Emini Futures | Are Currency Futures Better Than Forex?
June 16, 2012 at 11:50 PM Are Currency Futures Better Than Forex?
Currency markets are the most liquid and active markets of any sector. However, there is also a great deal of misinformation, slick advertising, and even outright deception regarding this $2 Trillion Dollar a Day marketplace. For starters, a large percentage of that $2 Trillion is traded through what is referred to as the interbank market. The interbank market is the top-level foreign exchange market where banks exchange different currencies. This trading between banks is not accessible to retail traders and is estimated to account for the vast majority of the Trillion Dollar liquidity factor that attracts so many retail traders in the first place.
Our platform and proprietary indicator set performs well in both Currency Futures and Spot Forex. While we are more than happy to accommodate and train Forex Traders, we do prefer the Currency Futures as a trading vehicle. Here are a few of the reasons why:
- Diverse customer base trading on one platform
- Level playing field for all participants
- Performance and reliability of Globex network
- Deep liquidity in both Futures and Options
- Safety and security of central clearing
There are 54 futures and 31 options contracts based on major and emerging-market currencies, such as the Brazilian real, Chinese renminbi, Korean won and the Turkish lira. Market participants have the ability to mitigate risk with currency futures' longer dated currencies and benefit from the significant margin offsets available.
If your Forex brokerage firm uses a dealing desk, your buy and sell orders never actually reach the true Forex market. In other words, you do not have access to the inter-bank market. Instead you are buying and selling at prices set, and potentially manipulated by the dealing desk.
The Chicago Mercantile Exchange guarantees each transaction. This means that if you go long a currency futures contract and your speculation was correct, you will walk away from the trade with your profit even if the person that took the other side of the trade fails to pay.
Whether you are a large institution or an individual trader, everyone is on equal footing when it comes to pricing currency futures. Best price wins, it is as simple as that — something that is not always the case in the fragmented OTC FX market.
One of the primary draws of retail accounts to Forex is the idea of commission free trading. FX brokerage firms working with a dealing desk make money on the fixed pip spread offered to clients, but don’t charge a commission. On the surface, this seems to offer discounted transaction costs relative to the futures market. However, it is important to note that the typical FX pip spread of 3-5 pips provides the brokerage firm with a handsome reward.
It is important to note that even though transactions costs in the futures market are much more visible, they are likely not more than in Forex. CME currency futures do not involve a fixed bid/ask spread. Instead, the spread adjusts to the market’s liquidity. The front month is typically a 1 point spread. In the case of the Euro currency futures one point is equal to $12.50. Forex firms offering a fixed 3-5 point spread may not be charging traders commission outright, or even in a form that shows up on an account statement, but there are significant costs built into the synthetic market that they provide to you.
Invitation To Forex Traders
If you currently trade Spot Forex, you are invited to download our Currency Futures Trading Platform with Live Real-Time Data at no charge. Use our platform, trading simulator and proprietary indicators for a full week (no C.C. required) to see for yourself if your currency trading can become more reliable, more predictable, and more profitable.
During the week you are also invited to join us in our Live Trading Room every trading day from 9AM-11AM Eastern. We will teach you exactly how we use our indicator set in a live market setting. We do call live trades in the room. It is important to note, we employ very strict entry criteria when placing a trade. The price at which we are entering any trade is announced "to the tick" before the trade is placed. Once executed, we then monitor, discuss and answer your questions regarding the trade as it moves to either our target or our stop.
To take advantage of this no-obligation offer today, simply Apply!
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Reader Comments (1)
I could never get my head around the spread in the forex markets. I know different places quote different spreads .. some better than others.. but it bugs me when each end of a trade I have no idea what the fee is going to be..