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Know the basics of position trading in Dubai

4 min read

In the finance sector, a position is defined as “the amount of a particular security, commodity or currency that a dealer has either bought or sold with a commitment to sell or buy it at a later date.”

In layman’s terms, trading positions can be understood as investments.

Position trading, also known as speculative trading, entails buying and selling financial instruments without the intention of holding them for an extended period—no more than three months on average.

It is categorised into two groups: speculative and hedging.

  • Speculative traders try to make gains from changes in market prices.
  • Hedgers use futures contracts to protect themselves from unfavourable declines in asset prices.

Middle East trading

Today, hundreds of thousands of people are trading in the Middle East.

One segment is full-time employed individuals who regularly buy and sell financial instruments to make gains from minute price movements.

How much these people earn usually depends on how much time they put into their trading activities. Almost all have day jobs but spend nights watching financial markets, thereby giving rise to a phenomenon known as the “round-the-clock market .”

For many years, the round-the-clock market remained an obscure niche with only a few participants globally. It was confined to Japan’s Osaka Exchange way back in 1981 until Fed funds futures were introduced in the US during the early 90s

Today’s speculative traders include top traders sitting in Wall Street banks who make trades every day to earn a living and unemployed youth looking out for opportunities to earn pocket money.

In Dubai, no official statistics are available on how many full-time employed individuals make the round-the-clock market a part of their financial strategies. Still, anecdotal evidence suggests that this number is more than 70%.

Why go for position trading in Dubai?

Dubai has been on top of the world when it comes to financial services since 2006 due to the rapid inflow of expatriates from over 200 countries who work in various industries such as construction and trade.

A large percentage of these foreign workers send home a substantial portion of their annual income, which creates ample market liquidity and offers traders tremendous opportunities.

For instance, in 2014 alone, UAE banks made a net profit of $9 billion through remittances by foreign workers.

These profits create even more liquidity in the wholesale market, where position trading thrives.

As such, all that you need to start trading is an internet connection or mobile application and some capital (minimum of $100) to begin with.

There is no strict distinction between full-time employed individuals and part-timers; many people leave their day jobs after they become confident about making enough returns from speculative trading.

Another reason why you should be interested in position trading in Dubai is because it can make you financially independent very quickly.

Dubai’s round-the-clock market

Here are some examples of how Dubai’s round-the-clock market helped traders multiply their capital in a short period:

  • According to one trader, he made $59,000 within ten months by trading securities backed by stocks.
  • Another trader earned around AED 3 million ($817,000) after 12 months of buying and selling futures contracts.

What are the advantages of position trading in Dubai?

The Finance Circle, an online platform for financial education based out of New York City, estimates that beginning traders who use borrowed money make as much as 20% return every month.

Speculative traders aim to buy low and sell high without owning the underlying product.

They make money only by betting on the price movements of stocks, commodities, currencies and other financial instruments, which means they don’t have to bear the expenses associated with ownership, such as storing and maintaining the products.

One significant advantage of position trading is that you can make markets work in your favour by using very little capital.

You can take advantage of market volatility and loss rates to generate returns over a short period. However, it’s important to remember that speculative traders should never borrow more than half their equity capital for this purpose.

It would only turn profitable positions into losing ones.

For more information, link to trade options online.

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