Forex vs Future
|Commission Free Trading*
|Up to 400:1 Leverage
|Guaranteed Limited Risk
In the Forex market, almost $4 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 traders a puny $30 billion per day. Thirty
billion?!! Peanuts! The futures markets can't compete with its limited
At 2:15 p.m. EST Sunday, trading begins as markets open in Sydney and
Singapore. At 7 p.m. EST the Tokyo market opens, followed by London at 2
a.m. EST. And finally, New York opens at 8 a.m. EST and closes at 5 p.m.
EST. So, before New York trading closes the Sydney and Singapore markets
are back open - itís 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 England or Japan while the U.S. futures
market is closed, the next day's opening could be a wild ride. (Overnight
markets in futures currency contracts exist, but they are thinly traded,
not very liquid, and are difficult for the average investor to access).
Commission Free Trading
You know whatís great about trading currencies? You pay NO commissions!
Because you deal directly with the market maker via a purely electronic
online exchange, you eliminate both ticket costs and middleman brokerage
fees. There is still a cost to initiating any trade, but that cost is
reflected in the bid/ask spread that is also present in futures or
equities trading. Brokers are compensated for their services through the
bid-ask spread instead of via commissions.
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 traderís account. Risk is
minimized in the spot FX 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. All
open positions will be closed immediately, regardless of the size or the
nature of positions held within the account. In the futures market, your
position may be liquidated at a loss, and you will be liable for any
resulting deficit in the account. That sucks.