Forex vs. Futures

[jacobfx]

I have a question to all the experienced traders here; What is better to trade Forex or Futures contracts?

I read the promotional material about trading Forex 24 hours a day vs. a limited time in the futures market but I've also noticed that while you can trade Forex 24/7 most of the time it does nothing

For those of you out there who have FX and Futures experience could you give me your two cents worth on this?

Forex Futures:
PRO: PRO:

CON: CON:

Thanks for your help

[designmax]

Hello JacobFX

I have been trading forex for just under 1 year. I learnt from a seasoned professional trader, who has traded both markets for a considerabe time. He has traded both, but when I put the same question to him 2 weeks ago, his advise was that the futures markets trend better, as they have to get all their movement into the session, and don't have all day to sit and meander sideways, like forex does. He also said he has not seen a forex market that has been so difficult to daytrade before, particularly over the last 7 months.
Hope that answers your question.

Designmax

[jacobfx]

Thanks for that insight. What about the costs of the futures vs. forex. Did you mentor mention any difference between the two?

In my mind the biggest drawback to Forex is the lack of a volume signal.

I've also been frustrated because while there are good charting packages for forex the ask/bid is not consistent between brokers anyone else have any insights?

[CrazyTrader]

I trade currency futures but mainly because I got my start in commodity futures and have slowly worked my way into currency and bond futures because of the instant fills compared to waiting for fills on grains, etc...

I pay $20 per trade (round trip -$14 plus exchange fees actually) and there's no fixed spread as in forex. Often the spread is 1 pip in currencies like the Euro. And I can trade 23 hours/day if I want to -the only break is between 5 and 6pm EST.

I trade from charts by fsxtra.com but now mainly use MetaTrader for free through Windsor Direct as they provide futures data, not just forex. I like that futures are regulated so the difference between brokers is non-existent.

As for movement, I don't agree with the perception that there is a difference between futures and forex. The movements are nearly identical though the price levels are a bit off based on market perceptions of "future" currency values.

Slippage has not proven to be a problem though I don't place trades before major announcements and hope that a stop loss will hold to cut a bad call short.

I do like that futures are fixed, no debate about leverage or lot size. 1 pip in a Euro will always be $12.50 (unless the exchange changes the contract size of course) and a pip in the Pound will be $6.25 for example.

Bottom line, both have their pros and cons. Either way, the same skills need to be developed.

CT

[united46]

Designmax

I'm afraid you're seasoned professional trader doesn't know what he's talking about.

Crazytrader is correct. If you compare a futures chart to a spot chart, the moves are virtually identical. The only differances are that futures prices are slightly different due to an allowance for interest rates in their pricing.

Also , futures are derivatives i.e they derive their price from the spot market.

Globex trades currency futures 24 hrs a day. It's true that liquidity dies down outside Europe/US hours and spread can widen. However, I've traded at 2-3 ticks as opposed to 1 tick at peak times.

If you think that futures markets traders move in different directions as they have to get "their trading done in a session ", you'll find they get torn a new asshole ( to quote from trading places).

Jacobfx

If you trade multiple lots, you'll find that costs are very similar. However, the futures market is regulated and you'll find the prices are truer to the spot market, unlike the retail shops where you often get price spikes (FXCM) to clear stops, especially around announcements.

Never had a problem with slippage in futures.

[jacobfx]

Originally posted by united46
Designmax

Globex trades currency futures 24 hrs a day. It's true that liquidity dies down outside Europe/US hours and spread can widen. However, I've traded at 2-3 ticks as opposed to 1 tick at peak times.

Jacobfx

If you trade multiple lots, you'll find that costs are very similar. However, the futures market is regulated and you'll find the prices are truer to the spot market, unlike the retail shops where you often get price spikes (FXCM) to clear stops, especially around announcements.

Never had a problem with slippage in futures.

Thanks for the information.

As someone with experience what would you recommend to a newer trader? Also what broker(s) would you recommend along with data feed?

The regulation part is encouraging, especially when I read about some of the "horror" fills on FX lately.

[merlin]

forex allows for very low startup captial, but there are no regulations that keeps the market honest. forex also has high commisions. people say forex is commision free, but that is BS. the spread is the commision, and dont forget about "rollover" charges as they can be substantial.

when you trade forex or futures, you are trading the same thing - commodities.

there are several layers to trading commodities >

layer 1: CASH MARKET
layer 2: FUTURES MARKET
layer 3: OPTIONS

the cash market for soybeans is where you actually give a grower money for his crop. the cash market for currencies is Forex. then you have futures (CBOT, CME, etc) layered on top of the cash market. and on top of all that you can buy options on your futures contracts.

[jacobfx]

Originally posted by merlin
forex allows for very low startup captial, but there are no regulations that keeps the market honest. forex also has high commisions. people say forex is commision free, but that is BS. the spread is the commision, and dont forget about "rollover" charges as they can be substantial.

when you trade forex or futures, you are trading the same thing - commodities.

there are several layers to trading commodities >

layer 1: CASH MARKET
layer 2: FUTURES MARKET
layer 3: OPTIONS

the cash market for soybeans is where you actually give a grower money for his crop. the cash market for currencies is Forex. then you have futures (CBOT, CME, etc) layered on top of the cash market. and on top of all that you can buy options on your futures contracts.

So what you're saying is that for smaller accounts Forex provides more opportunities but is more expensive?

Forget options they're for losers - unless you're selling them that is and that wasn't the topic I had in mind - sorry

Merlin, assuming you had $4,000 for trading what would YOU chose to trade?