How to Trade Futures? Complete 5-Step Tutorial From Futures Account Opening to Placing Orders in 2025

Want to amplify your investment returns through futures trading but feel confused by the complex “futures trading process”? Many beginner investors are curious about how individuals trade futures, yet often give up at the first step of opening an account. Don’t worry! This futures account opening tutorial, designed specifically for beginners, starts from zero and guides you step by step through the entire process, from account preparation and margin deposits to actual order placement. Using the simplest and most understandable explanations, we will help you fully grasp how to trade futures and easily take the first step toward efficient investing.

Before You Start Trading: First Understand What Futures Are

Before diving into the futures trading process, we must first establish a clear concept: what exactly are “futures”? In simple terms, futures are standardized “contracts for the future”. The buyer and seller agree to trade a specific quantity and quality of a commodity at a predetermined price at a specific point in the future. This “commodity” can be tangible, such as gold, crude oil, or corn, or intangible financial instruments, such as stock indices (Taiwan Index Futures), currencies, or interest rates. 

Futures vs. Stocks: What Are the Core Differences?

For most investors, stocks are the most familiar instruments. So what exactly differentiates futures from stocks? Their core differences can be understood from the following points:

The Two Core Elements of Futures Trading: Margin and Leverage

To master how to trade futures, you must understand the complementary concepts of “margin” and “leverage”.

• Margin: This is not the cost of buying the underlying asset itself, but a “performance guarantee deposit”. You only need to deposit a small portion of the contract’s total value as collateral to operate a futures contract worth far more. The purpose of this money is to ensure you can cover potential losses. Margin is mainly divided into:
  • Initial margin: The minimum funds required to open a new futures position (whether long or short).
  • Maintenance margin: The minimum account equity required when your position incurs losses due to market fluctuations. If your equity falls below this level, a margin call will be issued.
• Leverage: Leverage arises from the margin system. For example, if a Taiwan Index Futures contract has a total value of NT$1,800,000 and the initial margin is only NT$184,000, you are effectively controlling NT$1,800,000 of assets with NT$184,000, giving a leverage ratio of approximately 9.7 times (1,800,000 / 184,000). Leverage can amplify profits but also magnify losses, making it both the most attractive and most dangerous feature of futures trading.

Risks and Advantages You Must Know Before Trading

Before investing funds, it is crucial to rationally assess the advantages and disadvantages of futures.

✅ Advantages of futures:

• High leverage efficiency: Control a large position with relatively small capital, enhancing capital utilization.
• Two-way trading: Profit opportunities exist whether the market rises or falls, making strategies more flexible.
• Lower trading costs: Compared with stocks, futures transaction taxes are very low, with the main cost being broker fees.
• High liquidity: Popular futures products (such as Taiwan Index Futures or Mini Dow Jones) have many market participants, allowing orders to be executed quickly.

❌ Risks of futures:

• Leverage risk: High leverage is a double-edged sword. When the market moves against you, losses accumulate quickly, potentially reducing principal significantly in a short time.
• Forced liquidation risk: If account equity falls below the maintenance margin and funds are not replenished promptly, the broker has the right to forcibly close positions, realizing the losses.
• Expiration settlement risk: Futures contracts have an expiration date. If not managed, they will be forcibly settled at the settlement price, unlike stocks, which can be held indefinitely while waiting to recover.

Step 1: Futures Account Opening Tutorial | Complete the Application in 3 Steps

After understanding the basics, we officially enter the practical section of futures account opening. Most futures brokers now offer online account opening, making the process very convenient.

Step One: How to Choose a Futures Broker That Suits You?

Choosing a reliable futures broker is the foundation of trading success. When evaluating, consider the following key points:

• Legality and Compliance: The primary requirement is that the broker must be legally licensed by the Financial Supervisory Commission, ensuring the safety of your funds.
• Trading Commissions: Commissions are a key factor affecting trading costs. Compare the pricing and negotiation flexibility of different brokers, especially if you are an active intraday trader.
• Trading Software and Apps: The stability, speed, and user friendliness of the platform directly affect your order execution experience. It is recommended to choose software that provides a demo account function to test whether it matches your trading habits.
• Customer Service and Information Provision: High quality customer service can provide timely assistance when problems arise. Additionally, some brokers offer comprehensive market research reports and courses, which are very helpful for beginners.

Step Two: Prepare Two Forms of Identification and Bank Passbook, Detailed Online Account Opening Process

Once you have selected your preferred futures broker, you can prepare to open your account. Online account opening usually requires the following documents:

1. Front and back photos of your ID card
2. Front photo of a secondary ID (National Health Insurance card or driver’s license)
3. Photo of your own bank passbook cover (this account will serve as the designated deposit and withdrawal account)

The general online account opening process is as follows:

➡️ Fill in basic information: Access the broker’s online account opening page and sequentially enter your name, contact details, ID number, and other information.
➡️ Upload identification documents: Follow the system instructions to upload the pre taken photos of your IDs and bank passbook.
➡️ Sign contract documents: Read online and check to agree to all account opening contracts and the risk disclosure statement.
➡️ Wait for review: After submitting your application, the broker will review your documents, usually taking 1 to 3 business days.
➡️ Account opening confirmation: Once approved, you will receive an email or SMS notifying you of your account credentials and other information.

