Best Futures Brokers in 2021

• Is the futures broker regulated?

Your first port of call should be to assess the platform’s regulatory standing. If you are based in the US, then you need to ensure that the futures broker is regulated by both the National Futures Association and the Commodity Futures Trading Commission (CFTC). If you’re actively trading with a European-based broker, then key regulators include the UK’s Financial Conduct Authority (FCA) and CySEC in Cyprus.

• Trading fees

The trading commission varies across futures brokers. In the vast majority of cases, you will pay a fixed fee for each futures contract that you buy or sell. For example, if you purchase 10 futures contracts in Crude Oil, and the broker charges $1.50 per contract, then you will pay $15 in fees (10 contracts x $1.50).

Some futures brokers will instead charge you a percentage fee. This is calculated against the total size of your order. For example, if you purchase $10,000 worth of contracts on the S&P 500, and the broker charges 1% in fees, you would pay $100. Additionally, exchange, order routing, and clearance fees may be charged. These fees are often quoted separately from the commission fees so read the fees schedule carefully.

• Types of Futures Contracts Listed

Over a trillion dollars in futures contracts trade daily across a broad and growing range of underlying assets (BIS).  Popularly traded futures markets include currencies, grains, energies, stock market indices, cryptocurrencies, and interest rates. Not all futures brokers have an extensive list of futures contracts for sale, though, so peruse the product offering prior to signing up. Also check the maturity dates of each contract, as they can vary depending on the asset class.

• Customer Support

As futures contracts are a highly sophisticated financial instrument, you need to ensure that you have top-notch support available as and when you need it. The best futures brokers in the market will offer a number of different support channels. This should include a fully fledged telephone support line, as well as live chat. Crucially, you’ll want to choose a broker that offers customer support on a  24/7 basis.

• Margin Trading

The vast majority of futures contracts are purchased on margin. For those unaware, margin trading allows you to invest more than you have in your account. Although this leverage* allows you to amplify your gains, margin trading is fraught with risk. Essentially, if your futures trade goes against you, and you don’t have the required margin in your account, your trade could be liquidated. This means you will lose your entire stake, so tread with caution! Futures brokers set margins as a dollar amount per contract.

* Leverage is how much you can borrow above your account balance to increase your trading buying power. If you have a $1,000 account balance and 10:1 leverage, you can trade up to $10,000. The margin requirement is 10 percent.

• Research and Education

Futures trading is considered a sophisticated trading strategy, although it is actually quite simple once you understand the basic concepts. You should only engage in futures trading if you have a firm grasp of the underlying risks. With that being said, if you are a beginner and you’re prepared to start with small stakes, you’ll want to choose a futures broker that offers an extensive educational department.

We also prefer brokers that offer ongoing news and analysis on key futures markets. Some platforms have dedicated commentators on a specific niche like Crude Oil or GBP/USD, which is super-useful. For those of you that like to focus on the technicals, stick with brokers that offer heaps of charting tools.

• Stock Market Indices

One of the most popular markets for futures traders is that of stock market indices. For those unaware, indices allow you to invest in the wider stock markets. For example, the S&P 500 allows you to invest in the 500 largest US companies listed on the Nasdaq and NYSE. Similarly, the FTSE 100 covers the 100 largest companies traded on the London Stock Exchange. By trading futures on indices, you can speculate on the future price of the wider economy or industry at the click of a button. Stock indices are a good way to hedge the stocks and bonds in your stock portfolio.

• Energies

The energies market covers the conventional oil and natural gas space. Energy futures allow you to easily invest in the future price of oil and gas without needing to own or store the underlying asset. There are a number of energies futures markets traded, and prices are based on the location. For example, while Brent Crude Oil is based on oil fields in the North Sea, the West Texas Intermediate (WTI) is based on US reserves.

• Currencies

When investors buy and sell currencies, this is known as ‘Forex’ trading. You can also buy and sell futures contracts on popular forex pairs. For example, you can speculate on the future price of GBP/USD. Currencies in particular are heavily affected by real-world affairs, so you need to keep abreast of any key developments that could impact your trade. This could include an increase or decrease of central bank interest rates, or the release of GDP figures.

• Metals

Metals trading is also hugely popular in the futures space. This market includes gold, silver, and platinum. Once again, futures contracts make it super-easy to speculate on metals without needing to worry about storage. Instead, you merely need to assess whether you believe the price of the asset will go up or down before the contract matures.

• Bitcoin

Bitcoin futures became trendy in late 2017, with both the CME and CBOE launching markets for institutional investors. Although trading volumes are still minute in comparison to the more traditional asset classes, demand is on the rise. A number of brokers now support Bitcoin futures for retail clients. This gives you direct access to the weird and wonderful world of Bitcoin without needing to actually own or store the asset. Just remember that Bitcoin is still highly volatile, so proceed prudently – especially if trading on margin!

Learn more about cryptocurrency trading here.