A Beginner's Guide to Day Trading Futures Using Price Action
By Galen Woods ‐ 5 min read
Day trading futures using price action is not for everyone. If you determined to try, this guide will take you through the essential steps.
Want to start start day trading futures?
Want a reliable trading method without forking out thousands of dollars for glittery indicators?
Follow this guide for step-by-step instructions to get started with day trading futures using price action.
1. Choose The Futures Contract You Want to Day Trade
The first step to day trading futures using price action is to select the future contract you want to trade.
A futures contract fit for day trading must fulfill two criteria. It should be volatile as market movements are the source of our trading profits. A dead market does not offer much room for day traders to profit. It should also be liquid. In illiquid markets, the slippage and the bid-ask spread will increase our trading costs. An intraday trader looking to capture small profits must minimise these costs.
Earlier, we analysed a basket of futures contracts by studying their volatility and liquidity.
Beyond volatility and liquidity, you should also consider your available time. While many futures markets trade round the clock, they are active during certain time of the day. Look for markets that are active during the period you are free to sit in front of your trading terminal.
Each futures contract has its peculiarities. For instance, each market has a typical volatility pattern throughout a session. Also, the news events that affect each futures market vary. You will need time to research and understand your choice of futures contract. Do not be too quick to switch from one to another.
If you are looking to trade more than one market, familiarise yourself with one before moving to the next. As a beginner, it is best to keep things simple and start with one futures market.
2. Get Your Trading Platform and Data Feed
With your preferred futures contract in mind, look for a charting platform and data feed.
Many futures brokers offer an array of charting/trading platforms and data feed packages. Contact a broker and ask for a demo account. You can get a 30-day trial easily.
You might be wondering how to choose among the different brokers. You might be comparing their trading commissions and reliability. Do not be overly concerned with your choice of broker at this stage because you won’t be trading live any time soon. You can spend more time figuring out your broker options when you are ready to trade live. For now, we just want a charting platform with a data feed for the futures contract we want to trade.
As we intend to day trade futures using price action, we have no need for fancy indicators. Hence, most charting platforms are enough.
No idea which platform to use?
I use NinjaTrader. If you decide to start with NinjaTrader, I will be able to help you with setting it up, just email me. NinjaTrader also offers excellent support through its forum.
You can get a list of brokers that work with NinjaTrader here. You can also read this article and use these indicators.
3. Learn How to Trade with Price Action
Day trading futures using price action is the simplest way to trade, but it is still possible to go overboard with it.
Some traders overload their charts with trading indicators and analyse too much. Similarly, some traders see price patterns everywhere and want to trade everything they see. You must avoid that. Otherwise, you will overtrade.
This is a recipe for learning price action and keeping it simple.
- Set the market landscape with support and resistance.
- Pick up one trading setup.
- Learn about positive expectancy and probabilistic mindset.
To speed up your learning, refer to our expanding guide to price action trading.
Check out my eBook series titled “Day Trading with Price Action” that focuses on trading futures with price action. It contains detailed bar-by-bar trading examples using simple price patterns like the Trend Bar Failure.
Need more help? Here are 6 effective ways to learn day trading.
4. Trade in Simulation
Trading in simulation mode is an essential step to day trading futures using price action. With a demo account from your broker, you can do so easily without incurring any costs.
Trading simulation has many benefits. It allows you to:
- Learn how to operate the trading/charting platform;
- Accumulate your trading experience;
- Verify your trading edge; and
- Preserve your precious trading capital during the learning phase.
Some traders criticise trading simulation as a wasted exercise as it does not train the psychology of the trader. It is true that a trader’s emotions are magnified when real money is on the line. But it does not mean that simulated trading offers no value.
Traders who find simulated trading useless are not approaching it with a serious mindset. They treat trading simulation as an aimless game. Try setting a concrete goal for your trading simulation. For instance, you must get a certain amount of profit over a set of simulated trades before you can trade live. Once you have that goal in mind, you will care more about your “fake trades”. You will get emotionally involved, and your psychological practice starts.
Start Day Trading Futures Using Price Action For Real
Once you are confident of your trading edge in demo, switch to live trading.
Congratulations, you are no longer a beginner.
If you intend to day trade futures full-time, make sure you perform these extra checks.
Want a complete and simple framework for day trading futures with price action?
Check out my “Day Trading with Price Action” eBook series.