Entering into AFET market for the first time is a relatively simple process. Whether you are seeking to minimize risk through hedging or looking for opportunities to invest in a challenging environment, the procedures in getting started are the same.
The following are the steps or general rules which you should be aware of before you begin.
1. Know the rules in futures trading
It is important that you understand the rules before jumping into trading.
- Rules of trade (margins, buy or sell orders, position off-setting, delivery procedures)
- Understand the futures contract
- Understand how to calculate your margin or profit/loss
2. Choosing a broker in futures trading
There are a few factors to consider in choosing a broker such as service level, marketing staff experience, shareholders, office facilities, validity of operating licensed from AFTC, efficiency and access to market information, and research team expertise in analyzing trading data, just to name a few. THe list of approved AFET brokers is listed here or you may also inquire at the AFTC's website.
3. Opening an account with a broker
Only a few documents are required to open an account such as a copy of your identity card or passport. As a foreign investor (non-Thai citizen), AFET provides services for "omnibus account" allowing foreign investor to trade in complete confidentiality with minimal restrictions. Please consult your broker for further information.
4. Initial margin is only 3-5% of the commodity contract value
Before issuing a buy or sell order, you are required to place an initial margin with your broker which is only 3-5% of the full value of the contract. Initial margins are set by AFET and is subject to change. Click here for an update.
5. Executing trade orders
Placing orders to buy or sell can be done by contacting your broker to execute the order. You can also issue execute orders directly by yourself through the internet trading system at AFETDirect
6. Check your status or position at the end of each trading day (Mark to Market)
t the end of each trading day, brokers will calculate the profit/loss or margin position of their customers based on the settlement price of the contracts. This process is known as "Mark to Market". If the margin value is lower than the "maintenance margin" level, then customers are obligated to inject capital to bring the margin value back up to the "initial margin" level.
7. Taking physical delivery of the commodity
If you hold on to the contracts that you had either purchased or sold up to the last trading date, then you are bound to undertake physical delivery of the commodity on the contract that you had entered into.
