Forex Trade vs. Futures

Forex trade vs. Futures, that is the question many investors are considering today. There are advantages and disadvantages to both, including the respective risks. To help potential traders make an informed decision we have sought to provide some of the key points relating to both. At the end of the day it will be interesting to see which proves the more popular in the Forex trade vs. Futures.

Financial liquidity

Nearly two trillion dollars are traded daily on the spot Forex market, deeming it the biggest and most liquid financial market worldwide. The capacity of the Forex market to absorb trade and transaction volumes is unparalleled by any other trading market. The futures market trades approximately thirty billion a day, which doesn’t even make the scale of the Forex market.

There is no argument that the futures market is unable to compete with its own limited liquidity. One of the major advantages of the Forex trade is its continuous liquidity, positions can be liquidated and stop orders actioned without causing any noticeable slippage. The only time you would see any slippage would be if the market reached an excessively volatile condition.

24 hrs a day, 5 days a week

The Forex market is open 24 hrs a day, 5 days a week, only closing for the weekend. But what that means to traders worldwide is that there are very few time frames when they can’t access a time slot to be able to trade online. The Forex market bases its core time on the UTC which used to be GMT (Greenwich Mean Time) the logic behind this is because it is at 0 degrees longitude.

Consequently Sunday afternoon EST will see the markets reopen in Sydney and Singapore since it is already Monday by their time zone. The reversal is when the Southern hemisphere markets close the northern hemisphere ones will still be trading. So to all extents and purposes it is virtually a seamless market. You don’t get that opportunity if you are trading stock and shares or commodities.

The benefits to the trader are endless, allowing them the freedom and choices of times they want to trade be it at home or anywhere else they choose to be.

No broker commissions

One of the biggest bonuses to the Forex trader is there is no commission payable to the broker. Now you would be naive not to think the broker doesn’t get their cut in some other way, because they do, but it’s not from commissions. There is a cost admittedly to initiating a trade, and that cost is reflected in the spread, which is a situation you also find in equities or futures trading, so it’s nothing unexpected. Actually that’s where brokers make their money through the difference of the bid and ask spread.

Limited Risk Guarantee

Traders are required to have position limits for risk management. These limits are set according the balance of a traders account. Risk is reduced in the spot Forex market as a margin call will be generated by the trading platform if the needed margin exceeds the amount of available trading capital, and all open positions are closed immediately. So keep an eye on your account and don’t get carried away.

Conclusions

Overall whilst the futures market has a lot to offer the trader it falls far behind the potential of the Forex trades market in many ways. However, it must be kept in mind that the life on the edge nature of the Forex market doesn’t suit all traders. Not everyone wants to make instant decisions about their money based on the ticker that is flashing across your screen. There is no denying Forex is a very volatile market so in the choice between Forex trade vs. Futures there will always be some who make the choice for futures.

Compare the best forex brokers to manage your currency exchange account.

Related posts:

1. Futures Trader Jobs: How to Trade for Others
2. Futures Brokers: Deciding Who is Going to Trade
3. Novice Introduction To The Futures Trade
4. Benefit From The Forex Futures Market
5. The Top Futures Traders Trade What They See
6. Compare Forex with Currency Futures Options
7. Understanding Futures Trading