A Day in the Life of a Futures Trader

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Futures traders buy and sell futures contracts throughout the day or overnight. A futures contract is a legal agreement to buy or sell a commodity in the future at a predefined price. Futures traders earn money by capitalizing on price differences in commodities like soybeans, wheat, and oil.

Are you thinking about entering the futures market on your own? Let's walk through an average day in the life of a futures trader to learn a little more about futures contracts and how traders take advantage of volatility in price movements to earn a profit.

7:00 AM EST: Wake Up and Begin the Day's Research

Depending on your time zone, being a futures trader might mean waking up at the crack of dawn or depending on your location allows you to sleep in for a bit. Since the market is dependent on the EST time zone, you'll usually want to begin your day's research before the New York Stock Exchange opens. The first few hours of the market offer some of the highest volatility.

As an investor, you'll likely have your own news source of choice depending on where you live and the commodities you're investing in. You may want to decide which commodities you're going to trade on that day, set up alerts, price targets and open your trading chat group if you use one to inform your market movements. CME Group provides extensive research into the commodities futures market and is an excellent source.

8:30 AM EST: Pre-Market Has Begun

Take the time before the market opens to perform both fundamental and technical analysis for the highest possible chance of success. Be at your computer and ready to begin buying and selling before 8:30 AM EST, which provides a wide range of investment opportunities

Although research is never over for the day, it's time to refine your trading strategy. Some of the steps you might want to take to finish preparations for the day might include:

•     Testing your trading platform. Your broker's trading platform is your most important tool for buying and selling futures contracts. Be sure that you're using the latest version of your platform and that your pre-set trades and commands are ready to go.
•     Check your trading account balance. Double-check your trading account balance and calculate how much money you want to risk on each trade. Risking more than 2% of your investment capital on a single price movement is not recommended.
•     Set up your quotes streaming service. Effective futures trading relies on real-time market quotes. Be sure that your quotes streaming service is updating minute by minute.

Once your trading platform is ready to go and you've defined your market strategy, you are almost prepared for the market to open. When trading futures, you will want to be prepared to enter the market at 8:30 AM EST because this is when the pre-market opens. The pre-market period between 8:30 AM EST and 9:30 AM EST (the official opening time of the US stock exchanges) provides some of the most volatility, which is what futures traders capitalize on when executing their trades. It is almost 9:30 AM EST, which means it is time to review your trading strategy one last time

9:30 AM EST: Begin Your Trading Day

It is officially time to make your first investment of the day. Monitor your progress and keep careful track of your investments, profits and losses. If you feel your adrenaline starting to rush, take a deep breath. You have prepared for this in your assessment of the market and limits that you have set for yourself. Watch the commodities closely and believe in the preparation you did before market opening.

11:30 AM EST: Take a Break and Review

Many futures traders opt to take a break for lunch around 11:30 EST. This is typically the start of the predictable traders' "lunch break," and market volatility remains low. During this period, potential profits are dampened regarding futures commodities and we all must eat.

1:30 PM EST: Decide if You Want to Continue Trading

If you choose to re-enter the market, you'll usually want to start investing again around 1:30 to 2:00 PM. This is when market volatility returns, and you can earn enough of a profit to justify your time investment. This volatility usually continues until 4:00 PM, when the markets close for the day.

Many investors believe that "more is more" when it comes to trading. However, the truth is that you shouldn't feel compelled to trade in the afternoon if you haven't met your goals for the day. The goal of all futures traders should be to execute as many stable and predictable trades as possible, quality over quantity can be a good motto when it comes to futures trades. Don't feel like you need to trade all day or that being a successful investor means executing as many trades as you can in a single day.

4:00 PM EST: Review Your Progress for the Day

Unless you have a specific investing strategy in mind, it's typically a good idea to exit your positions a few minutes before 4:00 PM arrives and the markets close. From here, it's time to evaluate and reflect on your day and take a look through your transaction history. Some of the factors you might want to consider from your day of investing may include:

•     The number of hours you spent trading
•     The total number of points gained or lost during today's trading sessions
•     Hours when you were most active on the market
•     Which futures contracts produced the best and worst returns of the day
•     Your total net gain or loss for the day

It can be helpful to record all of this information in an online journal. You can even attach screenshots of patterns or formations you used to make successful trades. Outside of your daily review, your day is over unless you want to practice a trading strategy with a practice account.

Entering the Futures Market

If you're considering entering the futures market, it's a good idea to practice and hone your investing strategy before you begin investing real money. Some brokers offer practice platforms that you can use to analyze your trading strategy and practice in real-time without risking any of your own capital. We recommend doing plenty of research before beginning in the fast-paced futures market.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.