Tan Kin Lian's Blog: Trading in Futures

Tuesday, June 22, 2010

Trading in Futures

Hi Mr Tan

Recently I read about "STI Futures". As currently I have set aside 5K for investment( Spare cash ). I want to find an investment vehicle to earn quick money ( also aware that I might lost quick $ if not careful )

I noticed this "STI futures" recently, Initial we need to place an initial margin of about $1625 for one contract.
Per index point is $10 ( either earn or lost ), there is margin call also etc.

We can get in and out( trading ) within a few mins , hour, or a day to even months. As I understand that the RISK factor is there also. But I find that this STI Futures can let me earn $ fast as I don't like to wait long. I also prepare to lost this 5K if my decision is not right.

As this STI Futures might be one of my investment vehicle, it "attract me" is because if my decision is right, I might earn $ fast within a few hours or a day. I also understand that there might be risk also. Anyway this 5K is my spare cash (but doesn't mean I am prepare to loose the $ ).

I wondering any advises you can share with me or where I can find more detils to have a better understanding. As I am your regular reader to your blog, wondering you can post my enquiry to your blog so that your readers might share with me the risk factors etc or where to look for?

Anthony

MY REPLY
There are many futures contracts that you can trade in, i.e. stock index futures and currency futures. You need to be familiar with trading in futures before you plunge in. You have to understand the risk, liquidity and other factors. Please attend training courses on trading in this type of contracts.

16 comments:

SD said...: There is no liquidity at all on STI futures. Try other contracts like MSCI TW/ SG, NK, Hang Seng etc.; June 22, 2010 8:38 AM
Anonymous said...: This guy is gambling not investing...; June 22, 2010 8:47 AM
Anonymous said...: futures trading is more gambling compared to stock trading.
Nick Leeson was a futures trader
His bets on the Nikkei 225 brougt down a whole bank.

Futures trading can be very addictive as the returns can be very attractive and quick.

Please understand the risks and rewards very clearly.

It always starts with a small bet of $1 and soon it will be $100,000
Be very careful and know your own weakness.; June 22, 2010 9:28 AM
Anonymous said...: Ng Teng Fong's son was caught on the right foot when he betted the Hang Seng Index would shoot up in the last Asian Financial Crisis of 1997/1998.
When the younger man was asked to top up his account, the father had to bail him out as the Index collapsed .
If you want the thrill of gambling,
may as well go to the casinos. At least you only lose the $5,000 principal if you are unlucky.; June 22, 2010 11:07 AM
Anonymous said...: Anthony, don't ever trade in STI futures. You may not be able to get out of your position, given the wide spread between bid and offer at all times.; June 22, 2010 11:45 AM
Anonymous said...: Mr Tan has given the right direction, PLEASE attend a training course in charting & techinical anlaysis.

You will loose your $5000 in days if not weeks, 'guranteed', without some knowledge abt. the markets.

As another poster has pointed out you are gambling and not based on high probability trading.
There are some technical courses conducted by some of the brokerage houses, it will only lay the foundation, there is more to it.

Dont recommend trading in STI futures!; June 22, 2010 12:00 PM
Anonymous said...: Futures is a leverage product.

With a margin of merely $1625, you are holding 1 contract worth $28,850 (sti index 2885X$10).

In other words, you are putting down a 5% deposit for something that's worth about $28850 (based on current index level), 20 times gearing.

You lose all your deposit (margin) once the market moves >5% against you. You will be asked to top up another 5% to keep the 1 contract.

Leveraging is a powerful tool that cut both ways. You can make money fast and lost money just as fast.

Liquidity is also another key component to consider. When the market turns and there's no bids or offers for you to liquidate, you may end up losing more money than you thought because the futures can trade huge premium or discount to the underlying spot index.

You can make money trading futures but I can tell you its not easy. It can be done but you need hours of hard work understanding the instrument, observe its behaviour and learn various method to use on each market as everyone of them is a different animal.

