When it comes to futures trading, Charles Schwab provides robust platforms, research tools, and resources to help both beginners and active traders implement strategic positions. If you’re looking to add futures to your portfolio, this guide explores everything you need to know to get started.
I’ll walk through key topics like:
- What Are Futures and How Do They Work?
- Why Trade Futures with Charles Schwab?
- Available Schwab Futures Products
- Step-by-Step Guide to Opening a Futures Account
- Futures Trading Strategies for Beginners
- Managing Risk and Volatility In Futures
- Common Questions About Schwab Futures
Let’s dive in and discover how you can use futures contracts to diversify your holdings and profit from market moves with Charles Schwab!
What Exactly Are Futures and How Do They Work?
Before jumping into specifics on trading futures with Charles Schwab, let’s quickly level-set: what are futures and how do they function?
A futures contract represents an agreement to buy or sell an underlying commodity or financial asset at a predetermined price on a defined future expiration date. The value of that position fluctuates in real-time based on underlying spot price changes in the market.
As the buyer of a futures contract, you agree to purchase the asset. As the seller, you agree to deliver that asset. No immediate exchange of capital or assets takes place. Only changes in contract value trigger interim cash settlements prior to expiration.
Hedgers use futures to offset risks with counterbalancing positions. Speculators aim to profit from anticipating price movement directionality. I’ll cover common trading strategies more below.
Now that we’ve defined what futures are, why consider adding them to your portfolio?
Charles Schwab provides extensive futures offerings and resources that make them an ideal futures broker, including:
- Low Futures Fees & Commissions – Schwab charges just $1.50 per futures contract with deep exchange fee discounts. Extremely competitive pricing overall.
- No Account Minimums – You can open a futures account with any amount. Many other brokers require multiples of $5k or $10k minimums.
- Excellent Trading Platform – Schwab’s StreetSmart Edge desktop platform, mobile apps, and web interface provide robust futures trading capabilities for all trader types.
- Insightful Research & Analysis – They produce tremendous futures-focused trading education, daily commentary, forecasts, and actionable trade ideas from experts.
- Risk Management Tools – From automated stop losses to multi-leg order types, they offer futures traders ways to define and mitigate risk.
So with advantageous pricing, desktop/mobile access, research content, and risk frameworks, Charles Schwab creates a feature-rich futures trading ecosystem.
Which Futures Can You Trade with Schwab?
Charles Schwab provides access to a wide variety of popular futures products, including:
- Equity Index Futures – Trade major stock indexes like S&P 500, NASDAQ 100, Dow Jones, and Russell 2000.
- Energy Futures – Trade oil, gasoline, heating oil, natural gas, and more commodity contracts.
- Metal Futures – Take positions in gold, silver, platinum, copper, and palladium futures.
- Agricultural Futures – Schwab offers corn, soybean, wheat, cattle, cocoa and other agricultural commodity futures.
- Currency Futures – Trade foreign exchange futures on all major and minor global currencies.
- Interest Rate Futures – Wager on rate moves via Treasury, fed funds, Eurodollars and other global debt futures.
This wide futures selection allows you to diversify across market sectors and asset classes as part of a balanced portfolio approach aligned to your individual strategy.
Now let’s walk through the quick process to open a futures trading account.
Step-By-Step Instructions to Opening a Schwab Futures Account
You can conveniently open a futures trading account fully online with Charles Schwab in about 10 minutes by:
Step 1) Navigate to the futures account application page on Schwab.com and click “Open Account”.
Step 2) Choose between opening an individual trading account or IRA.
Step 3) Provide all required personal information, employment details, contact info, and more.
Step 4) E-Sign agreements like the Application Agreement, Margin Disclosure, and Account Terms.
Step 5) Officially submit your futures account application to Charles Schwab.
Step 6) Make your minimum $0 futures account opening deposit or fund more based on your trade plans.
Step 7) Wait 1-3 days as Schwab approves your application.
