Futures Trading Glossary

This glossary explains the futures trading terms used across the FuturesPro Academy, contract guides and prop firm reviews. Definitions are kept short and plain. Where a term is covered in depth elsewhere, we link to the full lesson or calculator.

Key points

• Terms are grouped alphabetically from A to V.
• Contract-specific numbers, such as tick values, come from CME Group contract specifications.
• Prop firm terms describe common usage. Each firm defines its own rules, so always read the firm's help center.
• Start the Academy from the beginning with What Are Futures?

A

Ask

The lowest price at which someone is currently offering to sell. Also called the offer. A market buy order fills at the ask.

Average True Range (ATR)

An indicator that measures how far price typically moves over a set number of bars, including gaps. Traders use it to set stop distances that fit current volatility.

B

Backwardation

A market where later contract months trade at lower prices than nearer months. The opposite of contango.

Basis

The difference between the cash (spot) price of an asset and its futures price. Basis usually narrows as the futures contract approaches expiry.

Bid

The highest price someone is currently willing to pay. A market sell order fills at the bid.

Bid-ask spread

The gap between the bid and the ask. On liquid contracts like ES it is often one tick. A wider spread raises your trading cost.

Bracket order

An entry order with a stop-loss and a profit target attached. When one exit fills, the other is cancelled. See Futures Order Types.

Breakeven

The price at which a trade shows neither profit nor loss after costs. Commissions and fees move your breakeven slightly away from your entry price.

C

Calendar spread

Buying one contract month and selling another month of the same contract. Rolling a position is often done with a calendar spread order.

Cash settlement

Settlement of an expiring contract by a cash payment based on a final price, with no delivery of the underlying. ES, NQ and MCL are cash-settled.

CFTC

The Commodity Futures Trading Commission, the US federal agency that regulates futures and options markets.

Clearing house

The organization that stands between buyer and seller on every trade, guaranteeing that both sides are paid. CME Clearing performs this role for CME Group exchanges.

Commission

The fee your broker charges per contract, usually quoted per side. Exchange and regulatory fees are often charged on top. Compare costs on our broker rankings.

Consistency rule

A prop firm rule that limits what share of your total profit can come from a single day. See How Prop Firm Evaluations Work.

Contango

A market where later contract months trade at higher prices than nearer months, often reflecting storage and financing costs. The opposite of backwardation.

Continuous contract

A chart that joins successive contract months into one series. A back-adjusted continuous chart shifts older prices to remove the gap at each roll.

Contract month

The month in which a futures contract expires. Equity index futures use March, June, September and December.

Contract unit

The size of one contract, such as 1,000 barrels for CL or $50 times the index for ES. Also called the multiplier for index futures.

D

Daily loss limit

A maximum loss allowed in one trading day. At a prop firm, breaching it may fail the account or only pause trading for the day, depending on the firm.

Day-trade margin

The reduced margin a broker requires for positions opened and closed within the same session. It is set by the broker, not the exchange. See Margin and Leverage.

Delivery

The transfer of the underlying commodity or financial instrument at expiry for physically settled contracts. Retail brokers close positions before delivery.

Depth of market (DOM)

A display of resting buy and sell orders at each price level near the market. Also called the order book or price ladder.

Drawdown

A decline from a peak balance. At prop firms, the maximum drawdown is the loss limit that ends the account if reached.

E

E-mini

A family of CME futures contracts smaller than the original full-size contracts. The E-mini S&P 500 (ES) is one-fifth the size of the original S&P 500 futures contract.

Evaluation

A paid, simulated trading test sold by a prop firm. Meeting the profit target without breaking the rules qualifies you for a funded account.

Expiration

The date a futures contract stops trading and settles. CME equity index futures expire on the third Friday of the contract month.

F

FCM (futures commission merchant)

A firm registered to accept orders for futures and hold customer funds to margin those trades. Your broker either is an FCM or clears through one.

Fill

The execution of an order. A partial fill means only part of the order's quantity was executed.

First notice day

For physically delivered contracts, the first day a seller can notify the clearing house of intent to deliver. Brokers usually require speculators to exit before this date.

Front month

The nearest contract month that is actively traded, usually the one with the most volume.

G

Gap

A jump in price between one trade and the next, often after the weekend, a daily break or a news event. Stop orders can fill beyond their stop price in a gap.

Globex

CME Group's electronic trading platform, where most CME, CBOT, NYMEX and COMEX futures trade. See Futures Market Hours.

H

Hedger

A market participant who uses futures to reduce the price risk of a business, such as an airline buying oil futures or a farmer selling grain futures.

Hedging

Taking a futures position that offsets the price risk of another position or business exposure.

I

Initial margin

The deposit the exchange requires to open and hold a futures position. Brokers can require more.

Introducing broker (IB)

A firm that handles customer accounts and orders but does not hold customer funds. It clears trades through an FCM.

L

Last trading day

The final day a contract month can be traded before it expires.

Leverage

Controlling a large exposure with a small deposit. In futures, leverage equals the contract's notional value divided by the margin posted.

Limit order

An order to buy or sell only at a set price or better. It controls price but may not fill.

Limit up and limit down

Price limits set by the exchange that restrict how far some contracts can move in a set period, sometimes with a temporary halt. Rules differ by product and are listed in CME's specifications.

