Futures Chart
Starter

1.1 A contract, not a company

A futures contract is a standardized agreement to buy or sell something at a set price on a set future date. For stock-index futures like the E-mini S&P 500 (ES), nobody delivers shares. The contract is settled in cash, and traders mostly close it before it expires. You are trading the price movement of the index, not owning a company.

Each contract has a fixed size. One ES point is worth $50, and the smallest price move, the tick, is 0.25 points = $12.50. The micro versions are one tenth the size, so they let you trade smaller.

Hypothetical example: you hold 1 MES and price rises 8 points. 8 points x $5 = $40. The same 8-point move on 1 ES = 8 x $50 = $400. In ticks: 8 points = 32 ticks; 32 x $1.25 = $40 for MES and 32 x $12.50 = $400 for ES.

1.2 Leverage and margin

Futures are leveraged. If the index is at 7,700, one ES contract controls 7,700 x $50 = $385,000 of index value, and one MES controls $38,500. You do not pay that. Your broker holds a margin deposit, which is a good-faith amount that is much smaller, and which varies by broker and by time. Margin is not the maximum you can lose. Losses can exceed what you put up, which is why sizing (see Supplement 5 (Psychology & Risk Management)) matters.

1.3 Futures versus an ETF, an option and Bitcoin

Futures expire. The quarterly index contracts use the month codes H (March), M (June), U (September) and Z (December). Traders roll from the expiring contract to the next one, usually about a week before expiry. Check the exchange calendar for exact dates.

2.1 Open, high, low, close

A candlestick summarizes the trading in one time period (one minute, one hour, one day) using four prices: the open, the high, the low and the close (OHLC). The thick part is the body, from open to close. The thin lines are wicks (also called shadows), reaching to the high and the low.

Hypothetical example on ES: open 7,700, high 7,712, low 7,696, close 7,708. The candle is up (close above open). Body = 8 points (32 ticks, $400 per ES contract). Upper wick = 7,712 - 7,708 = 4 points. Lower wick = 7,700 - 7,696 = 4 points. Total range = 16 points.

2.2 What body and wicks suggest

A big body means one side was in control for most of the period. A long wick means price went somewhere and was pushed back. It is a hint that the market tested a price and did not accept it. A small body with long wicks on both sides is a period of indecision.

2.3 Patterns are context, not signals

Candle names like hammer or engulfing describe a shape. They do not tell you the next move. The same shape can appear in the middle of a drift, where it means nothing. It means more when it appears at a level you already marked (see Lesson 5) and when other evidence agrees. Traders who treat a pattern as a trigger by itself often find it fails about as often as it works.

3.1 Same market, different zoom

A timeframe is how much time each candle represents. A 5-minute chart makes a new candle every five minutes. A daily chart makes one per day. Nothing changes about the market. You are changing the zoom level. A regular ES session of 9:30 AM to 4:00 PM ET is 390 minutes, which is 78 five-minute candles but one daily candle.

Short timeframes show more detail and more noise. Long timeframes show a cleaner picture, but fewer opportunities and wider stops. A 10-point stop on a daily chart is tiny; the same distance on a 1-minute chart is large.

3.2 Pick a timeframe that fits you

The choice also decides your risk. Your stop distance usually scales with the timeframe, and your position size should scale with your stop (see Supplement 5 (Psychology & Risk Management)). Hypothetical example: with a $100 risk budget on MES, a 20-tick stop ($25 per contract) allows 4 contracts; a 40-tick stop ($50) allows 2.

3.3 The top-down habit

Many traders look at the larger timeframe first for the trend and key levels, then step down to a smaller timeframe to time an entry. If the daily chart is in an uptrend and the 5-minute chart shows a short setup, you are trading against the bigger picture. That can still work, but it deserves a smaller expectation and a clear plan.

4.1 Swings and trends

Price moves in swings: a push in one direction, a pullback, then another push. A swing high is a peak with lower prices on both sides; a swing low is a valley with higher prices on both sides. An uptrend is a sequence of higher highs and higher lows. A downtrend is lower highs and lower lows. When neither holds, the market is ranging (moving sideways).

