Forex vs. Futures

A lot of people just getting into investment may not have an understanding of what the futures market actually is but you need to know in order to understand the differences between that and the Forex Market. The futures market is a legally binding agreement to deliver or accept delivery of a specified grade and quantity of a given commodity in a distant month.To put it into perspective, the Forex spot market rarely exceeds two days for a trade to be completely. So as you can guess, many people prefer the quick transactions over long-term waiting.

Probably the main advantage of trading in the Forex market is that Forex trades are almost always executed at the time and price asked by the speculator. Many people have found out the hard way when it comes to futures trading and have been locked into an open position even after placing the liquidation order. Since the foreign exchange market is about three times larger than all futures markets put together, the high liquidity ensures prompt execution of all orders at the desired price and time.

Market Limits

The CFTC or Commodity Futures Trading Commission authorizes futures trades to place daily limits on contracts that significantly hamper the options to enter and exit the market at your selected time or price. The advantage of trading Forex is that there are no limits like this that exist in the market. What this does is it makes for much better trading options for you as a trader and allows you to make decisions on specific times to enter and exit the market based off of your selected price and time.

One Currency to Another

When we talk about currency trading, the main point and idea is comparing one currency to another. This is a very simple concept that many people find easy to get a grasp on when they begin to trade Forex. However, when it comes to the futures market, it sometimes feels like comparing two totally different things in terms of the U.S. dollar.

With these kinds of markets you are comparing the U.S. dollar to things such as stocks or the price of wheat. As you begin to understand each market better, you see how much easier it is when comparing two currencies instead of two totally different things.

Obviously when it comes to trading forex you really only need to worry about the pair of currencies that you have decided to focus your trading on. What this allows is that you can focus your attention specifically on just those two currencies instead of trying to figure out what stocks or futures that you need to study throughout the market.

With so many different options, it can be really tough to study the market well, which causes you as a trader to make many different financial mistakes. When forex trading, you are able to make much better market decisions because you are much more familiar with what you’re trading.

Market Location

The big difference when it comes to market location is that the Forex market has no centralized exchange for trading currency. By not having a centralized exchange, it allows the trading of forex to be much less regulated than the futures market.

Like many may already know, the futures market has a centralized exchange, which means that there is much more regulation from certain agencies such as the CFTC. Not only is market location so much different but also forex trading includes high leverage for traders, as well as very low costs.