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Are You a Profitable Speculator?

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Basically there are two types of traders in futures trading; hedgers and speculators. A hedger trades in futures in order to protect himself from the risk of loss through price variations while a speculator relies on the risk to make a profit.

But not every speculator makes profits in futures trading. Many have lost money speculating the futures market. So before jumping into futures trading as a speculator, you should first and foremost know the futures market and understand yourself.

The Perils of Futures Margin

In order for you to trade in futures, you are required to have a certain amount of money in your futures trading account. This is called initial margin and it is as low as 10% of the total value of the futures contract. For example, you only need to have at least RM7,000 if you want to trade 1 lot of Crude Palm Oil futures (FCPO).

You might think that it is easy to make a lot of money trading futures because you only need to spend a little to get a lot more. While it is possible to make a large profit quickly through leverage, you can lose money quickly too as futures market price can fluctuate rapidly as 1 tick movement equals to change in hundreds even thousands in ringgit. Therefore it is important to note that many traders have lost a substantial amount of money speculating the futures market.

Characteristics of a Profitable Speculator

A profitable speculator is profitable because he has different characteristics that differentiate him from other speculators out there. Here are 3 characteristics that you too should have in order to become a profitable speculator:

1. Use risk capital to trade in futures

It is important to use money that you can afford to lose to trade in futures. Don’t use your savings or retirement fund as it only spells for disaster if you lose all of them. This way, when you are taking losses you are still able to support yourself and your family. You are also able to make better trading decisions as you are not emotionally attached to the trading fund.

Remember, only enter into futures trading when you have excess fund that you don’t know what else to do with it.

2. Enjoy taking risks

When trading futures, you risk losing all of your money. If you don’t mind losing and it won’t affect your everyday life, then you are only already on your way to become a profitable speculator.

3. Study the market

A good futures trader shouldn’t trade without studying the daily happenings of the market. Futures price fluctuations can happen in a blink of an eye so you must know and study the technical facts that may be affecting the particular market in which you are speculating.

If you’ve been on the losing end all this while, maybe these bonus tips could help you next time:

Bonus: Tips for Becoming a Profitable Speculator

1. Don’t get married to a particular futures contract. If you are losing money, don’t fight the market and hope that your losses will become profits later. Exit your position as quickly as you can. As the saying goes, let your profits ride but cut your losses short.

2. If you are uneasy with a position that you are holding, it is better to liquidate it. Don’t buy or sell a contract if you are unsure whether it is the right step. This is when trading plan comes handy because you have already planned your trade before entering it.

3. Don’t involve yourself with too many markets. It’s difficult to know all the technical facts and be able to follow numerous markets.

Remember, speculating futures market does not nor will it ever involve luck. Rather, it needs hard work, strategic planning, emotional control and in-depth understanding not only of the market but also of yourself. Then only can you hope for profits.


Wan Zuraiha Wan Zakaria contributes articles on investment and trading for Oriental Pacific Futures, a Malaysia-based brokerage authorized to provide futures broking services to institution and private clients since 2007. OPF specializes in futures broking, particularly Crude Palm Oil Futures (FCPO) traded on Bursa Malaysia Derivatives.

Oriental Pacific Futures articles published on the Corporate Website ( may be reprinted, reposted or distributed free for educational purposes only on the condition that Oriental Pacific Futures and the Corporate Website link information are included. However, other organizations are invited to link to articles that are available in the public area of the Oriental Pacific Futures’ Learning Resources website. No additional permission is needed for such a link.