Forex vs. Futures

[united46]

Jacob

With a $4000 dollar account you're probably better with a mini fx account at this time or you could easily be overleveraged IMHO. Here's why:

Assume you are trading Euro

Contract size ( mini ) is $62,500 Initial margin (varies depending upon company) is $1620. Thus, even on one contract you are using margin of roughly 33:1.

Tick size is $6.25 and spread is normally 1-2 ticks. Most brokers charge a round turn at say $6-8. Thus cost to trade one contract is $12 - $22.

A loss of 30 ticks would equate to $187.5 or 4.68% of your account. Most " experts" recommend risking no more than 1-2% of account on one trade. So depending upon how much risk you take on each trade, you may be overlveraging ( especially if new to trading).

With a mini fx account, trading 6 mini lots would be roughly the same as one mini future i.e $60000. Cost to trade would be $12-$18 ( assuming a 2-3 pip spread).

So cost wise there is little differance. However with a mini, you could trade position size more appropriate to account size. 3 mini lots at a 30 pip loss = $90 or about 2% of account.

It may not sound sexy but remember the biggest mistake people make is trading too large. New technical traders look at charts and think .... "i would have bought there according to my system and I would have made 79 pips!" They therefore trade 2 lots. This time the trade goes the other way. Emotions cut in and voila, the trade is closed at a 40 pip loss ; goodbye $800 or 20% of account.

Sorry, preaching a bit there ( but actually speaking from experience).

As said before, the only problem with retail fx is dodgy brokers. At least futures are regulated. I've heard mostly good things in terms of execution and spread about Oanda so you could try them. Spread does widen quite dramatically around announcement apparently. I never used or even demo'd them so this is only what I've heard.

Hope this helps.

Regards

DUFC

Ps look at cme.com for futures details

[Croesus]

FX vs Futures

[united46]

MMMmmmmm

After reading that, everyone should trade fx only... LOL

dufc

[CrazyTrader]

Active trading 24 hours per day vs. Active trading 7 hours or less per day

The term "active" referes to open outcry trading on the CME floor. 23 hours a day is enough for me -I'd like to sleep at least one hour per day. The Futures Market is nearly always open for trade during the business week.

World's largest, most liquid market vs. Limited liquidity, particularly after-hours

I'm sure the Forex market is the most liquid but it's comparitive overkill. I don't ever have trouble getting fills at the prices I want at any "reasonable" hour. During any particular trading session liquidity is great.

1% margin ($1,000) controls $100,000 vs. Stricter margins - usually 5% to 8%

This is bad? OK, I guess Forex allowing you to jepardize your trading account is an advantage to anyone with an aversion to money.

Instant order execution and fills - the FX market is all-electronic vs. Delayed fill reports are common in busy open-outcry markets

OK, this is ridiculous. I get instant fills -no delays at any time of day.

Guaranteed fills on stops and limits - no slippage or partial fills vs. Inefficient order execution - slippage and partial fills are routine

This is ridiculous as well. I have seen numerous posts of brokers not honoring stops, limits, etc... Forex is entirely unregulated -who are you going to complain to? I've never experienced a problem in slippage or partial fills -though I must admit that I've not ordered 20 contracts at any one time (although $250/pip does sound exciting!).

Free, real-time streaming quotes for all traders vs. Expensive exchange fees for real-time streaming quotes

Another falsehood. Any broker providing any service at all will also provide free streeming quotes which, incidentally happen to be the same quotes provided to traders worldwide -no discrepancy between brokers. Also, I get free streaming quotes through MetaTrader data provided through WindsorDirect for example -no fees or account established (just demo).

Guaranteed limited risk - no debits Gaps in the market mean debits are always possible

Honestly, I don't have a clue what they are saying with this. Perhaps the risk of having a position go so bad that you owe more than you have in your account? Well, Money-management plays a big role in avoiding this one. It is however a pretty violent and rare event that would cause such a gap. You know, I could get hit by a car tomorrow -if I trade forex will that be avoided?

Zero commissions and exchange fees Commission and exchange fees are charged on a per-lot basis

Ahhh, the long-standing "phony lure." I often trade at a 1 pip spread but most forex spreads are 3-5 pips or more. I pay about $20 per round turn per trade and there are brokers cheaper I know -that $20 includes the exchange fees as well. How does that compare to a 3 pip mandatory spread on a Euro lot?


I'm really not arguing that futures are any better to trade than forex -I'm just taking issue with "scare tactics" and misinformation designed to put more money in broker's pockets.


I wish you all great trading!

CT

[csaunders]

Hi Crazy Trader,

Thanks for the info - please can you specify what your setup/trade-station software is - what exchange. Plus if you could post links to this.

Something that worries me is getting in, in fast moving markets. I've heard of software such as ninja-trader which "chases" the price and attempts to get a fill at the best price - your comments and experiences would be helpful.

Plus where would be best to demo the currency futures market.

Thanks

[united46]

http://www.cme.com/files/FX1907CME.pdf

This helps show that majority of fx futures trading is done electronically, not via pit.

dufc

[CrazyTrader]

csaunders-

I can't stress enough that trading futures in forex is virtually identical. If you are skilled at one then those skills will or at least should carry over to the other. Just learn on a Forex demo and you'll be fine. As for what software/interface system I use, I go through www.dtfutures.com for my account but for charts I pay an extra $170/month for live charts from www.fsxtra.com because I like their tools and with that I have a live feed from the CME and CBOT as well as a delayed feed from every other exchange (though I could pay more for a live feed from any exchange).

As for fills on fast moving markets, there is little if any difference to this risk in futures compared to forex. Fast moving markets are a risk but with potentially high reward. I've resolved to approach those (such as post announcements or Greenspan) with a 1-minute chart as this often clarifies the trend and severely limits my losses.

Let me conclude by saying that I am no trading authority. I suppose I'm like many on this forum, I'm marginally successful as a trader believeing that I'm on the verge of "getting it" and going to trading full time. I've been at it for over a year and have learned far more than I ever thought I'd have to to do this successfully. I do know something of trading futures compared to forex though and wanted to make some clarifications here.

CT