Step Three: After Account Opening, How to Deposit Funds into the Margin Account?

After your account is successfully opened, you will receive a dedicated “client margin account” virtual number. When depositing funds, be sure to use the bank account you originally designated and transfer funds into this account via ATM, online banking, or counter remittance. Remember, to comply with anti money laundering regulations, do not use an account other than the designated one, otherwise the funds will be returned. 

Step Two: Complete Futures Trading Process Diagram | From Order Placement to Closing

Once your funds are in place, congratulations! You are only one step away from your first trade. The following futures trading process will be explained using the most popular “Taiwan Index Futures” as an example. 

Familiarize Yourself with the Order Placement App/Software: Understanding Quotes and Order Screens

When you open your trading software, the first thing you will see is a densely packed quote screen. Don’t panic, first learn to identify several key pieces of information:

• Product code: For example, “Taiwan Index Near” or “TXF1” represents the most actively traded near month Taiwan Index Futures contract.
• Last price: The most recent transaction price in the market.
• Bid/Ask price: The highest price buyers are willing to pay / the lowest price sellers are willing to accept.
• Bid/Ask volume: The number of contracts waiting to be executed at the bid and ask prices.
• Change: The point difference relative to yesterday’s settlement price.

How to Place Your First Order? (Buy/Sell Tutorial Using Taiwan Index Futures as an Example)

Suppose you believe the Taiwan stock market will rise today and decide to go long on one Taiwan Index Futures contract. The operation steps are as follows:

1. Select the product: Find “Taiwan Index Futures” in the order screen and choose the near month contract.
2. Select position type: For a new position, choose “New Position”.
3. Select buy or sell: Expecting a rise, click “Buy”.
4. Set price and conditions:
   • Limit order (LOC): Specify a price you are willing to buy, for example, 17,500 points. Your order will only be executed when the market price reaches or falls below 17,500 points.
   • Market order (MKT): No specific price is set, the order executes immediately at the best available market price.
5. Enter quantity: Input “1” in the quantity field (representing one contract).
6. Submit the order: After confirming all information is correct, press the “Place Order” button. The order will be sent to the exchange, and upon execution, your account will reflect holding one long Taiwan Index Futures contract.

What is Closing a Position? How to Calculate Profit and Loss?

“Closing a position” means taking the opposite action to your existing position to exit the trade. If you initially “bought” to go long, closing the position means “selling”; conversely, if you initially “sold” to short, closing the position means “buying”.

Profit and loss calculation formula: (Sell price − Buy price) × Point value × Number of contracts − Total trading costs

Continuing the previous example, suppose you bought one Taiwan Index Futures contract at 17,500 points (with a point value of NT$200). If the index rises and you decide to close the position at 17,600 points, your profit would be:

(17,600 − 17,500) × 200 NT$/point × 1 contract − (commission + transaction tax)

= 100 points × 200 NT$/point − trading costs

= NT$20,000 − trading costs

This represents a complete trading cycle of how an individual buys and sells futures.

Futures Trading Frequently Asked Questions (FAQ)

How Much Money Do You Need at Minimum to Trade Futures?

There is no fixed minimum amount for trading futures; it entirely depends on the “initial margin” required for the product you wish to trade. For example, in Taiwan Stock Index Futures, the margin for one TX contract is approximately several hundred thousand NT$, while the margin for one MTX contract is about one quarter of that. For beginners, it is recommended to prepare not only the required initial margin but also at least an equal amount of additional funds as a buffer to handle market fluctuations and avoid forced stop outs due to insufficient funds.

What Happens if The Margin is Insufficient (Margin Call)?

When your “account equity” falls below the “maintenance margin” due to losses on your positions, the broker will issue a “Margin Call”. You must top up your account within the specified time to bring your equity back to the “initial margin” level. If you fail to do so, the broker has the right to forcibly close your positions, regardless of how large the loss is at that time.

What is the Difference Between Intraday Trading and Holding Positions Overnight in Futures?

The main difference lies in the duration of the position:

• Day Trading: Refers to opening and closing a position within the same trading day, without carrying it over to the next day. The advantage is that you can apply for “half margin for day trading”, lowering the capital requirement, and it avoids overnight risk after market close.
• Overnight Position: Refers to holding a position for more than one trading day. This requires full initial margin, and the trader must bear the risk of market gaps at the open caused by major international events occurring during non trading hours, (such as overnight or holidays).

Can Beginners Trade Overseas Futures?

Yes. Most Taiwanese futures brokers provide overseas futures omnibus account services, allowing you to trade foreign products directly using NTD, such as Mini Dow Jones, Light Crude Oil, Gold, and more. However, be aware that trading hours, contract specifications, margin requirements, and volatility for overseas futures differ from domestic futures. It is recommended to become familiar with domestic futures trading first before gradually exploring overseas markets.

Summary

In conclusion, trading futures as an individual is not actually complicated. The three core steps are: open a futures account, deposit sufficient margin, and place orders through trading software. After mastering the futures trading process in this tutorial, you have acquired basic practical skills. However, the real challenge lies in market analysis, capital management, and trading discipline. It is recommended that, before investing real funds in the early stages, you make full use of demo accounts to repeatedly practice order placement and validate your trading strategies, taking the most stable step toward investing. 🚀