The stock market may seem daunting if you are a beginner and are unaware of the properties of its underlying trading asset. Trading in Bursa Malaysia can be done in stocks, shares, derivatives etc. A futures contract is a type of derivative that is traded hugely in Bursa Malaysia. Trading in a Futures contract is one of the most effective trading instrument that reaps immense returns and rewards. This article will shed light on the benefits of trading futures in Bursa Malaysia

What is Futures?

A futures or futures contract is a type of derivative that allows the seller and investor to buy or lock-in the underlying asset at a certain price today but the actual purchase or selling is done at a later date. For example Mr. A is given an option to buy (lock-in) a futures product called FCPO (crude palm oil futures) in the year 2020 at RM 300 (price is fixed today). 

Thus the above given example clearly states the trading of a futures contract in Bursa Malaysia. The Bursa Malaysia market offers various active investment tools for trading in futures contracts. Few of the most popular investment tools traded on the Bursa Malaysia Market are FTSE Bursa Malaysia KLCI Futures (FKLI), Crude Palm Oil Futures (FCPO), and Gold Futures (FGLD). These investment tools have been amongst top preferred futures contracts on the Bursa Malaysia Market. 

Let us understand the top 5 reasons to consider trading in futures as an effective tool of investment in Bursa Malaysia.

1. Exposure

Bursa Malaysia gives immense exposure to the investors / traders to invest and trade their capital. The exposure is immense as the Bursa Malaysia market allows the investors to trade the largest stocks listed on the exchange by trading the FKLI futures contract

The FKLI is the most effective futures contract that allows investors to gain quick exposure to the Malaysian stock market.

2. Leverage

The biggest advantage of trading with futures contract is that the investor does not have to enter into the future contract by paying the full amount. Instead, the trader can trade the futures contract i.e. can gain a trading position in KLCI by paying a small upfront amount called the margin and get an opportunity of FKLI trading.

Thus the FKLI investing gives an opportunity to the traders to invest a fraction of their cash for FKLI investing and enjoy the exposure of KLCI futures contracts.

3. Higher Returns

As we know that futures contract allows the investor to trade by paying margin amount so when the Bursa Malaysia market moves in the favor of the trade, the trader earns higher returns. FKLI Investing in a futures contract is advantageous for two reasons namely it allows investors to enter in a position of contract with margin money and secondly it offers higher returns as compared to other investment tools.

4. Earning Returns Even In A Downturn

FKLI Malaysia gives investors an opportunity to earn profits even when the market turns against your FKLI futures trade. The FKLI futures contract gives investors an option to hold their FKLI investment for a long time or short time as per the market movement.

Thus if the market movement is positive the investor can earn huge profits by entering a long position for their FKLI futures trading while in downward market movement the investor can opt for short position for their FKLI trading.

5. Hedging

Investing in FKLI futures contract can be considered as a hedging tool to offset the loss that is caused due to fluctuation in the market. Let us consider this with an example: consider you are a trader of stock portfolio and FKLI futures contract and you believe that both of the investment instruments shall be facing a negative impact. In this scenario the FKLI trading can be traded carefully to mitigate the risk associated with the negative impact.

The effective FKLI futures trading to mitigate the risk can be done by entering a short position in FKLI trading. Thus in this manner the investor can offset the risk of loss caused due to value fall. FKLI trading is thus a sophisticated way to hedge the risk associated with market movement and to secure gains. 

The hedging decision can be taken by either entering a long position for FKLI trading in a bullish market or to enter a short position of FKLI trading in a bearish market.

Thus investing in trade futures in Bursa Malaysia is a good and efficient investment instrument as it offers an opportunity to invest in the largest stocks listed on the Bursa Malaysia. FKLI trading offers opportunity and exposure to earn exponential returns and profits by investing in FKLI Malaysia

Lastly, a very important tip for the traders and investor is to gain knowledge of futures trading and trading contracts before venturing into trading of popular investment tool like the FKLI futures as you cannot afford to take a risk of losing your hard earned money.

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