What is the difference between trading currency futures and spot FX?

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Over the past few months of teaching with Online Trading Academya question has come up more and more often with new students. Futures or spot forex? Believe it or not, nearly every decision we make in trading much like life has potential positive things and potential negative things associated with that decision. Both a positive and a negative.

Being a well-rounded trader using multiple asset classes allows us to take advantage of currency futures trading account type of market, being trending or sideways channeling.

The most significant difference between a futures account and a spot forex account are the actual things that you can trade. With a futures account, you can trade stock market indexes, bonds, metals like gold currency futures trading account copper, cattle, wheat, even currencies! However, your choice of currencies is a bit limited.

When considering the choices available for trading with a spot forex account, in the United States we are limited to trading just currency pairs some foreign countries allow trading in metals in their forex accounts.

A second very significant difference between the two markets is the amount of actual dollar risk it takes to trade them. More contracts would obviously add more dollar risk. There are several e-micro futures contracts you could trade to make your dollar risk even less, but these are only on a few currency pairs. In addition, the volume on these contracts is pretty low. When trading in the spot forex market, trading micro lots at most brokerage firms will allow you to trade with stops that actually cost you as little as one dollar!

Yes, you read that right. Yet another major difference in these markets is the cost to trade, based currency futures trading account the margin required to buy one contract in futures or a lot in spot forex.

The cost to purchase one contract in the futures markets varies by several factors: Some lots are much cheaper, some are more expensive. So there you have a few of the big differences. The very basics are: With a spot forex account, you get to trade only currencies, but more of them.

In currency futures trading account futures market, generally your expenses will be higher when measured by dollar risk, amount needed to trade, and cost to do the individual trades. Spot forex then has the benefit of being cheaper to trade and learn the skills. As stated earlier, every decision you make in trading has potential positives and negatives, and it is up to you to decide which is better for your circumstances.

Disclaimer This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and currency futures trading account not assume any currency futures trading account whatsoever for the actions of the reader.

The currency futures trading account may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein.

Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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I believe in currency futures contracts. I am proud to say I was present on the trading floor of the Chicago Mercantile Exchange back in when the very first currency futures contracts were ever traded. But the standardized contract size — one of the hallmarks of all futures contracts — has sometimes been a drawback for the smaller, retail trader.

Since March 23, , the world of currency futures trading has added a new dimension aimed at the self-directed individual trader. This new dimension is known as Forex E-micro Futures.

Click here to order your copy of The VXX Trend Following Strategy today and be one of the very first traders to utilize these unique strategies. This guidebook will make you a better, more powerful trader. The same 10 pip 10 point price movement from 1. Trading in a regulated market. Futures trading is governed by the Commodity Futures Trading Commission and the brokers that offer accounts must be members of the National Futures Association.

Fully transparent markets and a fair and level playing field. Trading futures offers the safety of segregated customer funds and counterparty credit risk. The counterparty to all cleared trades is the clearinghouse of the Exchange. Micro currency futures are all cash-settled, just like stock index futures.

There is no risk or possibility of having to make or take physical delivery, as there can be with the regular-sized CME currency futures. To appeal to retail traders already active in currency futures trading, CME Group has kept the contracts consistent with each other and maintains identical settlement prices. But to appeal to traders accustomed to the nomenclature of over-the-counter OTC trading, the exchange quotes the micro-contracts in Interbank terms.

This means that the euro, Pound and Australian dollar are quoted in American direct terms but the Yen, Swiss franc and Canadian dollar are quoted and traded in European indirect terms. Transactions in futures and forex carries a substantial risk of loss. The information and data in this report was obtained from sources which we believe reliable but we do not guarantee its accuracy.

Neither the information nor any opinion expressed constitutes a solicitation by us for the purchase or sale of any futures or forex contracts. Larry Schneider is director of business development for the Zaner Group www. Zaner provides futures and forex brokerage services to self-directed traders, broker-assisted accounts as well as traditional full-service account management. At Connors Research, we are using it as an overlay to many of our best strategies to make them even better -- now you can, too.

The Connors Group, Inc.