Futures

Basically, trading futures is similar with trading forex that it traded based on the number of contracts. There are a lot of products that you can trade with futures including:
- Market Index (Dow Jones, S&P, Nasdaq, Nikkei, HSI, STI and some others)
- Interest Rate (Japanese Government Bond, Eurodollar, Euroyen, etc)
- Currency (Japanese Yen, Euro, Renminbi, etc)
- Agriculture (Corn, Soybeans, Palm Oil, etc)
- Energy (Crude Oil, Gas Oil, Kerosene, etc)
- Metals (Gold, Silver, Copper, etc)

For the list of the contract that you can trade is depend on the brokerage that you use. For example, Philips Brokerage offer quite a number of products that you can get the details from the following link: http://www.phillipfutures.com.sg/products/products.html

Some of the contract above can be traded in normal or mini contract. The size or volume for mini contract is smaller than normal contract which is more suitable for those with limited trading funds or beginner. For example is Dow Jones index that available in 3 size:
- Dow Jones ($10)
- Mini Dow Jones ($5)
- Big Dow Jones ($25)

The difference between the above is the contract size. For the Dow Jones, the size of the contract is Dow Jones Index * $10. So that, if current Dow Jones Index is 8,629, that means the contract size is 8,629 * $10 = $86,290. If you take long on this position, it means that everytime Dow Jones Index goes up 1 point, you will earn $10 and if Dow Jones Index goes down 1 point, you will lose $10. At the end of the day if Dow Jones close at 8,700, that means you will earn (8,700-8,629) * $10 = $710. Same concept applied to Mini and Big Dow Jones contract, just that the amount is $5 and $25 instead of $10.

Based on the brief explanation above, you can see that trading futures is similar with trading Forex that it carries a very high risk. If you know that, recently Dow Jones was very volatile as for example on 28 Nov 2008 (Friday) it closed at 8,829, while on 1 Dec 2008 (Monday) it closed at 8,149 which means it drop 680 points. If at the end of the day on Friday you open long position with the Dow Jones ($10) contract that means at the end of Monday you will lose 680 * $10 which is $6,800 just for a single contract.

Same as Forex trading, when you trade futures you must set cut loss target that you able to consume. Without cut loss target, trader might ended with a very big loss in as single day. It also has the same concepts with Forex trading that, you will receive margin call from your brokerage if your fund is not sufficient that some of the brokerage might force closed your position if you do not top up on the next 1-2 days.

Sometimes, you might wonder that why the oil, rice price are increase so much recently. The main reason is that there were a lot of people speculate and keep buying those products contracts. The results are those products price are increase a lot and there will be a lot of people suffering in the real life, especially for those with low income. At the same time those speculate and buying it is earning a lot of money during that time. So you can imagine that, some speculators with big amount of money can affecting the whole world life just from this electronic trading.

If you would like to trade futures, it will be better that if you can spare some amount of money that you willing to lose as futures trading is high risk with high return products. You can easily double up or clear up the amount of money that you trade inside, its because you only need to put about 1-10% amount of money to trade each contract. As the example above if you trade the Dow Jones ($10), which current value is $86,290 for each contract, you might needed to put about $900-$8,000 to trade it. The amount of money that you need to put is depend on your brokerage.

If you are unsure about the products that you would like to trade, its better if you seek advice from your financial consultant, experts or your broker if he/she has a good knowledge on that. It will be better if you trade using demo account that might be provided by some brokerages before you trade with the real money.

Good luck and enjoy your Sunday :)