Futures Trading: Concepts & Strategies
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- Live Trading
- Learning Track
- Prerequisites
- Syllabus
- About author
- Testimonials
- Faqs
Apply Futures Trading Strategies
- Create and backtest trend-following and counter-trend strategy.
- Manage risks effectively through diversification.
- Describe the need for position sizing and capital allocation as per the volatility parity approach.
- Analyzing the performance of the futures trading strategy using various measures such as drawdown plots, returns graphs, and Sharpe ratio.
- Explain term structure in the futures market and distinguish the futures market in backwardation or contango.
- Calculate implied yield and implement a term structure strategy.
- Explain futures market basics such as standardization, clearing, margin, speculators, expiry date, the first notice date, open interest, and limited life span.
- Live trade or paper trade trend following strategy and practice the concepts learned through a capstone project.

Skills Required for Futures Trading
Strategies
- Trend Following
- Counter Trend
- Term Structure
- Position Sizing
Python
- Pandas, Numpy
- Matplotlib
- Datetime, TA-lib
- While Loops
Concepts and Trading
- Futures Continuation
- Diversification
- Position Sizing
- Implied Yield, Margin, Notional and P&L Calculations

learning track 3
This course is a part of the Learning Track: Quantitative Trading in Futures and Options Markets
Course Fees
Full Learning Track
These courses are specially curated to help you with end-to-end learning of the subject.
Course Features
- Community
Faculty Support on Community
- Interactive Coding Exercises
Interactive Coding Practice
- Capstone Project
Capstone Project Using Real Market Data
- Trade & Learn Together
Trade and Learn Together
- Get Certified
Get Certified
Prerequisites
It is expected of you to have some financial markets experience. We have used Python for coding the strategies, however, Python is not a mandate to do this course. You can also replicate the models in spreadsheets or any other trading software language you are comfortable with.
Futures Trading Course
- IntroductionMr. Andreas Clenow, Chief Investment Officer of Acies Asset Management, assures you that futures trading is one of the simplest to understand and yet quite effective in the markets. You will go through the course structure and understand how the course is structured in the form of videos, quizzes, strategy codes and capstone projects. This will make sure that not only do you understand the mechanics of futures world, but also implement real world trading strategies in live markets.
Futures Contract
Futures contract is an obligation to buy or sell a specific asset at a predetermined price, at a predetermined date. In this section, you will learn what makes a futures contract unique. It talks about how speculators trade in the futures market, only to make economic gains. You will see what are the different assets that can be traded in the futures market. You will also learn about the properties of futures contracts.What Makes Futures Unique?3m 37sFeatures of Futures Contract2mAssets in Futures Market2mSpeculators2mProperties of Futures2m- Standardisation & ClearingFutures contracts are standardised and hence, enables you to trade in different assets without having an expertise in the traded material. This section will help you understand how the details like quality, quantity, place and time of delivery are regulated by a futures contract. Later in the section, you will also learn that the futures contract is an agreement between two parties. This agreement is centrally cleared by a clearing house.Standardisation2m 44sAttributes Regulated by Futures Contract2mClearing1m 37sAdvantages of Centralised Clearing2mRoles of Clearing House2mZero Sum Game2m
Futures Specific Properties
To deal in the futures market, you need to know a set of standard properties for all futures markets. Knowing these properties will help you effectively treat all the futures markets in the same way. In this section, you will learn about the specific properties like the root symbol, month, ticker, expiry date, first notice date, margin and execution terminology.Futures Specific Properties I2m 18sRoot Symbol2mDelivery Months2mTicker2mInterpret the Ticker2mFutures Specific Properties II2m 31sDelivery Date of a Futures Contract2mMargin2mTest on Futures Contract, Standardisation & Clearing and Futures Specific Properties16mFutures Profit and Loss
