By Ryan Watkins, Lead Coach
From the way the ticker symbols are different to the way you trade contracts instead of individual shares, the Futures market is an incredibly unique market to trade. Here at StockAbility™, our preferred vehicle for day trading is futures for many reasons. For a start, life is simpler when you trade futures day-to-day as there are fewer markets to trade. As a stock trader or investor, there are hundreds of companies to chose from. In futures, if you like stocks, you may as well just trade one of the four major Indices. That way, you get to trade a basket of stocks in one go.
Trading a futures stock index, is like trading the whole market in one easy step. Most active traders tend to focus on one of the “big” markets when using futures: The Dow Jones, The S&P 500, The NADAQ or the Russell 2000. Our CEO, Sam Evans typically trades just the Dow Jones Index every day in the futures market and nothing else. Now that is keeping it simple. Personally, I like to trade a few more, but it is all about personal choice and what works for you.
Another great aspect of the futures markets, are the size of the contracts. Now this is a deeper subject to understand and warrants a future article all to itself. However, it should be noted that all futures markets trade in contracts, not individual shares. Each contract is for a “set amount” of a product at a predetermined quality. For example, 5000 bushels of Corn, 1000 arrels of Oil or 100 Troy Ounces of Gold.
Many of these popular contracts have now been broken down into “Mini” and “Micro” contracts, with very low cash requirements to trade. Some of these contracts need as little as a few hundred dollars to buy and sell, with small exposure and reduced risk. It is feasible in today’s world to be able to open a futures account with as little as $2000. A few years ago, most brokers would have requested more like $10,000 to $20,000 starting capital to open an account.
If you are looking to take the next step in futures then there is a key aspect you need to grasp immediately. In futures, the ticker symbols or codes you use to chart, buy and sell are very different to everything else. For example, if you trade the Stock Market and want to buy Apple, Inc., the ticker symbol is “AAPL”. It has been AAPL from the start and will continue to be AAPL. The Futures Market is not so simple. Ticker Symbols change when trading futures contracts. Let’s take a deeper dive.
Futures Month Symbol Codes
Each futures contract has a letter associated with a month so that traders, brokerages, and exchanges all communicate the exact contract that is being traded.
For example, if we want to trade Crude Oil for the contract month of December for the year 2022, then the correct tradable symbol would be “CLZ22”. “CL” is the product code for Crude Oil (“C” being the first letter in Crude and “L” being the last letter in Oil), “Z” being the letter code for the month of December and “22” being the last two numbers of the year we want to trade.
One more example would be the S&P 500 E-Mini Futures contract. The market code is “ES” for the electronic mini futures contract or “e-mini” as it is commonly known as. The “E” represents the word Electronic, and the “S” represents the word S&P 500.
Quick side note, the S&P 500 stands for Standard & Poors 500, a list of 500 US listed publicly traded companies. In this example, we would be trading from the futures market rather than the stock market. Either one can be traded.
So, the symbol would be ES, then the month code and then the year code. Example “ESH22” would be the S&P 500 contract for the month expiring in March in the year 2022.
Below is a list that is used by the futures exchanges and will apply to all US (and most non-US) based futures brokerage firms:
January = F
February = G
March = H
April = J
May = K
June = M
July = N
August = Q
September = U
October = V
December = Z
or if you prefer…
Some futures ticker symbols are obvious like NQ (NASDAQ), GC (Gold), and Russell 2000 (RYT). Other like the Dow Jones are not so obvious, which is YM! It can be a little confusing at first when you start your journey in futures. Plus when charting futures, you need to be aware that there are multiple ways to chart each symbol. Most futures markets trade 24 hours a day and some traders like to see all of this information. On the other hand, some traders like to filter the chart and look at data that matches key trading hours of the day, like the New York Stock Exchange hours of 9.30 am to 4.00 pm Eastern Time. Again, this is based on your personal choice and trading style.
Like any new skill, I encourage you to take your time and get familiar with the necessary information before embarking on putting your money at risk. If in doubt about where to begin, StockAbility™ is here to help. Our Trading and Investing Orientation course is a great place to start. I hope this has given you some things to consider and to improve upon in your own trading and investing.