stock market invest trade forex money

Hi everyone, I just wanna noe more about the futures market (FKLI & FCPO) in m'sia. I notice that the volume is quite low n seems like not much people interested to trade it.

Any comment?

Futures contracts are merely forward contracts traded through an Exchange.
Its a leverage contract where you need to pay a deposit called margin which probably is about 10 to 15 times the contract value. Currently I think the deposit/margin is RM5000 per FKLI contract and RM5500 for CPO futures contract.
FKLI future contract has a multiplier of RM50 the price or index ie if the index is 1350 then the contract value is 1350 X RM50 = RM67500. That means if the index moves by 1 index points, you may win or lose RM50.
CPO Futures spec is 25 Metric Tonnes per contract. Its contract value thus would be 25 multiply by the price per MT. Thus if the current price of CPO is RM3025 per MT, then the contract value is (25 X RM3025) RM75,625. It means if the price moves by RM1, you may win or lose by RM25.
Thus, FKLI would have a leverage of RM67500/5000 = 13.5 times while CPO Futures has 13.75 times.
With the leverage, should the market moves by 7%-8%, you may double your gain or wipe out your deposit/investment. As you can see, it is a high risk investment/ speculation
For futures contract, you are allowed to short the market ie you can sell the contract before you buy them.
CPO futures contract are deliverable contracts while FKLI is a cash settled contracts. For deliverable contracts, if you do not close your position by the expiry date you may end up with 25 Metric Tonnes of Crude Palm Oil for 1 contract you buy.Thus the 3rd deliverable month is the most active/liquid compare with FKLI where the current/spot month is the most active. Thus if you wish to trade in CPO futures, then the 3rd deliverable month should be 'THE" month to be in whereas for FKLI, it is the current month.
FKLI can be used to hedge your portfolio. If you have a well spread portfolio of RM67,500 which has a close correlation with the KLCI index ie beta of close to 1, and assuming you expect the market to decline temporarily, then you may sell 1 lot to hedge your position rather than liquidating all your shares.
CPO futures are used by palm oil producers, traders and refiners to hedge their physical positions.
Hope I didnt take you to Holland!!!

For the present, you need to deposit RM5000 if you want to buy or sell 1 contract. Once you lose a little, the broker firm will ask you to top up the account. Besides having the money to play, you must also have the knowledge and wisdom to play intelligently.
You can use the fkli to hedge your portfolio if you know the strategy.

Jeff,

Since you re just starting out, dont play fkli or fcpo yet. Maybe later, not now.

Jeff,
Futures market is a high risks and high returns contracts.
You also need a good cash management system to to succeed in it. Brokers will collect a deposit called Initial margin/deposit from you when you start to take position. Thereafter you have to maintain the deposit at probably abt 70%-75% of the Initial Margin/deposit level that is called the Maintenance Margin. Should your deposit falls below the Maintenance Margin, the Broker will then call you to top up your deposit to the Initial Margin level.
When the prices in the market is volatile, the Clearing House has the right to increase the level of Margin. Once a new level of margin is set by the Clearing House, the Broker will then increase in tandem the Margin/Deposit and imposed it on their clients. When prices is highly volatile, margins can be increased within the trading day and you are supposed to pay within the day.
Should you default in your payment of margin call, the Broker, at its own discetion, has the right to liquidate your position.
Therefore, you need to have a standby cash above the Initial Margin/Deposit paid to your Broker in your cash management system.
Majority of the speculators loses in the Futures markets but there are a few that I have seen that makes millions within a short time span when they got it right.
Unlike stock markets where the overall market may increase in valuation and majority of the participants wins, Futures market is a zero sum game ie if you win, the opposite party loses and vice versa. Bear in mind that your opposite party may be the hedge funds, big hedgers etc with their so called huge cash chest and their trading and hedging desks manned by team of professional experts.
Well, trading in stock market is like playing soccer while the Futures market is like playing rugby. When you get hammered in the Futures market, it can be pretty painful and humbling but when you are right it's a.........WOW.

Go

Hmm... seems like futures is quite risky...

But i just have an idea, from my understanding tat the local stock market doesn't allow short selling n onli futures market allow us to do so. If according to the current trend tat the market mayb going to turn bear, how do u guys make money from stock market coz v cant short sell share?

For the margin, many has answered the requirement. In Msia, we only practise initial margin = maintenance margin.
In fact, in US, also initial margin = maintenance margin, well, at least for ES, YM and ER2. Others I am not sure :P

As for making money in a downtrend, well... for stocks in Msia, what ppl do is buy on dips and sell on rebounds. Some will tell u they shorted but I find this to be rubbish. One because its illegal. Then they ll say oh they already owned the stock. Then its not shorting is it? Its merely selling it and buying it back at a lower price. Any gapping down and still they ll be losing money. Thats not a real naked short as Futures per see.

As for me, I play FKLI. Sometimes FCPO. But these days mainly ES - thats S&P500 Futures in case one is wondering. And that is why I am still awake :P

And if in your trading vocabulary there is only bull and bear, then really, you shouldnt be playing futures. Give it another few years and I am sure you ll be ready in no time. No need to hurry.