Calculation of profit and loss on futures position works differently from other asset classes. Before creating a trading strategy, it is essential to understand the logic behind futures profit and loss calculation. In this section, you will learn about the concepts such as point value, mark to market and learn to calculate futures PnL with examples. Further in the section, you will learn about the effect of currency on futures PnL. You will also compare currency exposure on futures and stocks.Futures PnL Calculation4m 27sWhat is Point Value?2mCalculate Futures PnL2mCalculate Daily Futures PnL2mHow to Use Jupyter Notebook?2m 5sCalculate Futures PnL in Python10mGetting Started with Interactive Exercises5mRead Gold Futures Data5mCalculate Daily Price Change5mCalculate Daily PnL5mCalculate Cumulative PnL5mPlot Cumulative PnL5mFutures and Currency Exposure3m 59sRelationship Between Futures and Currency2mCalculate Realised PnL on Futures Position2mCalculate PnL on Stocks Position2m- Futures MarketFutures contracts are each based on different underlying assets. These can be based on physical commodities, like the agricultural and non agricultural commodities. The futures can also be based on the interest rates and currency exchange rates. Apart from these, the futures contract can even be based on the equity index value! In this section, you will learn about the various sectors on which the futures contracts are based. You will also learn about the deliverable and non-deliverable contracts, and the first notice date concept in the futures market.Futures Sectors: Overview4m 10sEquity Index Futures2mCurrency Futures2mRates Futures2mYield and Price2mFutures in the Commodity Sector3m 21sAgricultural Commodities2mAgricultural Commodity Futures2mDeliverability of Commodity Futures2mFirst Notice Date2mNon-agricultural Commodities2mNon-agricultural Commodity Futures2mVolatility in Futures Contracts2m
- Futures DatasetAll the futures contracts have a futures chain. In this section, you will learn how to read the futures chain. The futures chain is like a snapshot of the futures trading activity in a particular asset. You will also learn about the importance of a definite expiry date in the futures contract. The definite expiry date gives a lot of opportunities in terms of trading but is also problematic when you are trying to perform long term analysis on the data. You will understand how the same commodity can be traded at different prices for contracts expiring on different dates.Futures Data4m 1sFutures Chain2mVolume and Open Interest2mChange in Open Interest: Writing Contracts2mChange in Open Interest: Settling Contracts2mThe Issue of Limited Life Span2m 25sBuy and Hold Futures2mPredictable Life Span2mPrice Difference in Futures Contracts3m 31sPrice of Different Futures Contracts2mStitching Time Series2mFutures Active Trading2mLimited Life Span Problem2m
- Futures ContinuationsTo overcome the issue of the limited life span, different ways have been suggested to build a continuous price line of the same asset, in spite of different expiry dates. You will explore both the good and bad methods of building futures continuations. Finally, you will understand why the proportional adjustment method is good for analysis.Default Futures Continuations3m 29sProperties of Continuations2mOther Methods of Futures Continuation2m 31sConstruction of Continuations2mLimitations of Add and Subtract Method2mProportional Adjustment Method2mAdvantage of Proportional Adjustment2mOptimal Choice for Continuations2mAdditive Adjustment10mAdditive Adjustment Factor5mAdjustment Factor for the First Contract2mAdjustment Factor for the Second Contract2mProportional Adjustment10mProportional Adjustment Factor2mSources for Futures Data10mTest on Futures Profit and Loss, Futures Market, Futures Dataset and Futures Continuations20m
Analysing Tradable Assets
A very common problem with new traders is that they analyse one thing, and then trade the other. Like the index is analysed, and the futures are traded. This section highlights the importance of performing the correct analysis of tradable assets. With an example of an index and its continuous futures contract, you learn the importance of trading what you analyse.Trade What You Analyse3m 28sTradable Assets2mFutures and Underlying2mFutures Trading Concept3m 53sTrend Following Introduction
