What are futures?
Futures are contracts in which the seller and buyer agree in advance what the cost of a particular commodity will be the future, at the time of its delivery. For example, right now it’s February, and there is a futures contract for Brent crude with a March delivery date.
It makes sense that this contract can be sold as its price is constantly changing, just like currency quotations on the Forex market. For example, every minute sellers offer a different price at which they will be willing to sell Brent oil in March. And buyers agree to these price. So they don’t actually sell these contracts themselves, they earn money on the difference in their prices - hence the contract for difference – CFD. And this price continues to change all the way up to the expiration date.
What is the expiration date?
This is the exact expiration date of the contract. At this point, the idea is that if we were dealing with the physical delivery of the goods, as was agreed in the contract, the seller would be obliged to deliver the goods (wheat, meat, etc). In the Terminal, of course, it's all relative, so the expiration date, which you can see by hovering your mouse over your contract, simply indicates when the contract will expire and be removed from the Terminal.
After that date, the contract will not be traded anymore, so you need to be sure you close all your open positions on the contract before it expires. Otherwise, they will be closed by the broker. You can see all the specification dates on our website in the “Contract Specification” section. In addition, you can read the rules of expiration here.
What is a CFD?
A CFD is the ability to conduct transactions for the purchase and sale of futures the same way we do with currencies in the Forex market.
What commodities offer futures contracts?
Let's open our terminal right mouse click on the Market Watch window. You will see some green folders. This is the list of instruments which have contracts in our Terminal. This list includes currencies, indices, energy resources, metals, grains, softs, meats, bonds (Financials) and funds (ETF).
If you click on the "+" you can see exactly which instruments are included in each group.
Why every contract have two ticker symbols?
Let's click "show all symbols." Now all futures contracts are displayed in our Terminal. You can see that each of them has two ticker symbols, they follow one after the other.
The first is the name of the instrument, or its designation. You can see that the ticker price is the same in both the bid and ask columns.
They represent the single, common price at which the last transaction on the market was executed for that instrument. This price is called the last.
You will also see the second ticker, which has the suffix "#I." Notice the ask and bid prices are different – these are the real market quotes.
This second ticker can be used as a reference point, while the first symbol is the one you want to drag to the Terminal.
How do you open a transaction for a futures contract?
Just as we did with transactions on the Forex market. Because you are going to create an order to buy or sell, you should first click "new order."
Why does the deal open at that price?
You will notice that we are currently using the "market execution" type.
This means that your transactions will open at the price displayed in your Terminal at the moment. If the quote changes before the opening of the transaction is confirmed, then your order to buy or sell will be executed at the new, revised price. This is based on real market conditions. This is not a pitfall – the quotes change constantly both in your favor and against, so it does not good to get upset because your order was fulfilled at one price, instead of the other. But, as a rule, such differences are quite small, usually one or two points.
How do you open and close a Buy order?
For this you will need to choose “buy by market.”
In this case, your transaction will be fulfilled at the market ask price and you will be able to see the details of the contract with the #I symbol. To close the order, click on it, then right-click and choose "close order."
Your order to buy will be closed at the bid price.
How do you open and close an order to sell?
If you choose to sell by market, the order to sell will open at the market bid price and close at the ask price.
Is it possible to create pending orders?
Yes, you can - just like in the Forex market. You can choose at what price you want your order to be opened in the future. Depending on your decision, choose sell limit, buy limit, sell stop or buy stop.
How do you set a buy limit?
This is an order to buy at a price lower than the current one. You can find the buy limit by choosing “Pending Orders” instead of “Market Execution” in the "Type" field.
Now, your deal will open at the exact price you set as soon as the price of the contract exceeds it by at least one point.
How do you set a sell limit?
If you want to open an order to sell at a price above the current one, then you will need to select a sell limit.
The order will also occur precisely at the price you set, as soon as the price exceeds it by at least one point.
How do you set a buy stop?
This is a pending order to buy at a price higher than the current. Upon opening it, you will receive market execution of your order at the current ask price that is displayed in the contract information with for #I. This will happen when the last price that you see near the main contract, exactly matches the price you set.
How do you set a sell stop?
This is another type of pending order, this time to sell at a price that is lower than the current one. In this case, the deal opens at the bid price when the last price exactly matches the one you set.
How do you set a stop loss?
You set this control the same way as you did for transactions on the Forex market. Without a stop loss you are nowhere. But, be sure to note these small nuances: a stop loss in an order to sell is executed at the ask price when it exactly matches this level, and the stop loss for a buy order at the bid price when it also exactly matches the price you specify.
How do you set the take-profit?
The situation is a little bit different with the take-profit. If a take-profit is attached to an order to sell, it will close at the price you set only when the last price passes the one you specified by at least one point and continues to trade below that level.
If a take-profit is attached to an order to buy, then it will close at the price you set when the last price goes above this level by at least one point and becomes higher than your take-profit level.
Those are the fundamental and more than likely, the most important things you need to know in order to start trading with CFD futures contracts. Now you are well versed and quite ready to go out and conquer new peaks.
If this information has proven difficult to read, we suggest you view the video tutorial, which aptly demonstrates how to properly open and close deals of various types with CFDs on futures.
Thank you for reading our training manual! We hope that you found it useful!
We wish you every success and look forward having you as a client of FortFS!