How Much Money Will I Stand to Lose ?

If you invest a minimum amount of RM5000 for FKLI, this does not mean you are risking the entire RM5000 that you invest. You only risk the amount that you actually trade.

Today, FKLI October contract price opened at RM1396. This means that with RM5000 in your trading account, you can afford to trade 1 contract only. If you have RM15,000 in your trading account, you can trade up to 3 contracts. However, trading 3 contracts is extremely risky as the risk is 3 times higher than trading one contract.

For example,

1.Assuming you buy 3 FKLI contracts at RM1400 and the price falls 10 points. If you cut your loss by selling at RM1390, this means that you have made a loss of RM500 for one contract (10 x 50 = 500). But, if you have bought 3 contracts, your loss is RM1500 ( 500 x 3). If you have RM5,000 in your account, this means you only have RM3,500 left to trade. Whether you can continue to trade or not depends on the Company. Some Companies allow you to trade up to 50% of your margin.

2.The Margin for FKLI/FCPO may change from time to time depending on Bursa requirements. Assuming that the current margin is RM4000. If the Company allows you to trade up to 50%, then, you can continue trading with RM3500. But if you lose another RM1500, you can no longer trade as you will have left only RM2000 in your account.

3. However, if you had traded only one contract, you would have only lost RM500 and will still be able to continue trading without any interruptions and therefore stand a better chance of recovering your losses, since you still have a balance left in your account of RM4500 ( 5000-500 = 4500) instead of RM3500 only.

4. On the other hand, if the price had gone up 10 points and you sell at RM1410, you would have made a profit of RM1,500 by trading 3 contracts and only RM500 profit if you bought only one contract.

As such, in order to lose the entire RM5000 that you have invested, you will need to lose 100 points, which is quite a lot. Therefore, it is up to you decide how much money you are willing to lose by trading futures. If you do not want to lose more than RM500, you must make sure you do not lose more than 10 points (50 x 10 = 500) by trading within a limited range of price fluctuation.

So, as you can see, in Futures Trading, you can become very rich in a matter minutes or very poor depending on how much risk you take. It is up to you to decide how much risk you are willing to take with your money.