This section talks about the history of the trend following strategy. Further, it discusses the principle behind creating a robust trend following strategy. It explains the logic behind the successful and profitable trend following models with the help of a rolling dice game. Further in the process, you will also learn about the calculation of the expected value.Trend Following Background2m 47sHistory of Trend Following2mTrend Following Facts2mPrinciples of Trend Following4m 14sTrend Following Logic2mPercentage of Winning Trades2mExpected Value of Game2mExpected PnL Calculation10mProfitability of a Game2mProfitability of Trend Following2m- Trend Following EntriesIn creating a robust trading model, both entry and exit rules are important. In this section, you will learn about the entry rules to buy and sell in the trend following model. It discusses the importance of a trend filter and trend breakout to buy and sell. You will also learn to code and visualise the entry points in Python.Trend Following Entries3m 9sTrend Following Entry Logic2mPurpose of Dual Moving Average2mPositive Trend2mPurpose of Breakout2mPurpose of Trailing Stop Loss2mCode Trend Following Entries10mCalculate Exponential Moving Average5mDefine Trend5mLong Entry5mConditions for Short Entry2m
Risk Management
Measuring risk is very critical for any trading approach. In this section, you will learn about financial risk and how these risks are measured. Further, you will see that to manage risk, it is very important that each position you hold has an equal impact on your portfolio. This section explains why we should allocate more to the slow moving markets and less to the fast moving markets. It explains the concept of actual risk exposure and the notional value. Further, you will also learn how futures markets are different from the cash markets. You will also apply the learnings and calculate the position size for two assets in order to allocate equal risk to both.Financial Risk Primer2m 8sFinancial Risk Management2mImportance of Time in Risk Management2mLimitations of Allocating Equal Amount2mMeasuring Financial Risk Using Volatility2m 22sPurpose of Volatility Parity Position Sizing2mPosition Allocation3m 57sVolatility Parity Position Sizing2mLeverage in Futures Space2mRisk Factor2mNumber of Contracts2mPosition Allocation Using Python10mDaily Dollar Variation of a Contract5mTarget Daily Variation5mNumber of Contract5mNotional Dollar Value5mTrend Following Exits
The exit rules for the trend following strategy are discussed in this section. A pullback indicator is calculated which exits the position if the market moves against our position by a threshold value. The overall strategy position for trend following is calculated by combining the entry and exit signals.Trend Following Exits2m 8sPurpose of Trend Following Stops2mDrawback of Profit Targets2mSetting the Stop Distance2m 55sDrawback of Fixed Percent Stops2mDrawback of Fixed Dollar Stops2mCalculating Trend Exit2mTrend Following Exits: Single Asset10mRolling Volatility5mRolling Maximum Price5mLong Exit5mCarry Forward the Position5mPullback for Bearish Trend2m- Trend Following Analysis on Single MarketsThere are trading strategies that work well on both individual markets and portfolios of markets. This section discusses the trend following model rules for entry and exit on the individual markets. Further, you will apply these rules on the Palladium futures price and analyse the backtest results.Trend Following Rules1m 57sTrend Following Rules Flowchart10mEnter the Position2mTrend Following on Single Markets3m 17sConclusion from Backtest Results2mStrategy Returns for Trend Following10mTotal Positions5mStrategy Returns5mCumulative Strategy Returns5mPlot Cumulative Strategy Returns5m
Diversification in Trend Following
The trend following strategy works best when the portfolio is diversified. This section highlights the importance of diversification for obtaining good results using trend following strategies. For illustration purposes, a sample strategy is implemented on multiple assets and analysed.The Power of Diversification3m 2sTrend Following Backtest Performance2mDiversified Portfolio Backtest2mTrend Following Strategy on Multiple Assets10mInverse Volatility5mInverse Volatility Weights5mVolatility Weighted Returns5mPortfolio Returns5m- Strategy AnalysisAnalysing your strategy is very important to safeguard your capital. Return is not the only metric that can help you in understanding the performance of your strategy. In this section, you will learn the importance of analysing your strategy through thorough backtesting. It talks about various metrics, like Sharpe ratio and maximum drawdown, and rolling analysis. Further, it talks about how the number of winning trades are much smaller than the number of failing trades. And yet, the less winning trades results in net profit. It also explains how optimising the rules of a strategy will lead to overfitting.Strategy Analysis4m 24sAnalysing Strategy Returns2mConclusions on Strategy2mTrend Following Trades2mInterpret the Graph2mLimitations of Trend Following Trades1m 56sLosing Trades in Trend Following Strategies2mDrawbacks of Doubling the Stop Loss2mBacktested Results from Diversified Market2mBacktested Results from Single Market2mOptimising the Rules2mStrategy Analysis10mLog-scale Axis5mAnnualised Returns2mAnnualised Volatility2m
