Featured Image Caption: Futures Trading for Beginners
The London market provides many opportunities for both beginners and experienced traders.
Today, the world is increasingly becoming more interconnected as well as globalized.
As such, it’s no surprise that many discover that they can trade from home but connect to the world’s largest exchange to make trades, as opposed to solely trading with their local exchanges.
So let’s get down to it – here are some of the main reasons why traders should consider making their next P&L statement a profit rather than a loss:
The diversity on offer for products enormous
First of all, London is home to over 2000 different products in the futures market compared to New York’s 25.
The list includes everything from oil and gold to cocoa, sugar, coffee, cotton and corn, with every single one providing a unique opportunity for traders.
It’s highly liquid
The sheer volume of traders in London means that there are always buyers willing to buy your positions when you’re ready to sell at any point during the trading session.
It means that liquidity can often be higher than in other markets, making it easier for big orders or quick entries/exits without significantly moving the price.
Liquidity also comes in the form of low spreads—if you’ve ever traded forex, you’ll know the struggle of high spreads, which eat into your pips.
On the other hand, futures contracts usually have much smaller spreads between bid and ask, meaning you can enter/exit at more profitable price points than in other markets.
Trading hours are flexible
Most futures contracts expire weekly or quarterly, so it’s common to be trading overnight or slightly before the close to take advantage of volatility as well as opening new positions during market hours.
On top of that, London is five hours ahead of New York, meaning that strictly speaking, you could trade NYMEX products whilst living in London.
The LIFFE (London International Financial Futures Exchange) was founded in 1982 and has since become one of the most prestigious futures markets around the globe.
Since its inception, it has formed partnerships with major institutions worldwide, including Chicago Mercantile Exchange (CME), Eurex AG, located in Germany, and Tokyo Commodity Exchange (TOCOM).
What sets this apart from other trading exchanges is that you can trade in your local currency.
It means that you can use direct access to trade during pit trading sessions or off-hours via electronic communication networks (ECN).
The London market has contracts available on a variety of underlying commodities and financial instruments, which include:
- Standard & Poor’s 500 Index (SPX),
- Euro Bund, Euro Bobl,
- Euro Schatz,
- T-Bond Futures,
- Euribor Future,
- E-Mini S&P 500 stock index futures,
- E- Mini NASDAQ 100 stock index futures,
- UK Gilts future.
Several products are related to interest rates, including sterling overnight index average (SONIA) and bank offered rate.
The latest addition was the contracts on the FTSE 100 Index Futures, launched in March of 2007.
The London market is for traders who are located in the UK and those who reside elsewhere and would like to benefit from easy access to trade with a significant international exchange.
There are no stamp taxes involved when trading futures (a tax based on the number of agreements).
As an investor or trader, this means that you can utilize your money more efficiently than other markets where they charge additional taxes.
Additionally, there are no additional taxes imposed by LIFFE’s regulators; this includes Commission & Tax (CT), Stamp Duty Reserve Tax (SDRT), and Financial Services Compensation Scheme (FSCS) levies.
While many people are familiar with Chicago’s derivatives markets, it’s important to note that not only is the London market one of the most liquid in terms of futures trading.
There are also a few less complicated rules regarding margin requirements.
For example, you do not need to post an initial margin to take a position in the market; instead, there is only a maintenance margin that varies depending on each contract.
It means that if your trade moves against you by even 20 pips, then you’ll be expected to inject more funds into your account until you reach the 100% margin requirement.
For more info link to trade futures.