Complete Guide to U.S. Trading: Master the Logic of U.S. Stock Futures Investment from Scratch

Why Should Retail Investors Understand US Stock Futures?

Many stock investors feel unfamiliar with US futures (US stock futures), but in fact, these derivatives offer far more value to individual investors than you might imagine. Instead of passively holding stocks, it’s better to actively use US stock futures to hedge risks or seize short-term opportunities.

The core appeal of US stock futures lies in three points: leveraging a smaller amount of capital to control a larger market exposure, remaining profitable during a market decline, and locking in future purchase prices in advance. These features make futures a trading tool used by both institutions and retail traders.

What Exactly Are US Stock Futures?

Simply put, futures contracts are a “future trading agreement”: both parties agree to buy or sell an asset at a predetermined price on a future date.

For example, in oil: you sign a contract to buy 3 months later at $80 per barrel, locking in your procurement cost. If oil prices rise to $90 after 3 months, you profit from the difference.

US stock futures apply this logic to stock indices. When you buy a Nasdaq 100 futures contract, you are essentially betting on the future performance of a basket of tech stocks. Every 1-point increase in the index increases your contract’s value by a certain amount.

The most straightforward formula: Index points × Multiplier (USD) = Contract Nominal Value

For example: Nasdaq 100 at 12,800 points, buying a micro contract (MNQ): 12,800 × $2 = $25,600 nominal value

This means you can control such a large position with far less than $25,600 in margin.

How Much Capital Do You Need to Trade US Futures?

There are two specifications in the market:

Mini Contracts (E-mini) – suitable for institutions or well-funded investors:

• S&P 500 futures (ES): initial margin $12,320
• Nasdaq 100 futures (NQ): initial margin $18,480
• Dow Jones futures (YM): initial margin $8,800
• Russell 2000 futures (RTY): initial margin $6,820

Micro Contracts (Micro E-mini) – friendly for retail traders:

• Micro S&P 500 (MES): initial margin $1,232
• Micro Nasdaq (MNQ): initial margin $1,848
• Micro Dow (MYM): initial margin $880
• Micro Russell 2000 (M2K): initial margin $682

Important note: Margin is two-tiered. The initial margin is required to open a position, while the maintenance margin is the minimum to keep the position open. If your account falls below the maintenance margin, your broker will force a liquidation.

How Are US Futures Settled? Will You Receive Stocks?

No. US stock futures are cash-settled, not physically delivered.

At expiration (the third Friday of March, June, September, December each year), your profit or loss is automatically settled in cash based on the final settlement price. This design is clever—imagine the complexity of delivering 500 stocks in the S&P 500; cash settlement avoids this hassle.

If you want to roll over your position, you simply close the old contract and open a new forward contract, called “rollover.”

How Can You Profit from US Futures? The Three Main Trading Purposes

1. Hedging Risks

If you hold a large amount of tech stocks and worry about a Nasdaq crash, you can short Nasdaq futures. When the index falls, futures profit offsets the stock losses.

2. Short-term Speculation

If you are optimistic about US economic data, buy S&P 500 futures; if bearish, short. Using 1x leverage, you bet on the market direction.

Example: Buy ES contracts at 4,000 points, sell at 4,050 points:

• Price change: 50 points
• Multiplier: $50/point
• Profit: 50 × $50 = $2,500

3. Price Locking

Suppose you have funds to invest in three months, but the market is adjusting now. You want to “lock in” today’s entry price. Buying futures with a nominal amount equivalent to your target position allows this, without investing all your capital upfront.

How High Is the Leverage? What About the Risks?

Taking S&P 500 futures as an example, at 4,000 points:

• Initial margin: $12,320
• Nominal value: 4,000 × $50 = $200,000
• Leverage multiple: $200,000 ÷ $12,320 ≈ 16.2x

This means a 1% increase in the index results in a 16.2% gain; a 1% decrease results in a 16.2% loss.

Higher leverage equals higher risk. Shorting futures can theoretically lead to unlimited losses, so strict stop-losses are essential. Most professional traders recommend using 3-5x leverage for futures, not maximum leverage.

US Futures Trading Hours and Circuit Breakers

Trading hours (Eastern Time):

• Sunday 6:00 PM to Friday 5:00 PM
• Close for 1 hour from Monday to Thursday at 5:00 PM
• Nearly 24-hour trading overlaps with Asian morning sessions

Circuit Breaker Rules:

• After market close: 7% move triggers circuit breaker
• During trading hours: 7%, 13%, 20% three levels of circuit breakers

How to Choose the Right US Futures Contract?

Step 1: Decide on market direction

• Bullish on the overall market? Choose S&P 500 futures
• Bullish on tech stocks? Choose Nasdaq 100 futures
• Favor small caps? Choose Russell 2000 futures
• Prefer blue chips? Choose Dow Jones futures

Step 2: Select contract size Beginners with only 30,000–50,000 USD should avoid mini contracts (each with a nominal value of 200,000–300,000 USD). Micro contracts are more suitable.

Step 3: Consider volatility Nasdaq 100 is more volatile; set wider stop-loss distances. S&P 500 is relatively stable.

Step 4: Ensure liquidity Trade active products. Illiquid contracts may be hard to buy or sell, forcing you to accept poor prices.

US Futures vs. CFDs: Which to Choose?

Both allow small capital to control large markets, but each has pros and cons:

US Futures Advantages:

• Transparent regulation, traded on official exchanges (CME)
• Relatively conservative leverage, risk is manageable
• Deep liquidity, easy to enter and exit

CFDs Advantages:

• Lower margin requirements, some as low as $1,000–$2,000
• No expiration date, no rollover needed
• Can trade over weekends

CFDs Disadvantages:

• Leverage can reach 400x, very high risk
• Over-the-counter (OTC) trading, counterparty risk
• Less regulated, gray areas

For risk-aware retail traders, US futures are safer; beginners should be cautious with CFDs due to high leverage and counterparty risks.

Practical Tips for Trading US Futures

Rollover Reminder

Before expiration, always rollover. Close the old contract and open a new one. Remember the expiration date: the third Friday of March, June, September, December at 9:30 AM Eastern Time.

Factors Affecting US Futures Prices

• Corporate earnings outlook
• Federal Reserve policies (most critical)
• Economic data (GDP, unemployment)
• Geopolitical events
• US stock valuation levels

Iron Rules for Risk Management

1. Set stop-loss before opening – don’t decide on the fly
2. Limit loss to no more than 2% of your account per trade – protect capital
3. Avoid full leverage – leave buffer space
4. Review positions regularly – don’t leave them unattended

Summary

US stock futures are professional tools but also very practical for retail investors. They allow small capital to control large markets, profit during declines, and lock in future prices.

However, leverage amplifies both gains and losses. Successful futures traders are not usually relying on high leverage to gamble but follow strict discipline, proper stop-losses, and moderate leverage.

If initial margin requirements are still too high, you can try CFDs, but be aware of the high risks associated with high leverage. Regardless of the tool chosen, risk management always comes first.