Believe me, its a long journey to success with lots of excitement and despair along the way.

Qing; June 22, 2010 12:38 PM
Anonymous said...: If you want to gamble in financial instruments, strongly suggest you spend lots of time & a bit of money to learn technical analysis (TA) first. DON'T spend on those few thousand dollars training, whether for futures, options, forex, CFDs, warrants, whatever... Mostly talk cock sing song, and the little bit of so-called winning techniques are just some variations of TA methods.

Just focus on the fundamentals of technical analysis -- can be applied across a variety of financial instruments. You can start by borrowing books from library, and reading up on the Net.

But different types of instruments will have their own characteristics & behaviour -- you need to spend time to observe each type and see which one suits your taste.

Ultimately don't forget that it is just gambling -- it is a game of probability & chances. TA merely tries to identify occasions when you MAY have higher chance of winning -- no guaranty! Every trade you make you must already have a fixed amount or % that you are prepared to lose, and also to take profit on. Remember just like casino gambling, the "winner" is the one who controls his betting size, and controls his losses.; June 22, 2010 2:31 PM
Anonymous said...: I think it is better to use the money to buy yourself and your wife a good hoiliday.

Of course if you think you are good at it, then go ahead.

good luck :); June 22, 2010 2:39 PM
Anonymous said...: I have traded STI Futures many times in the past before when I was free.

It was stressful.

Yeah, I have attended all those technical courses. Short Term Trading techniques like Larry Williams Opps, all those short term trading techniques.

Believe me, those were of no help.

It is just gambling!

Return to it when you have deeper pockets. ($500K and above).

Pick a good technique and vary it according to your understanding. There are many professionals out there who knows the same technique and may pre-empt you.

Apply good money management principle. (Do 1 lot first)

You will then have less fear and will be in a better state of mind if you lose.

Good Luck in your journey!; June 22, 2010 2:55 PM
Anonymous said...: Life is a gamble. Sometimes you win, sometimes you lose.

Just need to make sure you can handle the losses as well as the winnings.

If you can afford to lose the $5,000, then go ahead, play the futures. If cannot, then don't even think of starting.

The Futures Guru; June 22, 2010 4:40 PM
Stock said...: The leverage of futures poses risks of making emotional decisions. If you cant play stocks well, you will be far worse at futures.; June 22, 2010 6:20 PM
Anonymous said...: A better way would be just leave your money in a REIT instrument and collect the 5 to 8% return.

Forget about futures. Its very tough especially for a beginner and with limited capital.

That's my advice.; June 23, 2010 9:31 AM
gerimegaly said...: You need to to have technical analysis (TA) to help you succeed in Futures Trading. And my advice is to trade intraday first, to get a feel of it. Holding positions overnight can result in surprises when the markets open the following day.

Lastly, be patient and wait for the right trades to come to you.

gerimegaly
http://futures-trading.blogspot.com; June 23, 2010 11:00 PM
Haven said...: Some specific Risk in futures trading:

1. Leverage/Margin Risk
2. Counterparty Risk
3. Platform/Contract/Margin Change Risk
4. Issuer/Exchange Risk
5. Platform Risk
6. Liquidity Risk (Volume and Depth)
7. Statutory/Country Risk (Including Circuit Breaker Governance)
8. Market Risk (Including Flash Crash)

Some tools to analyze:
Macro-view
Micro-view
Fundamental Analysis
Technical Analysis
Almanac Analysis

STI's Inclusion and Removal of Constituents

Contract Specifications

Most important of all, as mentioned by some: Good money management. If one can't lose the trading capital, one is likely to lose control of emotions (greed and fear) resulting his/her potential loss.; August 14, 2013 4:39 PM
StarIndia Equity Tips said...: It is a matter to give up and change the things which is implemented to short the market with lots of fun.

Stock Cash Tips
Stock Future Tips; September 24, 2018 7:09 PM