The ultimate futures trading guide for British traders

Futures trading can be an extremely lucrative and rewarding endeavour. It is a form of investment in which traders buy or sell a contract to purchase or sell an underlying asset at a predetermined future date and price. This type of trading allows traders to capitalise on price swings without owning the underlying asset outright, making it an attractive option for those who do not wish to take physical possession of the asset.

For British traders, it is vital to understand all aspects of futures trading before entering into contracts, as any misstep could prove costly. This guide provides a comprehensive overview of futures trading for British traders, offering step-by-step advice and tips for successful trades.

Determine your trading objectives

Before British traders embark on futures trading, it is essential that they clearly define their objectives. It will help them develop a realistic and achievable plan for making successful trades. It is essential to consider the amount of capital available for investing and the desired level of risk. Additionally, traders should decide whether to take an active or passive approach to trade and how frequently they plan to make trades. A clear understanding of these objectives will provide the foundation for successful futures trading.

Choose an exchange

The next step is to select an exchange that meets the requirements of British traders. The London International Financial Futures and Options Exchange (LIFFE) is one of the most popular choices for futures trading in the UK, as it offers a wide range of products with both short-term and long-term contracts. Additionally, LIFFE provides access to global markets and has meagre margin requirements. Other exchanges available to British traders include Intercontinental Exchange (ICE), Eurex, and MIAX Europe.

Select a broker

British traders must then choose a broker who can provide them with access to the chosen exchange. Reviewing each broker’s reputation and fees, and technical capabilities are essential. Additionally, British traders should ensure that their chosen broker offers algorithmic trading and automated order placement features. These features can help simplify the trading process and reduce stress for traders. Furthermore, traders should always ensure that their broker is regulated by the Financial Conduct Authority (FCA). Saxo Bank is a licensed investment bank that offers brokerage services, which you can consider.

Research

British traders must also research potential investments before entering a contract. It will involve researching the fundamentals of the asset, such as market supply and demand, historical price data, macroeconomic factors, and news headlines that could affect future prices. It is also essential to stay current on industry trends relevant to futures trading so that current market conditions inform trades. Additionally, review the analysis of other experienced futures traders to gain valuable insights.

Monitor your trades

Once British traders have entered a futures contract, they must monitor their trades closely to ensure optimal results. It means watching market events unfold and reacting swiftly, if necessary, to protect profits. Additionally, it is essential to set price alerts that will notify traders when their investments reach certain levels of their predetermined objectives. It is beneficial for traders to establish stop-loss orders that will automatically exit the market at pre-specified prices when losses exceed predefined limits. Furthermore, they should review their portfolio to ensure it aligns with their objectives.

Closeout positions

When the time comes to close out positions, British traders should review the contracts carefully before doing so. It is essential to be aware of any fees that may be charged for closing out a contract. Additionally, traders should consider the current market conditions and their objectives to determine when it is best to exit the position. It is also beneficial to review the future market trends before exiting to minimise losses and maximise profits.

British traders must keep detailed records of all trades made so they can review them later. It will provide valuable insights into their performance, allowing traders to make better decisions in the future. Additionally, keeping track of taxes owed on profits earned from trading futures contracts is a critical aspect of successful trading that should not be overlooked.