- Counter Trend ModelsIt is often seen that the trend following strategy stops out too early and too often. The counter trend strategy attempts to overcome this problem by entering into a position when the trend following strategy exits. You will learn how counter trend models try to capture the continuation of a trend, after the trend following strategy stops out.Counter Trend Models2mCounter Trend Nomenclature2mCounter Trend Logic2mCounter Trend Features2mDiversification in Counter Trend2m
- Counter Trend EntriesIn this section, you will learn about the importance of the entry points in the counter trend models. In the trend model, the exit is followed by an immediate entry signal, which leads to frustration in the trend followers. The section explains how the counter trend model overcomes this issue by reversing the logic of the trend model. It also explains the concept of pullback. Further, you will apply the learnings to generate your own entry signals on the S&P 500 Total Return index.Counter Trend Entries2mEntry Logic2mTrend Filter2mTrend Pullback2mNeed for Trend Filter2mMeasuring Trend Pullback2mTrend Pullback Using Volatility Method2mEntry Signal10mCalculate the Pullback5mGenerate the Entry Signal5m
- Counter Trend ExitsExperimenting with the exit rules is very important in order to create a proper exit rule. This section will walk you through a simple exit rule. It will explain how the model ends up with a reasonable profit even for a simple exit rule. You will further apply the learnings to generate your own exit signals.Counter Trend Exits2m 41sIdentify Exit Point for a Long Trade2mExit Rule2mCounter Trend Exits10mExit Logic: Position Held for a Month2mExit Logic for a Long Position2m
- Counter Trend Strategy AnalysisThe returns of the counter trend strategy are analysed in this section. You will learn how this strategy not only outperforms the benchmark but also performes well in equity bear markets.Counter Trend Strategy Analysis1m 36sCounter Trend Strategy Performance2mCounter Trend Performance Comparison2mTest on Trend-Following and Counter-Trend Strategies14m
- Term StructureThe concept of term structure trading is quite different from anything you may have seen with stocks, currencies or other common asset classes. In this section, you will learn about contango and backwardation structure and visualise them. Next, you will learn about annualised implied yield and its calculation in Python. Further, you will plot the implied yield to quantify the term structure which helps to make trading decisions.Futures Price and Delivery Dates3m 14sReason for Difference in Price2mIntroduction to Term Structure2m 37sInterpret Term Structure Graph2mInterpret Contango2mTerm Structure2mQuantifying Term Structure4m 17sPurpose of Annualising Term Structure2mAnnualised Term Structure Formula2mQuantification of Term Structure5mDays Between Spot and Futures Expiry5mPercentage Difference5mAnnualised Implied Yield5mTerm Structure Concept8m 29s
- Term Structure TradingIn this section, you will use the implied yield and open interest to decide if a contract that is further from the one nearing expiry can deliver more gains. Part of the gains will come from saving on the transaction cost of rolling over from the front contract to the one farther out. You will also look at the calendar spread strategy which considers the term structure as the sole indicator.Contract Selection2m 55sAnalysing Term Structure2mShorting Future Contracts2mCalendar Spread Strategy1m 30sAdvantages of Calendar Spread Strategy2mExamples of Application of Term Structure2mLong or Short in Calendar Spread Strategy2mCalendar Spread and Arbitrage2mPositions in Calendar Spread Strategy2mTiming the Exit of Calendar Spread Strategy2mTrading Term Structure3mTrading One Year from Current Futures2mUsage of Term Structure2mTerm Structure Strategy Analysis1m 36sTerm Structure Strategy Performance2mTerm Structure Performance Comparison2mTrading the Curve Presentation (Optional)10mTerm Structure Strategies13mTest on Term Structure14m
