Now time forex vs futures trading on why trade forex? Previously we have writing about forex vs stocks. In this article, we will again review the comparison of forex with other types of markets, namely futures.
Forex vs futures, the futures market includes manufactured goods, financial and currency bonds, and agricultural products.
What is forex? as we have already learned, is foreign exchange trading. If you speculate on futures trading, you don’t buy the actual item, but you buy the contract value of the item. Every future contract involves a buyer and a seller.
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Foreword forex vs futures trading.
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Forex trading is cross-border trading, where access to the forex market using the latest technology has provided many conveniences for retail traders and professional traders to become currency speculators.
In forex trading, a trader buys and sells one currency using another currency, in terms of a pair called, for example, EUR / USD.
Futures trading is a contract trade between the seller and the buyer at a certain price where the transaction will arrive at the specified time.
So in contract futures, there will be a maturity period where the transaction will be liquidated. The two types of trading do have similarities, but in terms of liquidation, forex trading makes it easier to close orders at any time.
Whereas in contract futures traders can only liquidate when the specified time comes on the date.
Liquidity of forex vs futures
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Comparing the liquidity of the forex market with the futures market. Like a giant with a dwarf, in forex trading volume, reaches $ 5.3 trillion a day.
You can compare with the futures market which only ranges between $ 30 billion a day. Very big difference, so that the forex market is still superior to the futures market in terms of liquidity.
Whenever a forex trader buys, he will immediately get the price and vice versa. Whenever a trader will sell, there will always be buyers out there.
Except in certain conditions where prices move very high. Or in high volatility, it is possible to cause a freeze where demand prices are crossed so that there is a delay in execution.
24-hour market forex vs futures
In the 24 hour market, the market provides advantages in terms of flexibility of trading time, as traders we can trade anytime.
When the Sidney session opens then followed by the Tokyo session. And before the Tokyo session ends the London session is followed and the last before the London session closes the New York session has opened. And, in the end, back to the Sidney session before the New York session closes.
In about flexibility time for example trade, when there is news that gives effect to market conditions, we can directly execute orders. The forex market with conditions on the market opens 24 hours of which provides convenience for choosing trading times.
Minimum cost forex vs futures
With very high competition conditions, many dealers offer a low commission or spread fee, and this fee is not as great as in futures trading.
At the ECN broker, he does not use spreads to get profit but will take a commission from traders who use their trading platform. In terms of commission fees, forex offers more minimal costs than futures trading.
The price of certainty forex vs futures
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Regarding price certainty, forex trading provides certainty in providing price terms.
Where you will get the speed of price execution under normal conditions so that you will easily close transactions on all price conditions.
In this case, it is different from the futures market where it does not offer price terms or instant execution. Although electronic trading that offers speed, prices filled with instant execution are far from certain. The price quote from the broker is the last price, not the price the trader wants to fill.
Liquidity risk limits
When comparing the risk limits between the forex and the futures market, forex trading offers a lower risk limit than the futures market.
The risks in trading are relative and this also depends on the trader itself. In forex trading, if the margin level has reached the limit set by the broker due to price volatility.
The broker will automatically close the trader’s transaction or we are familiar with the term margin call. You still have funds left when there is a margin call, but what needs to be understood is also related to the leverage you choose.
The low leverage of the remaining funds is more than the high leverage. In futures trading, you may receive a greater loss than what you have in the account at the time of order liquidation.
Forex vs futures which more profitable?
- In forex, we can trade 24 hours, but not in futures.
- In forex, we can trade with minimal or no commission, but not in futures.
- Forex has leverage until 1:500 but not in futures.
- In forex we get price certainty but not in futures.
- Forex has a guaranteed risk limit but not in futures.
From the comparison above gives an overview to traders in choosing which is more profitable between forex and futures trading.
However it does not mean that forex is not without risk, you must really have skills in trading this foreign currency.
Likewise, if you choose futures trading, maybe you will consider capital to start bigger than forex.
In the end, it is you who make your own choices, whether to try forex trading with low budget trading or futures trading.
Are you ready to start trading?