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What is the Difference between Forex and Futures?

Highly Trending markets

Because the foreign exchange market does not close, it isn't dramatically impacted by buying programs and cannot be easily manipulated, the Forex market offers some of the smoothest trends available in any market. No other market can come close to the amount of monetary volume and participation as the Forex market making it a haven for traders not having to deal with gaps and price movements, erratic spikes and other choppy market conditions more commonly experienced in the futures markets.

No Commissions or Hidden Fees

Though some speculators are unaware, ALL financial markets have a spread (the difference between the bid and ask price). In the futures market you are not only paying the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread. Ticker prices in the Futures market typically signify the last traded price, not the price at which you will be filled. Global Forex Trading offers you commission free trading on tradeable prices. In a sense, what you see is what you get, allowing you to make quick decisions on your trades without having to account for fees that may affect your profit/loss or slippage between the price that you have just seen on the ticker and the price in which the order will be filled.

Better Leverage

Trading in the spot currency markets provides advantages over trading currency futures contracts. One of the main advantages for traders trading spot currencies is the margin rate or leverage that clients are given. In spot currency trading customers receive one low margin rate for trades done 24 hours a day. In currency futures trading the client has one margin rate for "day" trades and one margin rate for "overnight" positions. This can become a hassle for traders and decreases the overall tradability of the currency futures markets. Margin rates in spot currency trading vary from around 1% to 5% depending on the size of transactions a particular trader initiates. GFT's spot currency trading gives the customer one rate all the time, no hassles, and no margin calls. One rate so that the trader can manage their own risk efficiently and simply.

24-hour Trading

Since the Forex market, in a sense, "follows the sun" around the globe the market rarely experiences periods of illiquidity. What this means is that any trader in any time zone can trade Forex at any time during the day or night! You no longer have to wait for the market to open when news has already hit the streets or have to stop trading because the CME, CBOT or other American futures pits have closed for the day. This gives the Forex trader added flexibility and continuous market opportunities that just aren't available in futures.

To explain the global effect on the Forex market, there are three main economic zones that are linked throughout the world. For instance, when the Pacific Rim markets such as Japan and Singapore begin to slow, the European markets of England, Switzerland and Germany begin, followed by the North American markets of the United States, Canada and Mexico. As the North American markets begin to slow down for the evening, the Pacific Rim starts their trading day. This example shows that you are no longer limited to trading the comparatively short trading day offered by US markets alone.

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24 Hour Liquidity and No Restrictions on Order Placement

Foreign exchange is one of the few true 24-hour markets. When trading Forex, clients enjoy unparalleled liquidity 24 hours a day. In many Futures markets the overnight access available to traders is simply put, "window dressing". The lack of liquidity and restrictions on what types of orders a client can place make trading and protecting positions a nightmare.

A good example is the Globex market. While the Globex market is only closed for a 15 minute period each day, the liquidity available after the open outcry market is closed in Chicago is normally very low. Spreads are wider and the ability to place larger orders is non-existent. Because of this most volume traders are forced into trading the EFP market overnight. The EFP market is the spot market priced in futures pricing. EFP's however come with additional fees, and are not available from an electronic interface. Electronic access, speed, no fees, and unmatched liquidity 24 hours a day makes Spot FX the choice for the currency trader.

Methodology

Foreign exchange is the prime market in the world. If you look at any market trading through the civilized world everything has a value in money. Money is the root of all pricing. Global finance itself is the distribution and re-distribution of money throughout different channels and different financial derivatives. Trading spot currencies can be done with many different methods and you will find many types of traders. From fundamental traders speculating on mid-to-long term positions based on world wide cash flow analysis and fixed income formulas, to the technical trader watching for breakout patterns in consoldating markets, or the Gann fanatic looking to duplicate the techniques of W.D. Gann, the methods for trading foreign exchange are many. Spot currencies is a great market for the "trader". It is where "big boys" trade, and can provide both large profit potential as well as commensarate risk for the speculator.

The history of the Foreign Exchange, was brought to you by Global Forex Trading.

DISCLAIMER:  Futures Trading involves a huge risk of financial loss!  FuturesKnowledge.com is a traders research and resource site - and is not meant to be used as a guide for trading.  Due to the large risk involved - we highly recommend that you consult with a number of different resources before attempting to invest in the futures, commodities, options, or any other market we report on.

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