Spot Forex: Forex vs. Futures
Advantages of Forex |
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Money is the basis of all trading. Everything from physical goods to time spent to services performed is valued in money. For example, if you wanted to trade coffee from Mexico using Australian dollars in the futures market, you would first have to convert your dollars to pesos. Forex is considered to be a principal market on which many others are based. This is because when purchasing goods or other financial instruments, in many cases you have to start by exchanging your currency for the local currency.
Futures traders often find it natural to transition into forex trading. Although there are many differences, such as market liquidity, pricing structure, available leverage and open hours, some of the concepts used in futures trading can be applied to forex.
It’s important to remember that both futures and forex trading involve risk. Because forex trading is not conducted on a regulated exchange, there are additional associated risks.
HIGHLY TRENDING MARKETS |
| The forex market offers some of the smoothest trends available in any market. Plus, no other market comes close in terms of volume and participation, making it a haven for traders seeking fewer price gaps, erratic spikes and other choppy conditions found in lower-volume markets, such as futures or options.
Because the market is closed only briefly on weekends, market gaps (although possible) are limited, resulting in smoother trends and more consistent pricing. |
Attractive to all Types of Traders |
Technical and fundamental traders alike find the forex market appealing due to its trending nature. Technical traders tend to use indicators to identify whether a currency is overbought or oversold and look for repeating market patterns displayed on price charts. Fundamental traders monitor worldwide cash flows and analyse currency supply and demand to take mid-to-long term positions. Forex market trends provide ideal conditions for both types of analysis.
In addition, because of the highly trending nature of the forex market, anyone from short-term scalpers to longer-term “buy and hold” position traders can find trading opportunities in the market. Forex trading can be a natural transition for those who already have some trading experience.
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STREAMING PRICING WITH NO EXCHANGE FEES |
In futures, you often are charged extra for live pricing data and clearing, commission and exchange fees. With GFT, you won’t see added charges; all you pay is the spread.*
Unlike futures trading, where you buy or sell based on the last price traded, GFT streams live, tradable prices directly within its trading platforms. So the price you see is the price at which you actually buy or sell, and not just an approximate price.
* GFT is compensated by revenues from our activities as a currency dealer, rather than customer fees, which includes revenue from buying, selling and converting, as well as holding currencies and interest on deposited funds and rollover fees.
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LEVERAGED TRADING |
One of the most significant benefits of forex trading is the high amount of leverage that can be used. With GFT, traders can control larger positions with less capital, using up to 400:1 leverage. Please note that without appropriate use of risk management, a high degree of leverage can lead to large losses as well as gains. |
CONSISTENT MARGINS |
| In forex trading, a single margin rate is quoted to customers for trades placed 24 hours a day, 5.5 days a week. Your margin requirement can be as low as or less than 1 percent, depending on the size of the trade. In futures trading, market volatility can cause rates to vary throughout the day. Rates are often higher at night because the market is closed and brokers are managing risk. GFT eliminates margin calls and hassles, giving you one margin rate all the time for currency trading so you can manage your own risk efficiently and simply. |
24-HOUR TRADING, 5.5 DAYS A WEEK |
The forex market allows traders in any time zone to trade forex any time of the day or night because as a market closes in one time zone, another is opening in the next time zone. So, when the Australian market begin to slow, the European markets of Germany, England, and Switzerland are just beginning. Next are the North American markets of the United States, Canada and Mexico. As these markets begin to slow, the Pacific Rim starts their trading day again.
Plus, forex trading allows you to react instantly when news hits the wires as opposed to having to wait for the market to open. You also don’t have to stop trading because the futures pits have closed for the day. You’ll enjoy continuous market opportunities and added flexibility that are not offered in futures. Futures are traded when the exchange is open for the day and, while there is “after hours” trading in futures, spreads are typically wide and order size and type is limited. This is due to a limited ability to manage risk when the futures markets are unofficially open.
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CD01A.020.051308
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24-HOUR ACCESS TO THE WORLD
FOREX VS. FUTURES
DEVELOPED COUNTRIES