Why Trade Forex: Forex vs. Futures
The forex market also boasts of a bunch of advantages over the
futures market, similar to its advantages over stocks. But wait, there’s more…
So much more!
Liquidity
In the forex market, $5.3 trillion is traded daily, making it
the largest and most liquid market in the world. This market can absorb trading
volume and transaction sizes that dwarf the capacity of any other market. The
futures market trades a puny $30 billion per day. Thirty billion? Peanuts!
The futures markets can’t compete with its relatively limited liquidity. The forex market is always liquid, meaning
positions can be liquidated and stop orders executed with little or no
slippage, with exception to extremely volatile market conditions.
24-Hour Market
At 5:00 pm EST Sunday, trading begins as markets open in Sydney.
At 7:00 pm EST the Tokyo market opens, followed by London at 3:00 am EST. And
finally, New York opens at 8:00 am EST and closes at 4:00 p.m. EST. Before New
York trading closes, the Sydney market is back open – it’s a 24-hour seamless
market!
As a trader, this allows you to react to favorable or
unfavorable news by trading immediately. If important data comes in from the United Kingdom or Japan while the
U.S. futures market is closed, the next day’s opening could be a wild ride.
Overnight markets in futures contracts do exist, and while liquidity is
improving, they are still thinly traded relative to the spot forex market.
Minimal or no commissions
With Electronic Communications Brokers becoming more
popular and prevalent over the past couple of years, there is the chance that a
broker may require you to pay commissions. But really, the commission fees are
peanuts compared to what you pay in the futures market. The competition among
spot forex brokers is so fierce that you will most likely get the best quotes
and very low transaction costs.
Price Certainty
When trading forex, you get rapid execution and price certainty
under normal market conditions. In contrast, the futures and equities markets
do not offer price certainty or instant trade execution. Even with the advent
of electronic trading and limited guarantees of execution speed, the prices for
fills for futures and equities on market orders are far from certain. The
prices quoted by brokers often represent the LAST trade, not necessarily the
price for which the contract will be filled.
Guaranteed Limited Risk
Traders must have position limits for the purpose of risk
management. This number is set relative to the money in a trader’s account.
Risk is minimized in the spot forex market because the online capabilities of
the trading platform will automatically generate a margin call if the required
margin amount exceeds the available trading capital in your account.
During normal market conditions, all open positions will be
closed immediately (during fast market conditions, your position could be
closed beyond your stop loss level).
In the futures market, your position may be liquidated at a loss
bigger than what you had in your account, and you will be liable for any
resulting deficit in the account. That sucks.
|
Advantages
|
Forex
|
Futures
|
|
24-Hour
Trading
|
YES
|
No
|
|
Minimal
or no Commission
|
YES
|
No
|
|
Up
to 500:1 Leverage
|
YES
|
No
|
|
Price
Certainty
|
YES
|
No
|
|
Guaranteed
Limited Risk
|
YES
|
No
|
Judging by the Forex vs. Futures Scorecard, Mr. Forex looks UNBEATABLE! Now meet the winners who trade the forex
market.
#Forex #Forextrading #Elliotstheory #Tradewithus
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