Now let’s explore recommended futures trading strategies for beginners using common index and commodity contracts.
Smart Futures Trading Strategies for First-Timers
As a futures newbie, it’s prudent to keep your risk small while focusing on highly liquid contracts with solid volatility. This allows you to learn ropes without excessive exposure.
Here are constructive futures trades to cut teeth with:
Trade S&P E-mini Futures – Gain stock market exposure trading high volume E-mini S&P 500 futures. Analyze technical levels and practice day trading or swings. Manage risk with stop losses on each trade.
Go Long / Short Oil Futures – Trade light sweet crude oil futures based on energy supply/demand fundamentals, geopolitics, inflation impacts, technical chart patterns and momentum. Enter and exit on 1-4 day holds.
Trade Gold Futures – Capitalize on fear/greed moves in gold futures driven by inflation concerns, market volatility, interest rates, and US dollar strength. Enter momentum swings using technical indicators like RSI and MACD.
** Scalp Index Futures** – Scalp trade high liquidity index futures like NASDAQ and Dow mini contracts on 1-60 minute holds. Ride near-term directionality by analyzing short-term moving averages, support / resistance zones, and volume.
The key is keeping position sizing small, using stop losses, booking profits early, and managing daily loss limits as you build futures experience. Over time you can incorporate more advanced strategies like spreads, arbitrage, and options hedging.
Now that we’ve covered smart starter strategies, how do futures traders mitigate inevitable volatility risk?
Effective Methods to Limit Futures Trading Risk
Given their inherently volatile nature, active futures traders employ a mix of mental frameworks and platform tools to define and limit downside risk, including:
Set Stop Losses – Automatically exit losing positions at a predefined adverse price level based on your maximum acceptable loss per trade. Bracket orders allow entering and automatically exiting both sides.
Use Good Till Cancelled Orders – GTC orders remain working beyond the trading day until filled or canceled. This avoids needing to reenter each morning.
Know Your Max Loss – Commit to a daily or weekly “max loss” you’ll absorb before stopping trading. This contains damage on adverse days preventing emotional decisions.
Trade Small Positions – Keep per-trade position sizing small relative to account size to limit exposure. Many traders risk only 1-2% of capital per play.
Have a Trade Plan – Outline trade rationale, entry/exit rules, and risk mitigation plans before entering positions. Enforce discipline following this blueprint without ad-hoc adjustments.
Stay Calm – Don’t panic as futures prices whipsaw. Make detached decisions and stick to pre-defined action plans. Don’t override stop losses or chase trades when emotional.
Over time, actively adhering to such futures risk management foundations allows you to sustain long-term trading without blowing up accounts on inevitable volatile periods.
Finally, let’s wrap up answering some frequent client questions around trading futures with Charles Schwab:
Common Charles Schwab Futures Questions
Here are answers to some top-of-mind futures trading questions with Schwab:
What futures platforms does Charles Schwab offer?
Schwab provides StreetSmart Edge for desktop, robust mobile apps, and browser-based access across all devices to trade futures. Their platforms are extremely highly rated.
What do I need to open a futures trading account?
Just a government ID, SSN, and US residential address. Unlike other brokers, Schwab has no account minimums. Just fund your futures account with as much as you feel comfortable trading.
What customer service options exist for futures traders? You have 24/7 phone support from live futures specialists via their dedicated Active Trader Services team.
Is futures trading allowed in IRA accounts?
Yes! You can trade futures tax-advantaged in several types of IRAs to gain portfolio exposure while delaying or avoiding taxes entirely.
Can I trade bitcoin futures or other cryptocurrency derivatives?
At this time Charles Schwab does not offer any cryptocurrency futures products, just legacy derivatives covering equity indexes, commodities, currencies, and bonds.
I hope this transparent guide empowers you to make informed decisions about trading futures with Charles Schwab. Please share any additional futures questions in comments!