What is a futures contract?
A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an asset at a predetermined price on a future date. The asset can be an index (S&P 500), a commodity (crude oil, gold), a currency, or an interest-rate product.
Contracts are standardized — each has a defined size, tick value, and expiry — which makes them easy to trade on exchanges like the CME. Most speculators never intend delivery; they close the position before expiry to capture the price change.
How does futures trading actually work?
You go long if you expect the price to rise or short if you expect it to fall — shorting is as natural as buying, which is one reason traders like futures. Your profit or loss is the price move multiplied by the contract’s tick value.
For example, the E-mini S&P 500 (ES) moves in 0.25-point ticks worth $12.50 each. Micro contracts (MES, MNQ) are one-tenth the size, letting beginners trade smaller — which is why most prop firm evaluations are run on these instruments.
Leverage and margin — the double-edged sword
Futures are leveraged: you post a margin (a fraction of the contract’s notional value) to control a much larger position. Day-trading margins can be a few hundred dollars per micro contract, as of our last test, which is why small accounts can trade meaningful size.
Leverage cuts both ways. A small adverse move can produce a large percentage loss relative to your margin, and losses can exceed your initial outlay on a live account. This magnification is the core risk of futures trading.
What are the most popular futures contracts?
The most actively traded retail futures include the equity indices — ES/MES (S&P 500), NQ/MNQ (Nasdaq-100), and YM (Dow) — plus crude oil (CL/MCL), gold (GC/MGC), and Treasuries.
For beginners and prop traders, the micro index contracts (MES, MNQ) dominate because they offer deep liquidity with a small per-tick value, making position sizing and risk control far more manageable.
Why do prop firms favor futures?
Most modern prop firms — Topstep, Apex Trader Funding, My Funded Futures — run on futures because the market is centralized, transparent, and regulated, with consistent contract specs and near-24-hour access.
Futures also suit the evaluation model: micro contracts let firms set realistic profit targets and drawdowns on modest account sizes. If you’re aiming for a futures funded account, learning the contracts above is step one. Trading carries substantial risk — start small and master risk before scaling.
Frequently asked questions
01Is futures trading good for beginners?
02How much money do you need to trade futures?
03What’s the difference between futures and stocks?
04Can you lose more than you invest in futures?
05Do futures trade 24 hours a day?
Related guides
Futures Trading Hours: When the Markets Are Open
Futures trade almost around the clock — but not all hours are equal. Here are the sessions, the daily break, and when liquidity is actually worth trading.
What Is a Prop Firm? How Proprietary Trading Firms Work
Prop firms let you trade larger capital than your own — but the modern, evaluation-based model works very differently from old-school trading desks.
Prop Firm Challenges Explained: Rules, Pass Rates & Costs
The challenge is the gatekeeper between you and a funded account. This guide covers how it works, how to pass, the pass rate, the timeline, and the cost.
