Futures Charts are fairly simple. The price information for futures changes constantly during the day according to supply and demand. Investors who quickly receive this information have an edge on those who are slow to obtain accurate price updates. Many pay substantial amounts of money to receive information even milliseconds faster than other traders in the market. This information is displayed via futures charts.
The quote price is the price you’re paying or receiving for the unit multiplied by the amount of units bought or sold in a single contract. The most recent transaction determines the current price, so if new orders for sale and purchase are filled the price may change. The spot price is the cost for buying the future’s underlying asset or commodity today. If you actually purchased a barrel of oil, you would be buying it for the spot price.
The bid price is the price the highest buyer will currently pay on the market. The offer price is the lowest price someone will currently accept on the marketplace. A quote chart displays prices from the trading day and previous trading days. It also displays useful information such as the highest and lowest price traded recently.
Prices move both upwards and downwards based on supply and demand within the market. This occurs mostly as a reaction to economic, political, and business data. Futures hedgers and speculators are attentive to new information and how it will impact the prices of underlying commodities or assets of financial futures.
Demand Supply Relation
The Demand Supply Relation (DSR) is a comparison of sellers versus buyers. This impacts market demand, and therefore prices. If the amount of selling orders outnumbers buying orders, supply is higher, which implies prices are likely to fall. If the buying orders outnumber the selling orders, demand is higher, which implies prices are likely to rise.
Price Limits create a maximum and minimum movement to daily price values. If trading prices hit the upper or lower limit, the contract’s price movement is halted. A “limit up” contract has risen to the maximum. A “limit down” contract has fallen to the minimum. This stops the market from crashing or rising too fast. Trading may resume the next day or if the price moves substantially in the opposite direction.
To actually understand how to read futures pricing, you need to understand how to read a quote table. Quote tables can be accessed both over the internet and in newspaper publications. In order to acquire a quote table, you may need the future code. A future code has five characters.
The first two characters specify the contract type based on underlying asset. These asset divisions occur for Agricultural, Currency, Energy, Equity Index, Interest Rates, and Metals. An incomplete list of asset codes is below. Codes vary depending on the futures market, but many are commonly shared across multiple markets. Check the commodity codes before making trades to avoid subjecting yourself to unpleasant surprises.
|Asset Name - Agricultural||Symbol|
|Lean Hogs||LH, LE|
|Live Cattle||LC, XL|
|Milk, Class 3||DA|
|Asset Name - Currency||Symbol|
|Euro||EU, UD, ED|
|Asset Name - Energy||Symbol|
|Asset Name – Index||Symbol|
|Dow Jones Industrial||DJ|
|Eurotop 100 Index||ER|
|FT-SE Stock Index||FI|
|Goldman Sachs Commodity Index||GI|
|ICE Composite Index||YX|
|Nikkei 225 Stock AVG.||NK|
|S&P Midcap 400 Index||MD|
|Asset Name – Interest Rate||Symbol|
|10 Year Treasury Notes||TY|
|2 Year Treasury Notes||TU|
|30 Year Treasury Bonds||US|
|5 Year Treasury Notes||FV|
|Canadian Government Bonds||CN|
|Federal Funds 30-Day||FF|
|Treasury Bills, 90 day||TB|
|US Treasury Bonds||XB|
|Asset Name - Metals||Symbol|
The third character is the month of underlying asset or commodity delivery. The last two characters are the year of delivery. If you see PAH16, you are looking at a contract for Palladium, March, 2016. The code for each month is below.
After you’ve identified the futures quote code, you can begin reading the commodity future’s price quote table. These tables will have multiple columns. The first column will be the date. Subsequent columns will be words relating to the price of investments with numbers beneath them. The definitions of these words are below.
|Open||Opening Price For The Day|
|High||Highest Price For The Day|
|Low||Lowest Price For The Day|
|Last||Price Last Traded|
|Lifetime High||Highest Price Ever Traded On Contract|
|Lifetime Low||Lowest Price Ever Traded On Contract|
|Settle||Closing Price For The Day|
|Change||Change From Previous Day’s Trading Price|
|Volume||Number Of Contracts Traded During The Day|
|Volume (Day)||Number Of Contracts Traded On Specific Day|
|Open Interest||Current Number Of Open Positions|
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