What Is Futures Trading? (With Duties and Job Tips)

By Indeed Editorial Team

Published 20 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Futures trading can be a rewarding career choice that allows you to help clients secure contracts and make informed financial decisions. The job can require many responsibilities, from monitoring futures prices and financial markets to communicating with clients and executing buy and sell orders on their behalf. Learning about what's involved in futures trading can help you explore this as a career path. In this article, we discuss what futures trading is, review some key job tasks, detail skills for a futures trader, provide a list of steps on how to become one and give tips that can help you become successful in this profession.

What is futures trading?

If you're interested in pursuing a career in the financial industry, you may wonder, 'What is futures trading?' Futures are contract agreements between two or more parties to buy or sell a commodity at a predetermined price and date. This means that, even if prices rise or fall, the contract agreement is already secure and the buyer and seller are already bound to fulfil their price and date arrangement. Companies may undertake futures trading to minimise financial risk. For example, a company that does business internationally might deal in futures contracts to offset price fluctuations in currencies.

Responsibilities of a futures trader

Here are some key responsibilities you may perform as a futures trader:

Gather information for securities contracts

A security futures contract is an agreement between parties that involves buying or selling shares of a security, like common stock or exchange-traded funds. A prospective buyer or seller might hire a futures trader to gather important information about contract specifications. This could include details about the contract's set size, such as how many shares make up each stock or about the contract's settlement terms, such as whether to settle in cash or other means. This responsibility can also include collecting information about the contract's expiration date and the optimal months to trade in the client's chosen securities.

Execute buy and sell orders on behalf of clients

A futures trader might analyse the price movement of a client's asset interest to help them identify the right time to buy or sell. With this information, the trader can help determine which futures order type is most appropriate to the client's needs. For example, the client may value financial protection, so the trader could arrange a stop order, which puts a set limit above and below the market price as security against potential loss. If the arranged order details satisfy the client, the trader can execute the buy or sell order on their behalf.

Monitor futures prices and market changes

Staying up-to-date on future prices and market changes is an important responsibility that can help clients make informed trading decisions. A futures trader might perform this by accessing available market quotes from a relevant financial website. This can give the trader market data relating to their client's security or commodity prices and recent changes. A trading platform is a tool that traders may also use to monitor market changes. This offers valuable features like regular market updates, trading ideas and market analysis.

Record buy and sell orders

Futures traders may work for a bank or an investment management firm that requires them to record the buy and sell orders of their clients. Traders might perform this duty with inventory management software, which helps businesses manage and locate their orders. This process can also help traders access important order information, such as an execution price or a contract's expiry date.

Beneficial skills for futures trading

Here are several skills that may benefit you as a futures trader:

Critical thinking

Critical thinking skills may be useful for a futures trader in workplace scenarios where they evaluate trade information and make informed decisions on a client's behalf. For example, a trader might analyse price trends for a client's individual stocks and identify the right time to execute their futures order. If you want to develop your critical thinking skills, there are financial education workshops you can find online that help professionals apply problem-solving skills and outcome-based thinking.

Communication

Communication skills are important for listening to client instructions and explaining trade information to them. For example, a client may require a trader to share their speculations about interest rates or certain commodities, like coffee or wheat. Strong communication skills can help a trader simplify technical knowledge like this and convey it clearly. Active listening is another communication skill that can help a trader, such as in scenarios where they might require to listen to a client's requirements and provide financial feedback.

Mathematics

Having mathematics skills can help you as a futures trader with planning strategies and performing other financial duties. For example, you might plan and construct a quantitative analysis to help clients make profitable investment decisions. This could involve using mathematical models, which may require knowledge of statistics and probability or linear algebra, to measure patterns and make accurate predictions. You may improve your mathematics skills by enrolling in financial mathematics courses, which are available online and at many vocational schools.

How to become a futures trader

Below is a series of steps to help you learn how to become a futures trader:

1. Gain an education

A useful first step towards becoming a futures trader is to gain a bachelor's degree in finance. Undertaking a bachelor's degree course in finance can help you learn about how different markets operate in the economy and how to apply credit lending principles. This course can also provide work placement opportunities and invitations to attend employer presentations and networking events. These can give you insight into the finance industry and help you develop professional contacts. Some specific skills you can develop in this course that apply for futures trading may include:

applying practical measurements of risk and return of investments (ROI)
understanding of options and futures derivative securities
constructing financial models for different client needs
conducting a financial analysis with relevant tools, like financial databases
managing balance sheets for different financial requirements

2. Attend career information sessions

Attending career information sessions can help you gain tips and other valuable information about entering the finance industry and preparing for the recruitment process. They also give you the opportunity to speak with professionals who may share their experiences with futures trading and their chosen career path. This can offer you a clearer understanding of the job and ways you could plan your career. You might find advertisements for upcoming information sessions on university campuses or you can gather details by contacting a relevant university department. Employment websites may also post advertisements for career information sessions.

3. Pursue employment in the financial industry

After you've completed your education, you can enter the financial industry and begin pursuing your career. When choosing your employment position, you may consider jobs that can offer you experience working with futures contracts, such as trading firms or investment banks. This can help increase your exposure to contract specifications and give you experience working with clients' future requests and queries. These experiences can build your resume and improve your employment opportunities as a futures trader.

Tips for becoming a futures trader

Here are some helpful tips for becoming a futures trader:

Consult with other traders

Engaging with other traders and requesting their insight may help improve your knowledge in areas like financial markets or price trends, which can also increase your employability. For example, a fellow trader might be involved in digital currencies and have multiple years of experience tracking price changes. By consulting with them, you could learn information that helps you develop new clients interested in trading with digital currencies.

Commit to consistent learning

Succeeding as a futures trader can require continuous learning. With markets and financial practices developing and new ways of trading constantly emerging, like digital currencies, staying up to date on financial changes can make you a valued trader. You might stay informed by following or subscribing to financial news websites or by downloading a news ticker program to your computer that alerts you to breaking news and trade information. Staying informed can help you show your knowledge in a job interview or excel at providing reliable knowledge to clients.

Build relationships with clients

A significant part of the job can include communicating with clients. Developing a positive relationship with them can help build their trust in you and retain their business. With a strong relationship in place, a client may also recommend your services to others, which could attract new clients. To build a strong relationship with a client, you might exceed their expectations by sharing extra information or taking the time to get to know them on a personal level.