Thursday, February 29, 2024

Does timed trading futures work in the UK?

Futures trading involves the buying and selling contracts that agree to buy or sell a set amount of a commodity, security, or index at a set price on a specific date in the future. Futures contracts are standardised, meaning that they are traded on an exchange, and each contract has specific terms and conditions.

Timed trading is a type of futures trading done according to a pre-determined schedule. You can use this type of trading to take advantage of predictable market movements, such as short-term price fluctuations. You can also use timed trading to limit exposure to the risk of sudden price changes.

There are two types of timed trading: fixed-time and conditional. Fixed-time timed trading involves buying or selling contracts at a specific time and date, regardless of market conditions. Conditional timed trading, also known as “if/then” trading, involves buying or selling contracts only if a specific condition is met.

You can use timed trading in the UK futures markets, but it is important to note that not all futures products are available for timed trading. For example, the UK E-mini S&P 500 contract is unavailable for timed trading. However, you can successfully trade the products available for timed trading in the UK.

Risks of timed trading
Missed opportunities

One of the risks of timed trading is that you may miss an opportunity to take advantage of a favourable market move. If the market moves in your favoured direction after placing your order, you will not benefit from the move.

Increased volatility

Timed trading can also lead to increased volatility in the markets. Traders using timed trading strategies are typically trying to take advantage of short-term price movements. When these traders enter and exit the markets, they can cause increased volatility.

Increased transaction costs

Another risk of timed trading is that it can lead to increased transaction costs. When you trade futures contracts, you incur two costs: the commission cost and the spread cost. The commission cost is the fee charged by your broker to execute the trade. The spread cost is the difference between the bid and the asking price.

Timed trading can lead to increased transaction costs because it often leads to more frequent trading. When you trade more frequently, you are more likely to encounter wider spreads and higher commission costs.

Limited flexibility

One final risk of timed trading is that it can lead to limited flexibility. You are typically locked into a position once you have placed your order. If the market moves in a different direction from what you expected, you may not be able to take advantage of the move.

Increased risk of slippage

The absolute risk of timed trading can lead to an increased risk of slippage. Slippage is the variance between the price you enter a trade and the price that your order is executed at. When you trade futures contracts, you are exposed to the risk of slippage because the prices of these contracts can move quickly. Slippage can occur when there is a significant imbalance between buying and selling orders.

How to minimise risk when time trading
Choose the right product

When trading futures contracts, it is crucial to choose the right product. Not all products are available for timed trading, so you need to ensure that the product you choose is suitable for this type of trading.

Do your research

Before entering into a trade, it is essential to do your research. It includes analysing the charts and understanding the market conditions. If you do not understand the markets well, you may not be successful when trading futures contracts.

Use a stop-loss order

Using a stop-loss order is one way to minimise the risk of losing money when trading futures contracts. A stop-loss order is placed with your broker to sell a security that falls below a specific price. It can help to safeguard you against significant losses.

Stay disciplined

When trading futures contracts, it is crucial to stay disciplined. It means following your trading plan and not making emotional decisions. If you cannot stay disciplined, you may be more likely to lose money when trading futures contracts.

You can try futures trading with Saxo here.

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