If you want to get started in futures trading, Singapore is a great place. The country has a well-developed financial system and a solid regulatory framework that ensures market fairness and transparency.
A short summary of how futures work
You either buy or sell a given commodity or asset that has been pre-determined at an agreed-upon price with a settlement date in the future. This is like purchasing a stock, except that two people are now involved in the trade instead of just one stock purchase. The person on the buy-side is said to be “long”, and the seller is “short”.
The key thing to keep in mind when trading futures is that it is a two-way contract. This means that once you enter into a futures contract, you are obligated to follow through with the trade regardless of what happens.
Types of futures in Singapore
There are two types of futures contracts:
In this type of contract, no physical delivery of the underlying asset occurs. The settlement amount is based on the difference between the final price of the contract and the initial price.
This involves delivering the underlying asset to the buyer upon the contract’s expiration.
Tips on getting started with features trading in Singapore
If you’re looking to get started in futures trading, here are some tips on how to get started in Singapore.
Choose an exchange
The first step is to choose an exchange. There are several exchanges in Singapore, each offering different products. Make sure you choose an exchange that offers the products you want to trade.
Open an account
Once you’ve chosen an exchange, you need to open an account. Most exchanges require you to provide proof of identity and residence before opening an account. Usually, this means submitting photocopies of your identity card and a recent utility bill. Some exchanges may require bank account information and salary slips if you plan to trade on margin.
Now that you have an account, the final step is to start trading! Most exchanges will place restrictions on new accounts, such as not allowing you to send or receive wire transfers until the exchange has verified your account. Requirements vary from exchange to exchange, so check with them if in doubt. Once your account is set up, it’s time to start futures trading in Singapore.
Risks associated with futures trading
Once your account is funded, you can start trading futures contracts. There are many different types of contracts available, so it is important to understand the features and risks involved before trading.
The risk of default
This is the risk that the other party in the contract will not fulfil their obligations. For example, if you sell a futures contract to someone and they do not have the cash to pay you, you may not get paid.
The risk of price changes
Futures contracts are based on speculation, so the contract’s price can change drastically before it expires. This can result in significant losses or gains for the investor.
The risk of margin calls
When you trade futures, you have to put up a certain amount of money called margin. This is used as collateral in case the contract goes wrong. If the market moves against you, your broker may ask you to put up more money to cover your losses. If you don’t have the money, your broker may sell your contracts at a loss to protect their costs.
It is also important to remember that futures trading is a high-risk investment and should only be undertaken with money you can afford to lose. Always consult a financial advisor before starting to trade futures contracts. If you are a new investor, we recommend contacting a reputable online broker from Saxo Bank and trade on a demo account before investing your own money. Learn more here: https://www.home.saxo/en-sg/products/futures.