How to Trade Futures on ThinkorSwim – An Easy Step by Step Guide

In this article, you will know how to trade futures on ThinkorSwim.

Futures Trading involves a contract where a purchase or sale at a particular price and time is being arranged. The asset normally transacted upon are a commodity, stock, or financial instruments.

What is Futures Trading?

Futures Trading is a financial contract or agreement that obligates both parties to the contract to transact a particular asset at a predetermined future date and price.

The asset must be sold at the agreed amount irrespective of the current market price at the scheduled date.

How to Trade Futures on ThinkorSwim
Photo credit: Finance Monthly

Is it Hard to Trade Futures?

Futures Trading is very demanding, and it demands hard work to be successful, and you must invest a reasonable amount of your time and energy.

Being successful in Futures Trading needs a lot of sacrifices; as a trader, you would need to stay a belt with market commentary, study and analyze different charts, and you would also need to stay up to date with the news.

How to Trade Futures – Step by Step Guide

Investors and traders can trade on multiple futures contracts like Currency, Stock Index, and Interest Rates.

They must clearly understand some things before trading on futures, such as Leverage, Liquidity, and Hedging, amongst others. Below are the steps to take if you want to trade on futures:

  • Set up an Account

To get started, you would need to open an account with a broker. You would need to answer some questions the broker will use to determine the percentage of risk they will issue to you for trading.

  • Choose a Trading Platform

After setting up your account, you need to pick a particular trading platform. You can use the TD Ameritrade account, which will give you access to ThinkorSwim, which is a strong trading platform for trading on futures. This platform will enable you to monitor the futures market plan and implement your strategy.

  • Develop a Trading Strategy

To succeed in futures trading, you need to develop and stick to a particular strategy. You can build your plan based on either technical or fundamental analysis. Technical analysis focuses on statistics by market activity while fundamental focuses on measuring an investment’s value.

  • Build Your Skills

It is essential for both beginners and expert traders as you need to refine your trading skills to boost your wins. Ensure you build your knowledge of futures trade and sharpen your skills.

Read also:

7 Proven Profitable Forex Trading Strategies for Consistent Profit

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What is Forex Trading Bot – Pros and Cons, and How to Use a Trading Bot

Forex Trading Signals – Step by Step Guide on How to Use Signals

How Much Money Can You Lose in Futures?

As a result of leverage used in futures trading, traders could lose more than their investment. Traders are usually advised to risk 1% or less on each of their trades to reduce losing more. It is advisable that you only invest what you can afford to lose.

How do Futures Traders Make Money?

Investors and traders usually trade Futures on Margin; they pay as little as 10% of the contract’s value to own a particular asset and control the right to sell when it reaches the scheduled date as agreed in the contract.

The Risks of Futures Trading

Futures Trading has some risks that brokers should familiarize themselves with to manage.

  • Leverage

Leverage is a major risk associated with Futures Trading. Investors and traders must be careful of their leverage as it causes many losses in Futures Trading.

  • Interest Rate

The Interest rate also affects an investor’s Futures Trade as an increase in interest can cause an investment to drop in value.

  • Liquidity

Liquidity also affects a trader’s contract as it may restrict the trader from executing their trading strategy. Even sometimes, a trader may not close or exit a trade if the project does not have liquidity.

  • Settlement and Delivery Risk

Executed trades need to be settled and closed at some points. This settlement takes the form of debits between accounts, and any form of shortfalls will be recovered through margin calls. The non-payment of these calls is a big risk for brokers.

  • Operational Risk

Manual mistakes is another thing the broker must consider as it has a serious effect on the investors. Measures should be taken to ensure adequate staff training and supervision amongst others.

What are Margin Requirements for Futures?

The margin requirement for Futures Contracts Trading is set at 5% or 10% of the contract to be traded. This initial margin requirement would give a trader a 20X leverage factor to run their Futures Trading.

ThinkorSwim Futures Trading Requirements

Investors will need a TD Ameritrade account to utilize the ThinkorSwim Futures Trading. A minimum of $1,500 is required for margins accounts. A minimum net liquidation value of $25,000 is needed to trade Futures in an IRA.

How to Trade Futures on ThinkorSwim

Traders can use the ThinkorSwim App from TD Ameritrade for trading as traders mostly use it. TD has its trading futures within ThinkorSwim known as “Futures Trader.” To access Futures Trader, you will start by selecting the ” Trade” tab then the “Futures Trader” tab below.

Once you log in for the first time, you will see six different equity indexes and futures in the top 2 rows of panes. You can change these by clicking on the drop-down for “Symbol Table” and picking your desired asset/index. You can also change the number of panes to what you want to follow. Use the grid tool in the upper right-hand corner of the trader.

  • Tracking and Placing Trades

These options will enable you to track and place your trades. At the top of the screen is the “Trade” button, which allows you to place trades and keep track of your open trades.

Once an order is placed, it will appear in that area. There’s also a “Dashboard” button that allows for quick placement of a track, and it shows the value of the asset and the initial margin requirement.

  • Live News to Trade Futures on ThinkorSwim

On the next two panes, you can change them to the particular stock market you need information on.

For example, if you need information on NASDAQ, click on the “Symbol Action” and upper right of the pane, then “Gadgets.” Click on “Live News” at the bottom of the panel’s righthand list with”Trade” and “Dashboard.”

On the third pane, you can pick ” Symbol Action” and “Gadget.” This will open the price chart, which will help you monitor and trade the NQ NASDAQ Future.

If you intend to make a “Sell” on the first pane, click on the option to sell, and the order entry tool will pop up at the bottom of the display.

Make sure you pick “Sell” in red and “Buy” in green. Once you set the amount you intend to sell and are comfortable with it, you can hit “Confirm and Send.”

Trading Futures on ThinkorSwim is easy when you use the TD Ameritrade platform, which has its trading futures in it.

Ensure you research the particular futures trade to invest in and always invest what you can afford to lose.

We hope this article will help as you trade futures on ThinkorSwim. For all your questions and concerns, drop us a message in our comment section.

Watch the video below to learn how to trade futures on ThinkorSwim:

About Author

How to Trade Futures on ThinkorSwim
Carlos James
I am a creative writer, researcher and strategic digital marketer who is focused on providing value to the community through my contents and creatives.

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