The risks of futures trading in Australia

Many Australians have been interested in the Futures market lately. It is an exciting financial instrument to add to your portfolio, but you must understand the risks involved. The Australian Securities and Investments Commission (ASIC) has warned against dangers in futures trading in Australia.

The ASIC has warned about the risk of futures trading. However, futures are not to be confused with options. Options give you more protection than lots do.

In Australia, there is a little history of people engaging in futures trading, but this may change due to the high demand for such products overseas. Australia’s financial service regulators, including ASIC and ASX, are trying to raise awareness of these risks among consumers and small businesses considering entering the market.

trading is a contract aimed at fixing the price of an asset on a particular date in the future. However, there are significant risks involved with this type of financial product, which you need to know before entering into any futures contracts.

These contracts allow you, traders, to gain from falls in price and fall – by either going short or long on a future contract. Australia’s securities regulator states that if your position moves against you and becomes unlimited – you will have to pay more than you initially invested if losses continue to pile up. Futures can also result in complete losses, depending on how much money was put into them as security. The margin required varies according to individual brokers, but it’s best to expect an amount considerably higher than the actual value of the futures contract.

Margin differs from leverage, which you can use when trading, allowing you to open up a position with only a fraction of the total value required if you open it on your own.

investment products like managed funds which are not as readily available for scrutiny. In contrast, some operate under wraps for decades before exposure (such as Bernie Madoff’s Ponzi scheme). This means traders can get ‘future shock’ by seeing what other traders are doing and moving in line with them. At the same time, brokers and dealers can see what you’re doing – which means that they may try to take advantage of your inexperience by imposing higher margins or offering worse prices than you could get elsewhere.

pay fees for this registration. Still, even so, ASIC says some unlicensed operators will offer their services for free to lure inexperienced traders in before ripping them off. However, it is worth pointing out that while all this seems like a lot of work, Australia’s financial regulators have taken great strides in recent years to better protect the interests of retail investors against those seeking to take advantage of them.

available in your country (such as binary options), make sure you only deal with fully licensed brokers. Audited companies that comply with ASIC’s Corporate Governance principles – otherwise, you’ll expose yourself to unnecessary risk.