Liquidity

How easily you can trade without moving the price. Liquid contracts have high volume, tight spreads and deep order books.

Long

A position that profits when price rises. You go long by buying a contract.

M

Maintenance margin

The minimum account equity required to keep a position open. Falling below it triggers a margin call.

Margin call

A demand to add funds when your account falls below maintenance margin. Brokers may close positions instead of waiting.

Mark to market

Daily revaluation of open positions to the settlement price, with gains credited and losses debited in cash each day.

Market order

An order to buy or sell immediately at the best available price. It guarantees a fill but not the price.

Micro contract

A smaller version of a futures contract. CME's Micro E-mini equity index futures are one-tenth the size of their E-mini counterparts, and MCL and MGC are one-tenth of CL and GC.

Month code

The letter that identifies a contract's expiry month: F (Jan), G (Feb), H (Mar), J (Apr), K (May), M (Jun), N (Jul), Q (Aug), U (Sep), V (Oct), X (Nov), Z (Dec).

N

NFA

The National Futures Association, the self-regulatory organization for the US derivatives industry. Firms and individuals in the futures business register with the NFA.

Notional value

The full dollar value controlled by a contract: price times multiplier. One MES at 6,000 has a notional value of $30,000. Try the contract value calculator.

O

OCO (one cancels other)

Two linked orders where a fill on one automatically cancels the other. Used for stop and target exits.

Open interest

The number of contracts that are open, meaning not yet offset or delivered. It is different from volume, which counts contracts traded.

Overnight session

Trading outside US stock market hours, from the evening open to the next morning. Also called the Globex or electronic trading hours session.

P

Physical delivery

Settlement by transfer of the actual underlying, such as crude oil, gold or Treasury notes. CL, GC and ZN are physically delivered.

Point value

The dollar value of a one-point move for one contract: $50 for ES, $5 for MES, $20 for NQ, $2 for MNQ. For CL, a $1.00 move is $1,000.

Position size

The number of contracts in a trade. It should come from your dollar risk and stop distance. Use the position size calculator.

Profit target

The price at which you plan to take profit, or the profit needed to pass a prop firm evaluation.

Prop firm

Short for proprietary trading firm. In retail futures, it usually means a company that sells evaluations and offers funded, often simulated, accounts with payouts. Compare them on our prop firm rankings.

R

Risk-reward ratio

The planned loss on a trade compared with the planned gain. A 10-point stop with a 20-point target is 1:2. Try the risk-reward calculator.

Rollover

Closing a position in an expiring contract and opening the same position in the next contract month. See Futures Rollover and Expiration.

Round turn

A complete trade: an opening order and a closing order. Commissions quoted per side are doubled for a round turn.

S

Scalping

A style of trading that aims for small, quick gains, often a few ticks, over many trades.

Settlement price

The official daily price set by the exchange, used to mark positions to market and calculate margin.

Short

A position that profits when price falls. You go short by selling a contract you don't own.

Slippage

The difference between the expected price of an order and the actual fill price. It is common with market and stop orders in fast markets.

Speculator

A trader who aims to profit from price changes and has no business need for the underlying product.

Stop order

An order that becomes a market order when price trades at the stop level. Commonly used to limit losses.

Stop-limit order

An order that becomes a limit order when price trades at the stop level. It controls price but may not fill in a fast move.

T

Tick

The smallest price movement a contract can make.

Tick size

The size of one tick in price terms: 0.25 index points for ES, NQ and their micros, and $0.01 per barrel for CL.

Tick value

The dollar value of one tick for one contract: $12.50 for ES, $1.25 for MES, $5.00 for NQ, $0.50 for MNQ and $10.00 for CL. See the tick value calculator.

Trailing drawdown

A prop firm loss limit that moves up as your balance rises. End-of-day trailing moves only on closing balances; intraday trailing follows open profit.

Trailing stop

A stop order that follows price in your favor by a set distance and never moves back.

U

Underlying

The asset a futures contract is based on, such as the S&P 500 index, crude oil or 10-year Treasury notes.

V

Volatility

How much and how quickly price moves. Higher volatility means larger swings, wider stops and often higher margin requirements.

Volume

The number of contracts traded during a period. Volume usually shifts to the next contract month during the roll.

VWAP

Volume-weighted average price: the average price traded during a session, weighted by volume at each price. Many traders use it as an intraday reference level.

Where to go next

If you are new to futures, start the Academy from lesson one, What Are Futures? A Plain-English Introduction, and work through to Futures Market Hours and Holiday Schedule. Keep this glossary open as a reference.

Frequently asked questions

What is the difference between tick size and tick value?

Tick size is the smallest price change, such as 0.25 points on ES. Tick value is what that change is worth in dollars, such as $12.50 on ES.

What is the difference between volume and open interest?

Volume counts contracts traded in a period. Open interest counts contracts still open at the end of the day.

Is an FCM the same as a broker?

An FCM is a type of futures broker that can hold customer funds. Some brokers are FCMs; others are introducing brokers that clear through an FCM.

What does contango mean for traders?

It means later months are priced higher than nearer months. When you roll a long position in contango, you buy the next month at a higher price, but the gap itself is not a loss.

Where do the contract numbers in this glossary come from?

Tick sizes, tick values and point values come from CME Group contract specifications. Our contract guides link to the CME page for each contract.