Futures Hand Signals Definition and Images

    Hand Signals used in the Futures Trading Pits

    Why use Hand Signals in the Futures Trading Pits?

    The futures trading pit is a chaotic place requiring very fast decision making skills, sharp communication skills, and the ability to execute orders quickly.

    Hand Signals used in the Futures Trading Pits

    Why use Hand Signals in the Futures Trading Pits?

    The futures trading pit is a chaotic place requiring very fast decision making skills, sharp communication skills, and the ability to execute orders quickly. The chaos in the pits makes it almost impossible for the floor specialists to take orders from dozens of pit traders who are yelling at the top of their lungs; therefore, the advent of the futures hand signals came into play during the early 1970's. These hand signals are commonly referred to as the sign language of the futures trading pit. This method of communication allows the traders to communicate quantity, price, expiration month, type of order (buy, sell, cover, short), and even the status of the order.

    Futures hand signals facilitate a more efficient means of communication as the trader can put an order in from a distance. Remember, the pits are full of aggressive traders who are all attempting to get color on the market place and position themselves on the floors' prime real estate to get their order executed as fast as possible.

    Hand signals also allow for speed in order execution. This is especially important as many of the floor traders are taking advantage of arbitrage situations where there is a small discrepancy within two markets that can be taken advantage of. These opportunities do not last for a very long time and once the two markets come back into equilibrium, the trader must be able to take their profits fast and clear the positions off.

    We discussed a few key components of the futures contract; let's take a look at the base set of hand signals that are used on the CME (Chicago Mercantile Exchange).

    Buying and Selling

    The key to remember with the buy and sell is that your palms must be facing INWARDS when signaling a buy and OUTWARDS when signaling a sell.

    Buy and Sell Futures Hand SignalsBuy and Sell Futures Hand Signals

    Price

    When signaling the price to buy at, your hand must be positioned in front of you. For the digits 1 through 5, your fingers must be put straight up. For 6 through 9, your fingers will be angled sideways. Finally, if you want to indicate a '0', you will use a clenched fist. It is important to note here that the price signal that you are making refers to the last digit of the bid or offer. For example, assume that the S&P futures are trading at 1405 and you want to put a limit buy in at 1403. A trader would raise three fingers straight up in this situation when indicating the price component of the purchase.

    One Futures Hand SignalOne Futures Hand Signal

    Two Futures Hand SignalTwo Futures Hand Signal

    Three Futures Hand SignalThree Futures Hand Signal

     

    Four Futures Hand SignalFour Futures Hand Signal

    Five Futures Hand SignalFive Futures Hand Signal

    Six Futures Hand SignalSix Futures Hand Signal

     

    Seven Futures Hand SignalSeven Futures Hand Signal

    Eight Futures Hand SignalEight Futures Hand Signal

    Nine Futures Hand SignalNine Futures Hand Signal

     

     

    Size or Quantity

    Now, we will cover how to signal the number of contracts that you wish to purchase.

    When bidding a size between 1 and 9, traders will touch their chin with the size.

    When bidding a size between 10 and 99, traders will touch their forehead with the size

    When bidding a size above 100, traders will make a fist and touch their forehead.

    Let's take a look at the signals:

    Size and Quantity Hand SignalsSize and Quantity Hand Signals

    Size and Quantity Hand SignalsSize and Quantity Hand Signals

    Expiration Month

    The following signals are used to indicate which expiration month the trader is looking to trade on.

    Expiration Month Futures Hand SignalsExpiration Month Futures Hand Signals

    Expiration Month Futures Hand SignalsExpiration Month Futures Hand Signals

    Other Market Signals

    Filled Order

    The specialist will make a signal that indicates that the order has been filled.

    Filled Order Futures Hand SignalFilled Order Futures Hand Signal

    Stop Order

    The trader will indicate that the order that is being placed is a stop order which will execute at market when the activation price is hit.

    Stop Order Futures Hand SignalStop Order Futures Hand Signal

    Order still in Progress (Working)

    Order Pending Futures Hand SignalOrder Pending Futures Hand Signal

    Options Trades

    For an options contract, the pit trader will make the following futures hand signal for either a call or a put.

    Options Futures Hand SignalOptions Futures Hand Signal

    Conclusion

    We just reviewed some of the basic futures hand signals that are used in the trading pits. As you can see, it is very complicated and will required quite a bit of practice to master these signals. It is absolutely critical that a new futures trader have these hand signals committed to memory; if they do not, the losses incurred from making an incorrect signal can be massive. Also remember, we have gone over the basics for the CME floor; futures hand signals may vary across different exchanges.

    For more information regarding futures hand signals, visit the CME's website.

     

    Tim Ord
    Ord Oracle

    Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...

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