S&P Micro Futures Contract Explained

Are you interested in the futures market? Do you know what lock limits are? Have you ever even heard the term “lock limit?”

Failing to learn this critical term could cause you to get stuck in a trade with no way out and cost you thousands of dollars in losses.

In this week’s video, I share with you everything you need to know before you start trading the Micro Future’s Market.

Before we get started, if you are new to the futures market, the first thing you will want to do is bookmark the website http://www.cmegroup.com.

The CME website is essential in helping traders obtain information on the futures contract that they are researching or trading.

So to begin, one huge difference you will find in the futures markets vs. the stock market, or even the forex market, is that futures contracts have expiration dates. What this means is there is a point in time when the contract will stop trading. It’s crucial to know when it’s time to roll over the contract to the next expiration.

One of the best ways to know if you are trading the most liquid or current futures contract is to look at the volume on each of the futures contracts. You can find the volume by selecting the underlying asset, such as the S&P, and then comparing the volume of the two closest contracts. The futures contract that has the highest volume is likely going to be the current contract that is trading.

Finally, we come to lock limits. I can’t stress enough how important it is for you as a trader to understand what this term means.

Lock limit is when the market has a big move up or down, and then the exchange halts trading for a specified time. You may ask, how can this be damaging to a trader? It’s simple. If you are in a long futures contract and the market lock limits down when the market reopens, it could open with a huge gap that is much larger than your initial stop loss. When this happens, you can experience a much more significant loss on the trade.

To help protect myself from getting stuck, one thing I like to do is draw out the lock limit levels on my charts each day before I start trading. If I see the market getting close to the level, I can exit the trade before suffering a catastrophic loss.

In my video below, I will show you how to find the exact lock limit for the futures contract you may want to trade.

In closing, I would like to once again remind everyone about the FREE live streams hosted by myself each week. These live streams are an excellent opportunity for traders of all skill levels to ask questions and interact with me live. Again, this experience is entirely FREE to you. So if you haven’t already signed up, why are you waiting? Please fill out the form below to be notified before any of my future live streams.

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