Spot Forex vs. Futures Trading

moyes · 3 October 2013

What are the Pros and Cons?

I trade the forex market on a part time basis and I am also interested in learning about different markets. The futures market seems to be very well regulated. Are the spreads and commissions the same as forex and where can i find some learning material? Thanks

havaiana · 7 October 2013

Futures currencies and spot forex track eachother, so in terms of how they move they are the same.

You won't have any problem getting commission for futures of $5 a contract (per round trip) or a little less. If you are trading a lot of contracts per month you will be able to get commission for less.

Spread is pretty much always 1 tick (pip), except during extremely thin times, news announcements etc. Even though the spread is more than your typical spot spread, in my experience it works out cheaper to trade futures (unless you're just hitting buy/sell market), learn to trade with a price ladder and it will be cheaper for sure.

In futures you can see how much volume has been and is being traded at each price, how many contracts just traded at the bid etc, not just at your broker but in the whole futures market.

Regulation is a lot better than spot forex.

I have traded both, sometimes side by side and futures wins hand down for me. You will learn more about the market trading futures than you will through spot too.

Through a futures broker you will also have access to indices, interest rate/bonds and commodities.

moyes · 8 October 2013

havaiana said:
Futures currencies and spot forex track eachother, so in terms of how they move they are the same.

You won't have any problem getting commission for futures of $5 a contract (per round trip) or a little less. If you are trading a lot of contracts per month you will be able to get commission for less.

Spread is pretty much always 1 tick (pip), except during extremely thin times, news announcements etc. Even though the spread is more than your typical spot spread, in my experience it works out cheaper to trade futures (unless you're just hitting buy/sell market), learn to trade with a price ladder and it will be cheaper for sure.

In futures you can see how much volume has been and is being traded at each price, how many contracts just traded at the bid etc, not just at your broker but in the whole futures market.

Regulation is a lot better than spot forex.

I have traded both, sometimes side by side and futures wins hand down for me. You will learn more about the market trading futures than you will through spot too.

Through a futures broker you will also have access to indices, interest rate/bonds and commodities.

What I am interested in trading is the Emini S&P 500 and commodities. What do you mean by trading with a price ladder, could you please elaborate on that? From what you are saying and what I have read, the futures market is well regulated and cheaper than spot fx depending on the broker and you can actually see the real volume. I do think one needs to have at least $10 000 to trade futures because the margin requirements are a lot higher than spot fx.

What futures broker would you recommend to trade with and hopefully they have a demo account that I can try?

Thank you for your input.

havaiana · 8 October 2013

The price ladder is just the DOM (depth of market), the vertical ladder of prices that lists all the bids and offers. The important thing is just to learn to execute your orders cheaply. For example in spot forex if you want to buy you click buy market and lift the offer. In futures if you have the ladder up and see that a lot of volume is hitting the bid, you can put a limit buy at the bid and buy for one tick cheaper than just buying the offer. Over time watching the volume trading at the bid and offer may also be able to help you improve your timing.

A lot of futures brokers will let you trade the emini or currencies for $500 a contract if you don't hold the position over night. This is not enough money though. Put $500 in a account with AMP futures, don't trade the $500, but you will have access to a simulator with ninjatrader for as long as you want as well as the real account. Pretty sure you will have free data for the emini and instruments on CME and can sim trade it or even record the session and sim trade later. I'm not advising for or against AMP after you decide to trade real money, most people on here use Interactive Brokers.

Spot Forex vs. Futures Trading

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