Best Futures Trading Platforms for February 2024 | The Motley Fool (2024)

The best futures brokers let you invest in assets that aren't available through the stock market or other easily-accessible sources. But when you're looking to diversify how you invest money with futures, it's important to understand the risks and to focus on futures brokers that can help cut costs.

We've put together this list to help you learn the ins and outs and to understand when investing in futures is right for you. If you're interested in taking steps toward trading futures, read on to find the best futures trading platform for you.

2 Featured Picks From Our Best Futures Trading Platforms

There are a lot of options to compare, even on this page. It can be overwhelming! If you're looking for a place to start, here are two trading platforms our experts recommend and why they like them:

• Interactive Brokers: Great broker for advanced futures traders
• TradeStation: Standout future trading platform

Perks of the best futures trading platforms

Not every futures broker will check all of these boxes. But here are some of the things to look for as you consider the best futures broker:

Interactive Brokers

Best broker for futures traders who: Trade at high volumes and want a powerful trading platform.

Interactive Brokers is known for its feature-packed trading platform and low-commission trading, especially on options and futures. While the platform can be a bit intimidating for beginners, Interactive Brokers offers a vast assortment of futures trading choices, with access to futures and futures options on more than 35 markets worldwide. For investors who regularly trade on margin, Interactive Brokers offers some of the lowest margin rates in the industry.

Why futures traders might love Interactive Brokers:

• Lower commissions for active traders
• Lots of variety in futures products
• Feature-packed trading platform

Why some futures traders might not choose Interactive Brokers:

• Complicated commission structure
• Not the most beginner-friendly trading platform

Read our full review of Interactive Brokers.

TradeStation

Best broker for futures traders who: Want an excellent trading platform with many other brokerage features.

TradeStation could be an excellent choice for futures traders who want a combination of a feature-rich futures trading platform with the ability to also do things like invest in mutual funds or buy cryptocurrencies. It has a high-powered trading platform for active investors, but also offers a user-friendly web-based platform that makes it a good fit for newer investors as well. One potential downside is that TradeStation's commission rates aren't exactly the lowest for futures and options.

Why futures traders might love TradeStation:

• Fantastic desktop trading platform
• Many different investments available
• Low-priced plan for beginners who don't need complex tools

Why some futures traders might not choose TradeStation:

• Futures commissions are higher than rivals
• Margin rates are on the higher end

Read our full review of TradeStation.

Tastytrade

Best broker for futures traders who: Want a platform specifically designed for active options and futures traders.

Tastytrade was founded with options and futures traders in mind, by the team that pioneered retail options trading many years ago. It offers a best-in-class tech platform for active futures trading, has plenty of different futures available on its platform, and has one of the lowest commission structures in the futures industry with per-contract commissions ranging from $0.25 to $1.25. Tastytrade also offers a feature-packed mobile trading platform, enabling futures trading on the go without sacrificing functionality.

Why futures traders might love Tastytrade:

• Commissions starting at $0.25 per contract
• Trading platform designed specifically for options and futures
• Wide variety of futures available

Why some futures traders might not choose Tastytrade:

• Other platforms are more beginner-friendly
• Doesn't offer certain investment and account types

Read our full review of Tastytrade.

Charles Schwab

Best broker for futures traders who: Want a full-featured brokerage experience with the ability to trade futures.

Charles Schwab might be the most well-rounded broker on this list, as it checks the boxes most investors want to see. It has many different investment types, lots of educational features, and even has physical branches for investors who have questions. Thanks to its acquisition of TD Ameritrade, Charles Schwab also has one of the best options and futures trading platforms in the industry (thinkorswim). One downside is Charles Schwab's relatively high commission rate, but it could be worth it for casual futures traders who find value in keeping all of their investments with the same financial institution.

Why futures traders might love Charles Schwab:

• Excellent trading tools and futures research access
• Many different investment and account types in one place
• Beginner-friendly trading platforms available

Why some futures traders might not choose Charles Schwab:

• $2.25 per-contract commission is higher than rivals
• Margin rates are relatively high

Read our full review of Charles Schwab.

Futures are agreements to sell a fixed amount of an asset at a specific date in the future -- instead of buying a commodity, currency, or other asset at today's market price.

Futures are traded in the form of contracts, which are agreements between the seller of an asset and the buyer, or futures trader. For example, one oil futures contract typically represents 1,000 barrels of oil to be delivered at a certain future date. Futures contracts can represent a wide variety of commodities, currencies, stock indices, and more.

And there are a couple of other types of futures and related investments worth knowing about:

Options on futures: These work similarly to stock options. A futures option gives you the right (but not the obligation) to buy or sell a certain futures contract at a predetermined price at any time before the option's expiration date.

E-Mini futures: Without getting into too much detail, E-mini futures are contracts that represent a smaller amount of assets than the standard contract. For example, CME's E-mini S&P 500 futures contract represents one-fifth the assets of its standard S&P 500 futures contract. Because they represent smaller quantities of assets, many brokers offer lower commission rates on E-mini contracts.

How do futures trading commissions work?

Futures trading brokers charge commissions on a per-contract basis. Until recently, there was also a base commission in some cases. Since brokers did away with stock trading commissions, the base commissions that had been charged on some futures trades have gone away.

Per-contract pricing can vary significantly. Typical online futures brokers charge futures trading commissions in the $1-$3 range per contract. Some of the more volume-oriented platforms have lower commissions. Some have separate commissions structures for futures options and E-mini futures as well.

Is futures trading right for you?

It depends. Like any other kind of trading, futures are appropriate for investors who really know what they're doing. Futures trading can be risky. For one thing, futures investors often use a significant amount of margin (leverage) when trading. Think of margin as borrowing a portion of an investment's value -- similar to getting a mortgage to pay for what your down payment doesn't cover on a house. Any time there's a large component of leverage, there's going to be the potential for amplified losses if things go the wrong way.

It's important for beginners to learn as much as possible before getting started. If you're thinking of starting to trade futures, it could be a smart idea to choose a broker with tons of educational resources. Also look for a "play money" platform so you can try futures trading without risking your actual money until you're 100% sure you're ready.

Pros and cons of futures trading

Pros

Longer market hours: Futures markets are open considerably longer hours than the stock market. For example, CME's futures markets are open nearly 23 hours a day, six days a week.

Tons of available assets: Want to invest in the price of oil? Orange juice? Bitcoin? Coffee? Euros? Want to predict the direction of interest rates? Those are just a few of the assets you can find futures contracts on.

Lots of leverage: Margin is a standard component of futures trading, to a much greater extent than the stock market. This can be a good or bad thing, but it does let you control a relatively large contract value with a small capital outlay.

No time decay: In options trading, options contracts generally lose some of their value over time as they get closer to expiration, a phenomenon known as time decay. Because futures contracts represent the actual price of an asset, and not the right to buy an asset, there's no time decay involved.

READ MORE: If you're looking to trade options, here's our list of the best options stock brokers.

Cons

Risk: Futures trading is a completely different animal than stock or options trading and carries its own set of risks. It can be very easy to lose money with futures trading if you don't know what you're doing.

World events: Events beyond investors' control can influence futures prices and lead to huge losses in some cases. For example, in the early days of the COVID-19 pandemic, there simply wasn't enough space to put all of the oil represented by futures contracts after demand collapsed. So, oil futures actually traded for negative prices at one point.

High leverage: As mentioned, the use of leverage can be a positive or negative. While high leverage gives you exposure to a high dollar value of assets, it can also make relatively small swings in asset prices turn into huge swings in futures traders' accounts.