Why futures trading is beneficial for investors in Singapore

Futures trading is a popular form of investment in Singapore, with the Singapore Exchange (SGX) being one of the leading futures exchanges in Asia. Futures contracts are agreements to buy or sell assets at a predetermined price and date in the future. This type of trading allows investors to speculate on asset prices without owning the underlying asset, making it an attractive option for traders in Singapore. This article will discuss the main reasons why futures trading benefits Singapore traders.


One of the critical benefits of futures trading in Singapore is diversification. By investing in futures contracts, traders can diversify their investment portfolio and spread risk across different asset classes. It is imperative in today’s market, where volatility and uncertainty are expected.

Futures contracts cover a wide range of assets, including commodities, currencies, and stock indices, allowing traders to take advantage of market movements in different sectors. For example, if a trader has a significant portion of their portfolio invested in stocks, they can use futures contracts to hedge against potential price declines. In contrast, traders with substantial exposure to commodities can diversify their portfolios by trading futures contracts on currencies or stock indices.

The SGX offers various futures contracts, such as interest rates, equity indices, and commodities. Traders in Singapore can take advantage of this diverse range of contracts to achieve a balanced portfolio less affected by market fluctuations.


Futures trading also provides traders in Singapore with flexibility, as they can take long and short positions. A long position means that the trader expects the price of an asset to increase, while a short position indicates that the trader anticipates a price decline.

In traditional stock trading, traders can only take advantageof rising prices, limiting their opportunities to potentially succeed in a volatile market. However, with futures trading, traders can take advantage of both rising and falling prices by taking long and short positions. This flexibility allows traders to adapt to changing market conditions quickly.

Futures contracts have standardised contract sizes, allowing traders to control more significant assets with a relatively small investment. This leverage effect magnifies potential returns but also increases the risk of losses. To manage this risk, traders can use stop-loss or limit orders to minimise losses and protect their investments.

24-hour market

Another benefit of trading futures in Singapore is that it allows traders to access a 24-hour market. The SGX offers trading of futures contracts on Asian, European, and American markets, providing traders with round-the-clock trading opportunities. It is especially advantageous for traders who cannot monitor the market during regular trading hours.

The continuous nature of futures trading allows traders to react quickly to breaking news or economic events that may affect asset prices. By being able to trade at any time, traders can take advantage of market movements and potentially take advantageof price fluctuations.

It is also worth noting that SGX’s electronic trading platform makes it easier for traders to access global markets, as they can place trades from anywhere with an internet connection.

Lower transaction costs

Compared to other forms of trading, futures trading in Singapore has relatively low transaction costs. The SGX offers competitive commission rates for futures contracts, making it a cost-effective option for traders. The leverage effect of futures trading means traders can control more significant assets with a smaller investment, reducing the overall transaction costs.

SGX’s electronic trading platform allows for faster and more efficient trade execution, minimising the impact of price changes on trades. It reduces the chance of slippage or price discrepancies between when a trade is placed and when it is executed.

Traders in Singapore can also benefit from tax exemptions on capital gains from futures trading, making it a more attractive option than other investment forms. Consulting a tax professional for specific advice on tax implications is essential.

Risk management

Futures trading provides traders with practical risk management tools, making it a valuable option for investors in Singapore. Traders can use futures contracts to hedge against potential price fluctuations and protect their investments. For example, an investor with a prominent position in a particular stock can hedge by taking a short position on that stock’s futures contract. If the stock’s price declines, the futures contract gain can offset the stock position loss.

Stop-loss and limit orders help traders manage risk by automatically closing a position once it reaches a predetermined price. It allows traders to set their maximum loss or profit levels, helping them control potential losses and lock in gains.

Traders must understand the risks of futures trading and use risk management tools to protect their investments. It is crucial to have a well-defined risk management strategy in place before engaging in futures trading.