
• Handling News and Volatility: Be extra cautious trading around major news events (like central bank announcements or economic data releases). These events can cause sudden spikes in volatility and wider bid-ask spreads (lower liquidity). If you’re in a trade, you might choose to tighten your stop or exit before the news to avoid getting caught in whipsaw moves. NovaBloom’s guidelines do not forbid news trading, but they emphasize using heightened caution due to the unpredictable moves that often occur. If you do trade through news, be prepared for potentially fast moves and slippage on orders. As a beginner, often the best move is to step aside during major news releases unless news trading is specifically part of your plan.

In summary, managing your positions involves monitoring price, managing risk (through stops, position sizing, margin awareness), and staying disciplined with your plan. It’s often said that how you manage a trade is just as important as your entry. This is where you practice patience – either letting your profit target hit or taking a prudent exit if conditions change. Always keep the bigger picture in mind: no single trade should make or break your account. It’s about consistent execution of your strategy over time.

Step 6. Closing the Position (Exiting the Trade)

Every trade must eventually end, so knowing how to close a futures position is crucial. Closing (or exiting) a trade means taking the opposite action of your entry to offset the position. In futures, you don’t “own” an asset in the traditional sense; you hold a contract. To exit that contract, you take an equal and opposite trade. For example:

• If you bought 1 futures contract to go long, you will sell 1 contract of the same futures to close that long position.
• If you sold 2 contracts to go short, you will buy 2 contracts of that futures to close the short position.

The CME Group (a major futures exchange) puts it simply: to close an open position, you take the opposite position in the same contract you’re holding. Once executed, your net position in that contract returns to zero.

There are a few scenarios for closing a trade:

a. Hitting Your Stop or Target: The ideal (and often easiest) exit is one that you planned in advance. If you had a stop-loss order in place and the market moved against you enough to trigger it, your position will be closed automatically at that stop price (or the best available price once the stop is triggered). Conversely, if you set a limit take-profit order and the market hits that level, you’ll be taken out with your desired profit. In both cases, the exit was predefined and mechanical. As a beginner, it’s great to use these automatic exit orders because they remove second-guessing. If your stop or target was reached, the trade is done – take a moment to record the result and think about what you learned, then move on to the next setup.

b. Manual Exit: You might also choose to close the position manually. Perhaps the trade hasn’t quite hit your target, but you’re satisfied with the profit and see the momentum slowing – you can enter a closing order (market or limit) to exit. Or maybe the trade isn’t working as expected (but hasn’t hit your stop yet) and you feel the market conditions changed; you can decide to cut the trade early to limit the loss. To close manually, simply place an order opposite to your position: e.g., “Sell 1 at market” if you’re long 1 contract, or “Buy 2 at market” if you’re short 2 contracts, etc. As soon as that order fills, you’re out of your live position. Ensure you specify it’s to close the position in your trading platform (most platforms will automatically match it to your open position if it’s the same contract and size). After closing, check that your position is flat (0 contracts) and note your realized P&L for the trade.

c. Exit at Expiration: In some cases, a trader might hold a futures position until it expires. However, this is not typical for beginner or short-term traders. If you ignore the expiration date and don’t close, the contract will go to final settlement. Depending on the futures, this will result in either cash settlement (a debit/credit to your account based on the final settlement price) or physical delivery of the underlying asset. For example, stock index futures are cash-settled – if you’re long at expiry and the final index level is above your entry, you’d just receive the profit in cash (or lose the equivalent if below). But a crude oil future is physically delivered – holding it to expiry could theoretically make you responsible for a delivery of barrels of oil. In practice, brokers will usually force-liquidate any positions before they go into the delivery period if you haven’t closed them, especially in a funded account or if you lack the ability to handle delivery. Bottom line: as a beginner, you should plan to close or roll over a futures trade well before the expiration date. There’s rarely a reason to hold to the last minute. Traders who want to maintain a position beyond expiry will roll it to the next contract month (selling the current contract and buying the next expiration) rather than go through expiry. Rollover is a separate process, but essentially it’s closing one trade and immediately opening a new one in the later month.

When you close your trade, your profit or loss is realized. The difference between your entry price and exit price (multiplied by the contract’s size) determines the P/L. For instance, if you bought a future at 100 and sold at 105, that’s a 5-point gain. If each point is worth \$50 (depending on the contract), you made \$250. Your account balance will reflect this gain (minus any commissions/fees). If it was a loss, the balance drops accordingly. The used margin on that position will also be freed up after exit.

After closing a position, it’s good practice to review the trade. Examples of questions to ask yourself include: Did it go as planned? Did I follow my rules? What could I improve next time? This reflection helps you grow as a trader. But whether the trade was a win or loss, know that futures trading is a continuous learning process.

In Summary

‍Closing a futures trade is done by executing the opposite transaction to your entry. You can (and usually should) exit before the contract’s expiration – you’re never obligated to hold until expiry. By managing your exit strategy, you complete the trade lifecycle: from planning and entry to management and finally to exit and evaluation. With this complete picture, you’re now equipped to place a futures trade from start to finish in a structured, confident manner.

By following this guide, you should have a solid grasp of how to place a futures trade from start to finish. Remember, start small, stay disciplined, and continuously learn from each trade. Futures trading offers exciting opportunities across many markets including stock indices, commodities, and crypto markets accessible via NovaBloom’s programs – Good luck on your trading journey!

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