Trading futures is similar to trading stocks but with a high degree of leverage, hence it can potentially be more risky. There are two possible positions, long and short. When we are long we are profiting from a rising of the future contract price. Assume that we have bought 1 contract of WTI crude oil at $100/barrel. The contract refers 1000 barrels of oil. If the price goes to $105/barrel we can sell it and close the position achieving a profit of $5/barrel (total profit=$5,000). If the future price goes to $95/barrel then we can close the position but this time with a loss of $5/barrel (total loss=$5,000).

When we are short a futures contract then we are profiting from a decline of its price. If we short sell 1 contract of WTI crude oil at $95/barrel then if its price goes to $90/barrel we can close the position (by buying it back) and achieve a profit of $5/barrel (total profit=$5,000). If the future price goes to $100/barrel then we will have a loss of $5/barrel (total loss=$5,000).

Stop orders are essential in order to protect ourselves from great losses.