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The Advantages and Disadvantages of Online Futures Trading

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The Advantages and Disadvantages of Online Futures Trading

Over the recent years, online trading has gain immense popularity in Malaysia. It started with securities and equities trading with the local banks. Now, Bursa Malaysia Derivatives has also opened its doors for individuals to trade derivatives products such as futures and options via the internet.

With the availability of online futures trading platform, not only do local traders and investors have access to Bursa Malaysia’s derivatives products but are also able to trade approved offshore derivatives products such as those provided by Chicago Mercantile Exchange (CME), which has the largest options and futures contracts open interest of any futures exchange in the world. The partnership between Bursa Derivatives Bhd and CME Group Inc was announced in September 2010.

This means individual traders and investors can choose to trade derivatives products on their own (self-managed account) or to go through their brokers (broker-managed account).

Now that we know the choices you have, let’s look at the advantages and disadvantages of online futures trading.

Advantages of Online Futures Trading

Cheaper Commission Rates

Since there is no middle person involved, there are no additional fees for the services of brokers. You will only need to commit to a minimal amount of commission fees from using the online trading software.

Instant Access

Trading online will allow for instant access since you are the one that is going to place the order yourself. With that, you are able to act on price movement immediately and take advantage of the volatility of the market, which is especially important in the derivatives and commodities market.

While trading online does gives you the convenience there are also setbacks and disadvantages of trading online.

Disadvantages of Online Futures Trading

No Expertise Opinion

Trading on your own will also mean that you will only solely rely on your own judgment of the markets, of which you are more bound to make errors. Having an experienced broker will give you the confidence since the job of the broker is to study all aspects of the market as well as on-going research and news that will affect the market.

No Exit Plan

Another disadvantage is that no one is going to tell you to exit your position either to close for profits or to cut loss. As humans, sometimes we may trade according to emotions and that can distort judgments and the rationality of investing, regardless the strategies. Having a broker will help reduce or eliminate emotional trading.

Whether you should consider online futures trading very much depends on your level of experience. It also depends on the support of the broker. Some brokerage firms offer added services for clients such as training classes so that traders may get comfortable performing their online trading on their own.


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