Futures contracts are traded on exchanges and allow investors to bet on the direction of underlying assets. They are popular among hedgers, who use them to offset exposure to price changes, and speculators, who hope to profit from their bets. Futures contracts were first introduced in the UK in 1848, and today there is a wide range of futures available to trade on indices, commodities, currencies, and interest rates.
The UK’s position as a world-leading forex centre makes it an ideal place to trade futures. London is home to the world’s largest futures exchanges, including the Intercontinental Exchange (ICE) and the London Metal Exchange (LME).
Reasons why you should consider trading futures in the UK
There are several reasons why you should consider trading futures in the UK:
The UK is a world-leading financial centre: London is a base for the world’s largest financial institutions, and the UK’s regulatory regime is widely respected, which makes it an ideal place to trade futures.
The UK has a long history of trading futures: Futures contracts were first introduced in the UK in 1848, and today there is a wide range of futures available to trade.
The UK offers a variety of exchanges: Several exchanges are based in the UK, including the Intercontinental Exchange (ICE) and the London Metal Exchange (LME), giving investors a platform to trade.
The UK has a favourable tax regime: Investors in the UK can benefit from a favourable tax regime when trading futures. For example, there is no stamp duty on futures contracts traded on exchanges in the UK.
What are the risks of trading futures in the UK?
As with any investment in the UK, there are risks associated with trading futures. These include:
Loss of capital: Investors in the UK can lose all or part of their investment if the underlying asset price moves against them.
Leverage: Because futures contracts in the UK are traded on margin, investors can end up owing money to their broker if the underlying asset’s price moves against them, which can magnify losses.
Volatility: Futures prices can be volatile and may fluctuate widely in response to changes in the underlying asset’s price, market conditions, and other factors, making it difficult to buy or sell contracts at a favourable price to the investor.
Before trading futures, you should consider your investment objectives, experience level, and risk tolerance. You should also know the risks associated with leveraged investments, such as margin calls and liquidation.
How to get started trading futures in the UK
If you want to start trading futures in the UK, there are a few things you need to do to get started:
Choose an exchange
Several exchanges are based in the UK, including the Intercontinental Exchange (ICE) and the London Metal Exchange (LME). You must open an account with one of these exchanges to trade.
Select a broker
You will also need to choose a broker through which to trade. Some brokers specialise in futures contracts, while others offer a more general service. It’s essential to compare different brokers before selecting one.
Consider your investment and trading objectives, experience level, and risk tolerance
Before trading futures, you should consider your investment and trading objectives, experience level, and risk tolerance, which will help you choose the most suitable futures contract.
Research the underlying asset
Understanding the underlying asset is essential before trading a futures contract on it. You should research the asset’s price history, as well as factors that could affect its price in the future.
Know the risks involved
Before trading futures, you should be aware of the risks involved. These include loss of capital, leverage, and volatility. Ensure you know these risks before trading.
The bottom line
The UK is an excellent choice if you are a new investor looking for the perfect place to trade futures. With its world-leading financial centre, long history of futures trading, and variety of exchange options, the UK offers investors a favourable environment to trade. Novice traders can get started by selecting a platform and finding a reputable and reliable broker like Saxo Bank that suits their needs.