Trading futures in London is a profitable way to trade on the stock market. Although a relatively new financial instrument, it can be highly profitable and easy to get started.
When trading futures in London, you are essentially making bets on the future value of an asset or market index. You will aim to buy something at one price and then sell it for a higher price. In essence, you’re speculating on short-term changes in prices. The good news is that markets tend to move more frequently than individual stocks, allowing you more opportunities for profit over time.
Other benefits include reduced commission rates versus buying and selling stocks, which means more money for your bottom line, and occasional daily settlement of profits, making this a popular choice for the serious investor.
Understand the risks
One of the most important factors to keep in mind when trading futures in London is that this market operates under very different rules. For one thing, it’s possible to lose more money than you’ve put into your account by opening a contract, known as having a negative margin. This is because prices aren’t fixed like typical share prices but will fluctuate depending on supply and demand for any given future (meaning they can go up or down). You could therefore have a position where you have invested £5,000, but your potential losses are unlimited should the value of the contract drop below this amount. This can be a stressful position to be in, so it pays to be prepared and choose a broker who offers customer support around the clock.
Learn how day trading futures work
The second thing you need to understand is how day-trading futures work. Unlike shares where you can buy and sell at any time during a trading session, futures only trade at set times of the day. This helps reduce risk as it means prices shouldn’t be subject to wild fluctuations on one side or another preventing your position from being closed out. However, this does mean you’ll miss some opportunities, so ensure you check when each future market is open before getting involved.
How do you get started with futures trading in London?
Follow these easy steps to start trading in futures;
Create an account
First, create an account with a City firm. You will need to fill out some paperwork and provide documents before opening your account, but it’s time to make your first trade after this initial step.
Choose a product
When you are ready to enter the market, pick what product you are interested in trading. The London Market offers futures for many different commodities, so decide which one you want to invest in before researching how these products work.
Do your research
Once you have settled on something specific, research the futures contract so that it won’t be too complicated for you when the time comes. This is where knowing how much risk you can handle comes into play; if futures trading is new to you, stick with simple contracts like wheat, gold, and oil until you get the hang of how it all works.
Open a second account.
It is also worth pointing out that if you’re looking at trading futures in London, you will need to open a second account with another broker. They tend not to offer this service alongside traditional share dealing accounts. You should then ensure your two accounts are kept separate for compliance purposes, such as having different passwords and login details that do not cross over.
Remember that when you trade futures, you are using your own money to buy or sell shares of products that have already been created but are not yet available for use. However, by being aware of your surroundings and staying up to date with current events, future markets can be very lucrative sources of income while also being stable enough for long-term investments. New traders should use a reputable online broker from Saxo Bank before investing real money.
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