- Pushing Diversification FurtherThe concept of diversification using multiple assets is portfolio diversification. But we don’t know for sure which strategy to run for the assets in the portfolio. The concept of style diversification is introduced in this section where you learn that diversification of the strategy also results in a better return on investment.Pushing Diversification Further4m 54sStyle Diversification2mStrategy Performance2mDiversification Benefits2mPushing Diversification Further10mRebalancing Logic2mTest on Diversification, Risk Management and Strategy Analysis16m
- Run Codes Locally on Your MachineLearn to install the Python environment in your local machine.Uninterrupted Learning Journey with Quantra2mPython Installation Overview1m 59sFlow Diagram10mInstall Anaconda on Windows10mInstall Anaconda on Mac10mKnow your Current Environment2mTroubleshooting Anaconda Installation Problems10mCreating a Python Environment10mChanging Environments2mQuantra Environment2mTroubleshooting Tips For Setting Up Environment10mHow to Run Files in Downloadable Section?10mTroubleshooting For Running Files in Downloadable Section10m
- Live Trading on IBridgePyThis section gives an overview of live trading your strategies using IBridgePy. It includes details about the code structure, how to place orders, and the link to our free course on IBridgePy.Section Overview2m 2sLive Trading Overview2m 41sVectorised vs Event Driven2mProcess in Live Trading2mReal-Time Data Source2mCode Structure2m 15sImportant API Methods10mSchedule Strategy Logic2mFetch Historical Data2mPlace Orders2mIBridgePy Course Link10mAdditional Reading10mFrequently Asked Questions10m
- Automate Trading Strategy Using IBridgePyThis section includes a template for live trading which can be used on IBridgePy. The live trading strategy template is based on the strategies discussed in the course, modified to run in a live trading environment. A data subscription may be required based on the asset being traded in the strategy.Template Documentation10mLive Trading Strategy Template2m
- Capstone ProjectIn this section, you will undertake a capstone project on real-world data. This project will require you to apply and practice the concepts learnt throughout this course.Capstone Project: Getting Started10mProblem Statement10mFrequently Asked Questions10mCode Template and Data Files2mModel Solution: Futures Trading Capstone Project10mCapstone Solution Downloadable2m
- Course SummaryIn this section, you will go through the different concepts you learnt throughout the course. You will also be able to download all the strategy notebooks as a zip file. You can use these notebooks and modify its contents to create your own unique strategy.Conclusion2mPython Codes and Data2m
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Faqs
- When will I have access to the course content, including videos and strategies?
You will gain access to the entire course content including videos and strategies, as soon as you complete the payment and successfully enroll in the course.
- Will I get a certificate at the completion of the course?
Yes, you will be awarded with a certification from QuantInsti after successfully completing the online learning units.
- Are there any webinars, live or classroom sessions available in the course?
No, there are no live or classroom sessions in the course. You can ask your queries on community and get responses from fellow learners and faculty members.
- Is there any support available after I purchase the course?
Yes, you can ask your queries related to the course on the community: https://quantra.quantinsti.com/community
- What are the system requirements to do this course?
Fast-speed internet connection and a browser application are required for this course. For best experience, use Chrome.
- What is the admission criteria?
There is no admission criterion. You are recommended to go through the prerequisites section and be aware of skill sets gained and required to learn most from the course.
- Is there a refund available?
We respect your time, and hence, we offer concise but effective short-term courses created under professional guidance. We try to offer the most value within the shortest time. There are a few courses on Quantra which are free of cost. Please check the price of the course before enrolling in it. Once a purchase is made, we offer complete course content. For paid courses, we follow a 'no refund' policy.
- Is the course downloadable?
Some of the course material is downloadable such as Python notebooks with strategy codes. We also guide you how to use these codes on your own system to practice further.
- Can the python strategies provided in the course be immediately used for trading?
