Best Futures Brokers April 2024: Top 5 of 44 Brokers Reviewed (2024)

3 Featured Picks From Our Best Futures Trading Platforms

There are a lot of options to compare, even on this page. It can be overwhelming! If you're looking for a place to start, here are some trading platforms our experts recommend and why they like them:

• Interactive Brokers: Great broker for advanced futures traders
• Tastytrade: Standout option for serious futures traders
• TradeStation: Fantastic future trading platform

How do I choose a futures broker?

Here are some questions to ask when comparing futures brokers:

• Do you want to trade futures in the same place where you keep your long-term investments and retirement accounts? Some brokers only offer a trading platform and one or two account types, while others have pretty much any kind of investment account you can think of, and then some.
• Does the broker offer educational resources? Whether you're new to futures or just seeking more information, a broker that offers extensive educational resources could be a smart idea.
• What is the cost of trading futures with the broker? You'll pay a per-contract fee to trade futures, and this can vary widely from platform to platform, and even within the same platform, it can vary based on the type of futures contracts and the volume you're trading.

It's also important to make sure any brokerage you consider offers securities you're interested in. Whether that means a specific futures contract, stocks, bonds, or other investments -- not all brokerages carry all types of securities or even all types of futures contracts.

How to open a futures trading account

Once you've decided on a brokerage that supports futures trading, the next step is to open an account.

You'll need to provide some personal information, including your Social Security number.

You may have to fill out a tax form, as brokerage firms need to be able to send you tax documents every year detailing your profits, losses, interest, etc.

You may need to answer a quick questionnaire about your knowledge and experience about these products. Some brokers want to make sure you have some knowledge of investing before you begin trading futures, to mitigate risk.

What are futures?

Futures are agreements to sell a fixed amount of an asset at a specific date in the future -- instead of buying a commodity, currency, or other asset at today's market price.

How do futures work?

Futures are traded in the form of contracts, which are agreements between the seller of an asset and the buyer, or futures trader. For example, one oil futures contract typically represents 1,000 barrels of oil to be delivered at a certain future date. Futures contracts can represent a wide variety of commodities, currencies, stock indices, and more.

There are a couple of other types of futures and related investments worth knowing about:

Options on futures: These work similarly to stock options. A futures option gives you the right (but not the obligation) to buy or sell a certain futures contract at a predetermined price at any time before the option's expiration date.

E-Mini futures: E-mini futures are contracts that represent a smaller amount of assets than the standard contract. For example, CME's E-mini S&P 500 futures contract represents one-fifth the assets of its standard S&P 500 futures contract. Because they represent smaller quantities of assets, many brokers offer lower commission rates on E-mini contracts.

What can you trade futures on?

Just to name a few, here are some of the types of futures contracts you can trade:

• Stock index futures
• Interest rates
• Metals
• Foreign currency
• Energy
• Livestock
• Commodities

Pros and cons of futures trading

How much money do you need to trade futures?

This depends on your broker and the futures you want to trade.

Some brokers have a minimum amount of money that must be in an account before futures trading can take place. Others don't have a set minimum.

There's also margin minimums to consider, which have to do with the specific futures contracts you want to trade. This is a different concept than using margin to trade stocks, and is the minimum amount of money you'll need in your account in order to trade a specific type of futures contract. This can vary based on a few factors, including the volatility of that particular type of futures.

While you may be able to open a futures trading account with a relatively small amount of money, in reality you may need significantly more in your account to start trading the types of futures you're interested in.

Risks of futures trading

The risks of futures trading are quite complicated and could be the topic of their own long-form article. But there are a couple of big risks that are important to keep in mind before you open an account.

First, futures trading generally uses a lot of leverage. When trading stocks on margin, you can typically get two-to-one leverage, meaning that you can buy $10,000 in stock with a $5,000 account balance. When it comes to futures, there can be significantly higher leverage -- as much as 20 to one. This can be both a positive factor (higher profits) as well as a big negative factor. Because of this, if your futures trade starts going in the wrong direction, you may be required to deposit more money to cover the maintenance margin requirements and could ultimately result in big losses.

Second, while it might seem obvious, futures contracts are speculative investments that are based on the future price of something. And there's a lot that can happen between now and then. There was a famous situation in the early days of the COVID-19 pandemic where oil demand crashed when everyone went into lockdown, and oil futures were actually trading for negative values because there was simply nowhere to put all of the oil they represented.

These aren't the only risks of futures trading. It's important to study the risks and benefits of futures before you attempt to trade them.

Is futures trading right for you?

It depends. Like any other kind of trading, futures are appropriate for investors who really know what they're doing. Futures trading can be risky. For one thing, futures investors often use a significant amount of margin (leverage) when trading. Think of margin as borrowing a portion of an investment's value -- similar to getting a mortgage to pay for what your down payment doesn't cover on a house. Any time there's a large component of leverage, there's going to be the potential for amplified losses if things go the wrong way.

It's important for beginners to learn as much as possible before getting started. If you're thinking of starting to trade futures, it could be a smart idea to choose a broker with tons of educational resources. Also look for a "play money" platform so you can try futures trading without risking your actual money until you're 100% sure you're ready.