If you’re thinking about starting a career as a futures trader or even just start trading futures in your free time, Hong Kong may be the perfect place for you. With its thriving economy and access to the world’s leading exchanges, Saxo Hong Kong provides opportunities for many leading investors and traders in the world.
If you are interested in getting started, this article will guide you through what futures trading is, how it works, the benefits of trading futures in Hong Kong, and most importantly, how you can get started.
What futures trading is and how it works
Futures trading is an investment that involves speculating on the future price of an acquisition. Futures contracts are agreements to buy or sell an asset at a later date for a set price. For example, you might buy a futures contract for gold, which would entitle you to purchase gold at a specified price on a specific date in the future.
Futures trading is generally considered to be higher risk than other types of investing, as prices can fluctuate rapidly, and there is potential for losses and profits. However, proper research and risk management can be a lucrative way to make money.
Why trade futures in Hong Kong?
Hong Kong is one of the world’s leading financial hubs and home to some of the largest exchanges in the world, such as the Hong Kong Stock Exchange and the Hong Kong Futures Exchange.
The city is also one of the world’s freest economies, with policies that benefit merchants, entrepreneurs, investors, and traders immensely, such as low taxation and low costs of living.
There are plenty of opportunities for futures traders Hong Kong, and the city’s proximity to mainland China – one of the world’s largest economies – means a lot of economic activity and news flow, which can impact prices and create even more opportunities for those who are looking to make their way into mainland China in the future.
The benefits of futures trading
Futures trading offers many advantages over other types of investing.
For starters, trading futures allows you to speculate on the price of an asset without actually owning it. It means you can trade with leverage, leading to more significant profits if your predictions are correct, without having to pay the deposit to cover the full position at the outset.
In addition, futures contracts have expiry dates, meaning that you know exactly when you need to sell or buy the asset. This can help manage risk and ensure you don’t get caught by sudden price changes, and it can encourage traders to plan well in advance, which is a good skill to have in the world of trading.
Finally, because futures trading is conducted on exchanges, it is highly regulated. This provides a level of protection for traders and ensures that prices are fair and transparent, and allows you to make the most of your capital.
How to get started in futures trading
If you’re interested in starting a career in futures trading or just want to begin trading futures in your free time, there are a few things you need to know. Most importantly, these are tips regarding the concrete steps to setting up an account that will allow you to take part in trades.
First, you’ll need to open a brokerage account with a firm that offers futures trading. You can find a list of licensed firms on the Securities and Futures Commission website, the financial regulator in Hong Kong.
Next, you’ll need to deposit money into your account. How much you’ll need will depend on the types of contracts you want to trade and the margin requirements of your broker. You should generally have at least $10,000 to get started.
Finally, you’ll need to choose a futures contract to trade. A wide variety of futures contracts are available, including those for commodities, indices, currencies, and more.
Tips for beginners
If you’re new to futures trading, there are a few things you need to keep in mind. First, make sure you do your research and understand the market you’re trading in, as well as the product itself.
It’s also essential to have a solid risk management strategy in place. It means knowing how much you’re willing to lose on each trade and sticking to that amount consistently.
Finally, though you may have a large amount of capital in your account, don’t be afraid to start with small positions. Many beginner traders make the mistake of trying to trade too big too soon, and it’s better to start small and gradually increase your position size as you become more comfortable with the market.
Things to avoid when starting in futures trading
When you’re starting in futures trading, there are a few things you need to avoid.
First, don’t try to trade with too much leverage. It can be tempting to make the most of your capital by taking on the use of high leverage, but you should only do so if you are an experienced trader.
The misuse of leverage can lead to substantial losses if the market moves against you, losses that may exceed the amount of money you had first invested.
Next, you should not get caught up in the excitement of the market. It’s easy to get carried away when prices are rising and they are bound to rise at some point, but it’s essential to stick to your risk management strategy, take profits when available, and learn to be satisfied with your profits. Do not get swept up in the moment, and do not give into greed.
You should also avoid trading without a plan as that is a dangerous approach. As a futures trader, you should have a solid plan that can guide you on your trading journey, and it should include details like your budget, your trading timeframe, the assets you will trade, and other details.
Although there is room for adjustment of the plan when you become more familiar with the market, you should avoid deviating from this plan once it is set. You should also always have an exit strategy before you enter any trade.
Finally, you should learn not to overtrade or spread yourself too thin across assets. You can do this by firstly narrowing your focus on the kind of assets you would like to trade with and doing research on them.
There is the possibility of ‘shopping’ different assets and trying out which one works best for you, which can be done on a demo account. Narrowing your focus on a few assets is the ideal way for you to manage your time and learn to become skilled.
Resources for learning more about futures trading
If you’re interested in learning more about futures trading, many resources are available. The websites of various brokers, as well as educational sites dedicated to trading futures exchanges, can both be helpful.
You can also find a wealth of information on the website of the National Futures Association, the industry’s self-regulatory body, if you want to learn more about how regulations work and the legality of trading futures.
Aside from learning the concepts and fundamentals of futures trading, you would also do well to keep up with market charts, news, and other factors that can impact futures trading and price movements on markets.
To do this, you can visit websites of brokers and banks that provide futures trading as a service and sign up for an account with them. You can then access their trading platform, which will be able to give you live prices, historical market charts, and other information you will need.