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5 Key Benefits Of Futures Trading In The Digital Age

, | March 8, 2024 | By

Since the dawn of the 21st century, advancing technologies have made the open outcry trading pits of decades past all but obsolete. Business in the contemporary marketplace is conducted almost exclusively digitally.

There are many newfound benefits of futures trading in the digital age; below are the top five, in no particular order.

#1 Accessibility

Remote, real-time market access has opened the door to millions of prospective futures traders. Geographic locale is no longer a challenge, and reduced capital requirements have given interested parties the ability to take control of their investment lives.

A six-figure brokerage account or seat at the exchange is no longer necessary to enjoy the benefits of futures trading. All one needs to trade is computing power, an internet connection, and a relatively small reserve of risk capital.

#2 Opportunity

The modern futures marketplace offers participants an abundance of opportunities. Before an electronic framework, traders faced a restricted slate of products. Though the conventional commodity-oriented contracts were available, variety was limited.

By comparison, today’s futures markets offer a vast lineup of products suitable for nearly any strategy or individual. Listings such as E-minis, E-micros, and Micro E-minis furnish traders with an unparalleled array of options. In addition, most futures markets are open for trade on a nearly 24/5 basis. No matter which time zone you live in, there is a market open for business and unique opportunities to be had.

#3 Volatility

Increased pricing volatility may be the single greatest influence that the digital era has had on market behavior. Ultra-low-latency technologies have given traders of all types the ability to execute their strategies in the blink of an eye. The increased participation has brought life to the trade of many asset classes, from commodities to equities.

Although volatility is often thought of as a dirty word, it is a primary driver of profitability and a premier advantage to engaging with the modern futures markets. The movement of asset values from a point of equilibrium opens the door to gain; without active markets, the financial benefits of trading futures are limited.

#4 Liquidity

One element of modern futures that younger traders may take for granted is consistent liquidity. A robust depth of market promotes efficiency via tight bid/ask spreads and limited slippage. When markets are rich with participation, they are easily entered and exited; when they are thin, erratic price action, increased slippage, and wide bid/ask spreads become the norm.

The electronic marketplace has boosted participation and liquidity exponentially from years past. It is now possible to consistently buy/sell a contract at or near a desirable level. This is one of the key benefits of trading futures because it has made the process of price discovery more efficient.

#5 Cost-Effectiveness

Near the end of the 20th century, in the heyday of open outcry, it was costly for an off-floor retail trader to conduct business. Commissions were expensive, as were exchange fees, service fees, and account minimums. Often, participation in the market was limited to high-net-worth investors.

However, as witnessed in various other industries, technology has brought down operational costs dramatically. For a majority of the most popular futures products, an affordable all-in, per round-turn pricing structure isn’t too hard to find.

Want to Learn More About the Benefits of Trading Futures?

With more than two decades in the futures industry, the team at StoneX has been there since the digital markets were in their infancy. They have seen it all―through booms, busts, and the evolution of trade.

For more information on how the contemporary futures marketplace can aid in the achievement of your financial goals, schedule a free consultation with a StoneX pro today.

Download the eBook: Futures and Options Strategy Guide