Forex Vs Currency Futures

If you have read our article comparing forex to equities you probably already know why Forex is a superior market in measuring up to the equities market. In this article we will evaluate the Forex market in conjunction with the currency futures market. Of course there are various points of distinction between each of these markets – historical, philosophical and technical to name a few. In this article we will review some significant differences between the two markets that reflect the way you trade and make money in each of them.

One of the biggest advantages the Forex market has to offer is its unparalleled volume. In fact, the amount of money traded every day on the Forex market is over 50 times bigger than the volume on the futures market. If you have read our previous Forex trading articles you probably already know that the Forex market is the biggest financial market in the world. Fact is that this size does not only indicate the popularity of the market but most of all it shows the amount of trading opportunities you can find on this market. The Forex market offers a place for any trader, from the smallest pastime traders to the professional, high-rollers.

Margin accounts and leveraging in the Forex market is quite different from the currency futures market. Currency futures brokers give different margin and take different commissions for 'day trade' and 'overnight' positions. Also, the margin rates that the futures brokers give usually depend on the size of the deal. On the other hand, Forex brokers offer the same leverage and the same margin rates at all times, day or night and with no concern to the size of the trade.

The learning curve of a new trader in the Forex market is not as steep as the one in the futures market. The methodology and quotes used in the Forex market are very easily understood and are quite intuitive, even to new traders. The futures market on the other hand is completely different. The price quotes of currency futures are inversions of regular prices that are used only in this market. Furthermore, the futures market demands many complicated adjustments. To name a few, the futures prices include time factors, interest rates and discrepancies between interest rates of different currencies. This turns the futures market into a much less intuitive and friendly market.

In summary, the Forex market has many significant advantages over the currency futures market that turn it into the natural choice for any entrepreneur or smart investor.

Brat Milman, Editor

2005–12–27