We focus on teaching these quantitative and machine learning techniques and how learners can use them for developing their own strategies. You may or may not be able to directly use them in your own system. Please do note that we are not advising or offering any trading/investment services. The strategies are used for learning & understanding purposes and we don't take any responsibility for the performance or any profit or losses that using these techniques results in.
- I want to develop my own algorithmic trading strategy. Can I use a Quantra course notebook for the same?
Quantra environment is a zero-installation solution to get beginners to start off with coding in Python. While learning you won't have to download or install anything! However, if you wish to later implement the learning on your system, you can definitely do that. All the notebooks in the Quantra portal are available for download at the end of each course and they can be run in the local system just the same as they run in the portal. The user can modify/tweak/rework all such code files as per his need. We encourage you to implement different concepts learnt from different learning tracks into your trading strategy to make it more suited to the real-world scenario.
- If I plug in the Quantra code to my trading system, am I sure to make money?
No. We provide you guidance on how to create strategy using different techniques and indicators, but no strategy is plug and play. A lot of effort is required to backtest any strategy, after which we fine-tune the strategy parameters and see the performance on paper trading before we finally implement the live execution of trades.
- What does "lifetime access" mean?
Lifetime access means that once you enroll in the course, you will have unlimited access to all course materials, including videos, resources, readings, and other learning materials for as long as the course remains available online. There are no time limits or expiration dates on your access, allowing you to learn at your own pace and revisit the content whenever you need it, even after you've completed the course. It's important to note that "lifetime" refers to the lifetime of the course itself—if the platform or course is discontinued for any reason, we will inform you in advance. This will allow you enough time to download or access any course materials you need for future use.
- How does futures trading work?
A buyer and seller enter into a contract where the seller agrees to deliver an asset to the buyer at an agreed price on a future date. Initially, it was for commodity producers and consumers to settle for a price today so that they won't have to worry about price uncertainty in the future. Now, there are a plethora of assets which include agricultural and non-agricultural commodities, currency, equity as well as interest rates. Along with the individuals interested in the delivery, there are speculators in the futures market who are not interested in the physical delivery but want to speculate on the price direction as well
- What is the difference between options and futures trading?
While both options and futures are derivatives of the underlying asset, the option buyer has an option to buy or reject the option at the time of expiry. In comparison, the futures buyer has an obligation to honour the trade at the time of its expiry. In futures, both buyer and seller is required to post margin. Whereas in Options, only seller is required to post margin.
- What is trend following trading?
Trend following trading is a trading strategy where we first identify if an asset is trending. It is usually seen that a trending asset's price does not actually keep increasing, but dips temporarily before rising again. The trend following model developed in the futures trading course waits for the trend to develop before entering the trade. The position is closed when the price goes in the opposite direction rapidly.
- How to trade counter trend?
The entry condition of a counter trend model is logically opposite to that of the trend following model. It is also called a mean reversion model in certain cases. In this strategy you actually look for dips in an asset whose price is increasing in the long run. The position is closed when the long term trend flips.
- What is portfolio diversification?
No matter how successful a trading strategy is, it cannot predict any unexpected event or announcements. Thus, to reduce the risk, you should never put all your capital in one place. The practice of trading in multiple assets is generally known as portfolio diversification.
In the futures trading course, you not only diversify your capital, but also use the three trading strategies taught in the course to diversify your portfolio further. - What are futures and how does futures trading work?
Futures are financial contracts where two parties agree to buy or sell an asset at a set price on a specific date in the future. These assets can include commodities like oil or gold, stock indices, or even cryptocurrencies.
Futures trading involves speculating on the price movement of these assets. Traders can profit if they predict correctly whether the price will rise or fall. For instance, if you think the price of oil will go up, you could buy a futures contract now and sell it later at a higher price.
It’s important to note that futures trading often involves leverage, meaning you can trade larger amounts than your initial investment, increasing both potential profits and losses. - Is futures trading safe?
Futures trading can be risky due to the use of leverage, which can amplify your potential gain or loss. However, backtesting your trading strategy on historical data can help you understand your strategy performance and adding risk management methods can help mitigate these risks.