Natural Gas Futures Trading Basics

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How to Start Day Trading Natural Gas

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The price of natural gas fluctuates from moment to moment, as it is publicly traded on an exchange. The price of natural gas is determined by global supply and demand for the physical commodity, as well as the expectations and supply and demand from traders. Day traders don’t assess the “real” value of natural gas. Instead, day traders profit from daily price fluctuations in the commodity, attempting to make money whether it rises, falls or its value stays nearly the same.

Futures Markets

Day trading natural gas is speculating on its short-term price movements. Physical natural gas isn’t handled or taken possession of, rather all the trading transactions take place electronically and only profits or losses are reflected in the trading account.

There are a number of ways to day trade natural gas. One way is through a futures contract. A futures contract is an agreement to buy or sell something–like natural gas, gold, or wheat–at a future date. Day traders close out all contracts (trades) each day and make a profit or loss on each trade based on the difference between the price they bought the contract and the price they sold it.

Natural gas futures trade through the Chicago Mercantile Exchange (CME Group). There are several types of natural gas, and contracts, which can be traded. The most heavily traded contract, preferred by day traders, is the Henry Hub Natural Gas Futures (NG). Each contract represents 10,000 million British thermal units (mmBtu).

On the futures exchange, the price of natural gas (NG) fluctuates in $0.001 increments. This increment is called a “tick”–it’s the smallest movement a futures contract can make. If you buy or sell a futures contract, how many ticks the price moves away from your entry price determines your profit or loss. To calculate your profit or loss (your trading platform shows you, but it’s good to understand how it works) you’ll first need to know the tick value of the contract you’re trading.

For a Natural Gas contract (NG) the tick value is $10. This is because the contract represents 10,000 mmBtu, and 10,000 mmBtu multiplied by the $0.001 tick size results in $10. That means for each contract, a one tick movement will result in a profit or loss of $10. If it moves 5 ticks, you win or lose $50. If it moves 5 ticks and you’re holding 3 contracts, your profit or loss is $150.

Trading Accounts and Margin

The amount you need in your account to day trade a natural gas (NG) futures contract depends on your futures broker. NinjaTrader for example, requires you have $1000 in your account to open a day trading position for one natural gas (NG) contract. You also need enough in the account to accommodate for potential losses (need much more than $1000).

These figures assume you’re day trading and closing out positions before the market closes each day. If you hold positions overnight, you are subject to Initial Margin and Maintenance Margin requirements, which will require you have more money in your account.

ETFs and Stock Market NG Plays

Another way to day trade natural gas is through a fund which trades on a stock exchange, like the United States Natural Gas Fund (UNG). Or, if seeking a more volatile option (moves three times as much each day), the 3X Long Natural Gas ETN. If you have a stock trading account you can trade the price movements in natural gas.

The 3X Inverse Natual Gas ETN (DGAZ) is another popular natural gas ETF. Since it is an inverse fund, it moves in the opposite direction of the natural gas price, on a daily basis.

The intraday price movements of these products are reflective of daily (not long-term) percentage price changes in natural gas.

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The products trade like stocks. The minimum price movement is $0.01, therefore you make or lose $0.01 for each share you own each time the price changes by a penny. Stocks and ETFs are typically traded in 100 share blocks (called lots) so if the price moves a penny and you’re holding 100 shares, you make or lose $1. If the price moves $1, from $5 to $6, you make or lose $100 on your 100 share position. If you are holding 500 shares, you make or lose $500 on that same price move.

The amount you need in your account to day trade a natural gas ETF depends on the price of the ETF, your leverage, and position size.

To become a day trader of stocks or ETFs in the U.S., you need to have a $25,000 minimum trading account balance. Depending on how much income you want to generate and your leverage, you may wish to have more than $25,000 available to you.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Trading natural gas futures

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Natural gas futures – ETF Tracker

The underlying assets of the fund consist of natural gas futures contracts.

ETFs Tracking Other Mutual Funds

ETFs Tracking The Natural gas futures – ETF List

ETFs tracking the Natural gas futures are presented in the following table.

ETFs Tracking The Natural gas futures – ETF Returns

The following table presents historical return data for ETFs tracking the Natural gas futures.

ETFs Tracking The Natural gas futures – ETF Fund Flow

The table below includes fund flow data for all U.S. listed Highland Capital Management ETFs. Total fund flow is the capital inflow into an ETF minus the capital outflow from the ETF for a particular time period.

Fund Flows in millions of U.S. Dollars.

ETFs Tracking The Natural gas futures – ETF Expenses

The following table presents expense information for ETFs tracking the Natural gas futures.

ETFs Tracking The Natural gas futures – ETF Dividends

The following table presents dividend information for ETFs tracking the Natural gas futures, including yield and dividend date.

ETFs Tracking The Natural gas futures – ETF Holdings

The following table presents holdings data for all ETFs tracking the Natural gas futures. For more detailed holdings data for an ETF click the ‘View’ link in the right column.

ETFs Tracking The Natural gas futures – ETF Tax Rates

The following table presents sortable tax data for ETFs currently tracking the Natural gas futures.

ETFs Tracking The Natural gas futures – ETF Technicals

The following table presents certain technical indicators for ETFs tracking the Natural gas futures. To see complete technical metrics click the ‘View’ link in the right column.

ETFs Tracking The Natural gas futures – ETF Analysis

The following table presents links to in-depth analysis for ETFs tracking the Natural gas futures.

ETFs Tracking The Natural gas futures – ETF Realtime Ratings

The following table presents a proprietary ETFdb rating for ETFs tracking the Natural gas futures.

Natural gas futures – ETF Tracker

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Symbol ETF Name Asset Class Total Assets* YTD Avg Volume Previous Closing Price 1-Day Change Overall Rating 1 Week 4 Week 1 Year 3 Year 5 Year YTD FF 1 Week FF 4 Week FF 1 Year FF 3 Year FF 5 Year FF ETFdb.com Category Inception ER Commission Free Annual Dividend Rate Dividend Date Dividend Annual Dividend Yield % P/E Ratio Beta # of Holdings % In Top 10 Complete ST Cap Gain Rate LT Cap Gain Rate Tax Form Lower Bollinger Upper Bollinger Support 1 Resistance 1 RSI Advanced Fact Sheet ETF Holdings Chart ETF Home Page Head-To-Head Liquidity Rating Expenses Rating Returns Rating Volatility Rating Dividend Rating Concentration Rating
UNG United States Natural Gas Fund Commodity $340,085 -21.5% 4,164,867.0 $13.24 6.17% 3.3% -6.1% -43.7% -57.4% -75.7% Oil & Gas 2007-04-18 1.28% N/A $0.00 N/A N/A 0.00% N/A 0.49 1 100.0% View 23% 23% K-1 $11.41 $14.92 $12.87 $13.43 47.48 View View View View View View A A
UNL United States 12 Month Natural Gas Fund Commodity $3,088 -6.5% 4,819.0 $7.84 2.35% 1.8% 3.3% -25.2% -28.3% -38.9% Oil & Gas 2009-11-18 0.90% Charles Schwab $0.00 N/A N/A 0.00% N/A 0.25 1 100.0% View 23% 23% K-1 $7.35 $7.91 $7.76 $7.92 54.37 View View View View View View B+ B+

Sort By: Largest in Assets Highest YTD Returns Lowest Expense Ratio

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