Hypothetical example: ES makes a low at 7,700, a high at 7,740, a low at 7,715 and a high at 7,760. The lows are 7,700 then 7,715 (higher) and the highs 7,740 then 7,760 (higher). That is an uptrend by this definition.

4.2 Break of structure

A break of structure happens when price breaks the pattern. In the example, if price falls below 7,715, the last higher low, the series of higher lows is broken. That does not mean a downtrend has started. It is a warning that the earlier pattern may be changing, so traders review the plan, tighten expectations or stand aside.

Many traders use the last swing low in an uptrend as the place where the idea is wrong, so it is a natural spot for an invalidation level (see Supplement 5 (Psychology & Risk Management)). Structure gives your stop a reason.

4.3 Trends end

Every trend ends. The definition only describes what has happened, it does not forecast. Trends can also be defined differently by timeframe: a 5-minute uptrend can be a pullback inside a daily downtrend. Always note which timeframe you are describing.

5.1 Levels where price reacted before

Support is a price area where buying has tended to appear, so a fall pauses or reverses. Resistance is a price area where selling has tended to appear, so a rise stalls. They are not promises. They are places where price reacted before, which is why traders watch them.

Good levels come from prior highs and lows, round numbers (like 7,700), and previous days' highs, lows and closes. The more times a level held, the more traders have it marked, but more tests can also mean the level is weakening.

5.2 Zones and role reversal

Draw levels as zones, not single lines. Hypothetical example: ES has reacted around 7,760 several times, with turns at 7,758, 7,761 and 7,763. Treat it as a zone of 7,758 to 7,763, which is 5 points or 20 ticks wide, rather than a line at 7,760.

Role reversal: once price breaks above a resistance zone and holds, that zone may act as support on a retest, and the other way round. It is a common pattern, not a rule.

1. Mark obvious highs and lows on a higher timeframe.
2. Draw each as a zone, not a thin line.
3. Note how many times each has been tested.
4. Decide before the session what you will do if price breaks it.
5. Place a stop beyond the zone, where the idea is wrong.

5.3 A level is a plan, not a prediction

A level gives you three things: a place to look for a trade, a place for a stop (beyond the zone) and a way to measure reward. Hypothetical skipped example: you want to buy a bounce at 7,700, with a stop at 7,690, which is 10 points = 40 ticks = $500 on one ES, or $50 on one MES. The next resistance is only 8 points away. The reward is less than the risk, so you skip the trade. That is the level doing its job.

6.1 Volume

Volume is the number of contracts (or shares) traded in a period. The bars under a price chart show it. High volume means many participants traded; low volume means few did. A breakout through a level on rising volume is often read as more convincing than one on thin volume, although this is context, not proof.

Volume has a daily rhythm. It tends to be highest near the regular-session open (9:30 AM ET) and the close (4:00 PM ET), and lower around midday. Comparing a candle's volume to nearby candles matters more than the raw number.

6.2 Sessions

Index futures trade almost around the clock from Sunday evening to Friday afternoon ET, with a short daily maintenance break (check the CME schedule for current hours). Traders split the day into sessions named for the active markets: Asia, London and New York. Liquidity and volatility differ in each.

The regular trading hours (RTH) for US stocks are 9:30 AM to 4:00 PM ET. Futures also trade outside RTH in the overnight session, often called Globex.

6.3 Where to go next

You now know what a futures contract is, how to read a candle, why timeframe matters, how to describe trend and structure, how to mark levels and how to read volume and sessions. That is the vocabulary. The next step is putting it into a repeatable routine, with risk limits, and practicing it on real charts.

That is what the book Learn to Trade in 31 Days ($29) is for: 31 short daily lessons covering futures and options, with printable worksheets on real ES, SPY and Bitcoin charts and an answer key. It is educational only and does not promise any result.