What a futures contract actually is, and how it differs from every other market you've traded.
Cadet
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Almost every mistake a new futures trader makes traces back to one thing: treating a futures contract like a share of stock. It isn't. Before you place a single order, you need a clear mental model of what you are actually buying and selling.
A futures contract is a standardised agreement to buy or sell a specific quantity of something at a set price on a set future date. You are not buying an asset; you are entering an obligation that is priced continuously by the market. Index futures such as the E-mini S&P 500 settle in cash, so nothing is ever delivered — the difference between your entry price and your exit price is simply credited or debited to your account.
Because the contract is standardised by the exchange, every participant is trading exactly the same instrument. The size, the tick increment, the settlement method, and the expiry schedule are all fixed. The only variable you negotiate is price.
When you buy an index futures contract, what do you actually own?
10 XPEducational content only. Futures trading involves substantial risk of loss and is not suitable for every investor. Mission 01 — Astrofund program rules & FAQs.