How to create a futures trading strategy in Singapore

Singapore has become a popular location for futures trading. The city-state’s regulated and liquid markets and solid infrastructure have made it an attractive place to trade derivative products. This article will explore how to create a futures trading strategy in Singapore. We’ll start by covering the basics of futures products and then discuss the different strategies that can be used in futures trading. Finally, we will provide tips on getting started in Singapore’s futures market.

What is futures trading, and why should you consider it an investment option?

Futures trading is buying or selling a financial contract that will deliver a commodity, currency, index, or other assets at a later date. Futures contracts are standardized products that are traded on an exchange. The most common futures contracts are commodities, currencies, and indexes.

Futures trading can speculate on an underlying asset’s price movement or hedge against the risk of price fluctuations. For example, if you expect the price of gold to rise in the future, you could buy a gold futures contract. If the price of gold does indeed increase, you will make a profit on your trade. Similarly, if you are worried about the potential for a decline in the value of the US dollar, you could sell a US dollar index futures contract. If the US dollar falls in value, you will make a profit on your trade.

There are many reasons to consider futures trading as an investment option. Firstly, futures contracts are highly leveraged products, which means you can control a large amount of the underlying asset with a relatively small amount of capital. This leverage can lead to both higher profits and losses, so it is important to use risk management strategies to protect your capital.

Futures contracts are traded on regulated exchanges, which provides greater transparency and price discovery than other over-the-counter markets. Finally, futures contracts can be easily traded and liquidated because they are standardized products.

What are the different types of futures trading strategies?

There are a wide variety of futures trading strategies that can be used to speculate on the price movement of an underlying asset or to hedge against the risk of price fluctuations. Some common futures trading strategies include:

Trend following: This strategy involves taking a position in the direction of the overall trend. For example, if you believe that the price of gold will continue to rise, you could buy a gold futures contract.

Countertrend: This strategy involves taking a position against the overall trend. For example, if you believe that the price of gold will fall, you could sell a gold futures contract.

Range trading: This strategy involves taking a position at the top and bottom of a trading range. For example, if you believe that the price of gold will trade between $1,200 and $1,300 per ounce, you could buy a gold futures contract at $1,200 and sell another contract at $1,300.

Scalping: This strategy involves taking small profits on many trades. Scalpers typically hold their positions for a brief time, using technical analysis to identify profitable entry and exit points.

How do you go about creating a futures trading strategy in Singapore?

If you are interested in creating a futures trading strategy, there are a few things that you will need to consider. Firstly, you must identify the underlying asset you want to trade. For example, do you want to trade gold, silver, oil, or another commodity? Once you have selected your asset, you must select a strategy that fits your investment goals.

For example, scalping might be a good option if you are looking to take advantage of short-term price movements. However, trend following might be a better option if you want to take advantage of long-term trends.

Once you have selected your asset and strategy, you will need to find a broker that offers futures contracts on that asset. Not all brokers offer all assets, so it is vital to check that your broker offers the asset you want to trade.

Finally, you will need to develop a risk management plan. This plan should include how much capital you are willing to risk on each trade, your profit goals, and your stop-loss levels. Having a well-defined risk management plan can limit your losses and protect your capital.

Creating a futures trading strategy can be a complex process, but it can be a rewarding way to speculate on the price movement of an underlying asset. By carefully selecting your asset, strategy, and broker, you can put yourself in an excellent position to succeed. And by developing a risk management plan, you can protect your capital and limit your losses.

Originally published at Entrepreneur News and Startup Guide.