Forex Futures Trading

Foreign exchange is the principal market of the world. Everything a trader do is valued in money, from physical goods to time spent to services performed. Money is the root of all pricing and is the basis of all trading. For example, in the futures market, if you want to trade coffee from Mexico using U.S. dollars, you would first have to convert your dollars to pesos. Since you have to start by exchanging a currency to trade something in a foreign market, forex is considered the principal market, and it is the one on which all others are based .Both futures and forex trading involve risk. Forex trading is not conducted on a regulated exchange and as a result, there are additional risks associated with forex trading. There are a certain number of differences between Forex and Futures trading. In forex, there is no need to wait for the market to open when news has already hit the streets or to stop trading because the futures pits have closed for the day. This gives the forex trader added flexibility and continuous market opportunities that are not available in futures. Futures are traded when the exchange is open for the day. There is “after hours” trading in futures, but order size and type is limited and spreads are generally wider. This is because there is a higher risk and less ability to manage risk when the futures markets are unofficially open.Currency market is a 24-hour market, unlike most of the futures exchanges, allowing its traders to react to the immediate news happenings by trading immediately. This facility cannot be availed with the futures market which only operates during business hours and not for 24 hours a day. Forex markets hold unmatched liquidity as compared to currency futures .

Forex is the largest and most liquid market in the world. It can absorb a large trading volume and the transaction sizes are huge too, in comparison to any other market.Futures market provides only limited liquidity with a lesser trading volume. While the currency futures trading and price quotes have added complications of time factor and interest rates between various currencies, the Forex markets require no such adjustments of future calculations and consideration for the interest rate of future deals .It is only with Forex trading that a trader can experience high execution quality and speed because of its high trading ratio as compared to any other market. The reason why futures market does not offer rapid execution or price is due to the lesser volume of trading and liquidity and definitely due to uncertainty during normal market conditions . The currency futures and options markets are volatile and contain substantial risks for unsophisticated customers. The currency futures and options markets are not the place to put any funds that you cannot afford to lose. For example, retirement funds should not be used for currency trading. You can lose most or all of those funds very quickly trading foreign currency futures or options contracts .

You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. In the currency market, you pay no commissions and no exchange fees since you deal directly with the market maker via a purely electronic online exchange, you eliminate both ticket costs and middleman brokerage fees .In contrast to the cash market, forex futures trading markets allow traders to buy and sell contracts and thus avoid the need for the cash settlement of trades. Such is always available at the quarterly settlement of maturing contract allowing professional arbitrageurs to keep the two markets tightly in line with one another .Although there are substantial number of differences between Forex and Futures trading,future traders often find it easy to make the transition into Forex trading.