Forex, Forex Trading, Forex Trading

What is the Difference between Forex and Futures?

Highly Trending markets
Because the foreign exchange market does not close, it isn't dramatically impacted by buying programs and cannot be easily manipulated, the Forex market offers some of the smoothest trends available in any market. No other market can come close to the amount of monetary volume and participation as the Forex market making it a haven for traders not having to deal with gaps and price movements, erratic spikes and other choppy market conditions more commonly experienced in the futures markets.

No Commissions or Hidden Fees
Though some speculators are unaware, ALL financial markets have a spread (the difference between the bid and ask price). In the futures market you are not only paying the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread. Ticker prices in the Futures market typically signify the last traded price, not the price at which you will be filled. Global Forex Trading offers you commission free trading on tradeable prices. In a sense, what you see is what you get, allowing you to make quick decisions on your trades without having to account for fees that may affect your profit/loss or slippage between the price that you have just seen on the ticker and the price in which the order will be filled.

Better Leverage
Trading in the spot currency markets provides advantages over trading currency futures contracts. One of the main advantages for traders trading spot currencies is the margin rate or leverage that clients are given. In spot currency trading customers receive one low margin rate for trades done 24 hours a day. In currency futures trading the client has one margin rate for "day" trades and one margin rate for "overnight" positions. This can become a hassle for traders and decreases the overall tradability of the currency futures markets. Margin rates in spot currency trading vary from around 1% to 5% depending on the size of transactions a particular trader initiates. GFT's spot currency trading gives the customer one rate all the time, no hassles, and no margin calls. One rate so that the trader can manage their own risk efficiently and simply.

24-hour Trading
Since the Forex market, in a sense, "follows the sun" around the globe the market rarely experiences periods of illiquidity. What this means is that any trader in any time zone can trade Forex at any time during the day or night! You no longer have to wait for the market to open when news has already hit the streets or have to stop trading because the CME, CBOT or other American futures pits have closed for the day. This gives the Forex trader added flexibility and continuous market opportunities that just aren't available in futures.

To explain the global effect on the Forex market, there are three main economic zones that are linked throughout the world. For instance, when the Pacific Rim markets such as Japan and Singapore begin to slow, the European markets of England, Switzerland and Germany begin, followed by the North American markets of the United States, Canada and Mexico. As the North American markets begin to slow down for the evening, the Pacific Rim starts their trading day. This example shows that you are no longer limited to trading the comparatively short trading day offered by US markets alone.

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24 Hour Liquidity and No Restrictions on Order Placement Foreign exchange is one of the few true 24-hour markets. When trading Forex, clients enjoy unparalleled liquidity 24 hours a day. In many Futures markets the overnight access available to traders is simply put, "window dressing". The lack of liquidity and restrictions on what types of orders a client can place make trading and protecting positions a nightmare.

A good example is the Globex market. While the Globex market is only closed for a 15 minute period each day, the liquidity available after the open outcry market is closed in Chicago is normally very low. Spreads are wider and the ability to place larger orders is non-existent. Because of this most volume traders are forced into trading the EFP market overnight. The EFP market is the spot market priced in futures pricing. EFP's however come with additional fees, and are not available from an electronic interface. Electronic access, speed, no fees, and unmatched liquidity 24 hours a day makes Spot FX the choice for the currency trader.

Methodology

Foreign exchange is the prime market in the world. If you look at any market trading through the civilized world everything has a value in money. Money is the root of all pricing. Global finance itself is the distribution and re-distribution of money throughout different channels and different financial derivatives. Trading spot currencies can be done with many different methods and you will find many types of traders. From fundamental traders speculating on mid-to-long term positions based on world wide cash flow analysis and fixed income formulas, to the technical trader watching for breakout patterns in consoldating markets, or the Gann fanatic looking to duplicate the techniques of W.D. Gann, the methods for trading foreign exchange are many. Spot currencies is a great market for the "trader". It is where "big boys" trade, and can provide both large profit potential as well as commensarate risk for the speculator.

What is the Difference between Forex and Stocks?

Historically the securities markets have been looked at, at least by the majority of the public, as an investment vehicle. In the last ten years securities have taken on a more speculative nature. This was perhaps due to the downfall of the overall stock market as many security issues experienced extreme volatility because of the "irrational exuberance" displayed in the marketplace. The implied return associated with an "investment" was no longer true. (If indeed it ever was.) Many traders engaged in the "day trader" rush of the late 90's only to realize that from a leverage standpoint it took quite a bit of capital to day trade, and the return while potentially higher than long term investing was not exponential to say the least. After the onset of the "day trader" rush, many traders moved into the Futures stock index markets where they found they could leverage their capital greater and not have their capital tied up when it could be earning interest or making money somewhere else. Like the futures markets spot currency trading is an excellent vehicle for the pattern day trader that desires to leverage his current capital to trade. Spot currency trading provides more options and greater volatility while at the same time stronger trends than currently available in stock futures indexes. Former securities day traders have an excellent home in spot foreign exchange.

No Middlemen
Centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument trader will cost the them money. Either in time or in fees. Spot currency trading does away with the middlemen and allows clients to interact directly with the market maker responsible for the pricing on a particular currency pair. Quicker access, cheaper costs.

Buy/Sell programs do not control the market
How many times have you heard that "fund A" was selling "X" or buying "Z"; Rumor had it that the funds were taking profits because of the end of the financial year or because today is "triple witching day", all as an explanation of why this stock is up or the market in general is down or positive on the session. No matter what your broker says the stock market is very susceptible to large fund buying and selling, and it is not uncommon for a fund to "run" a particular issue for a few days. In spot currency trading the liquidity of the market makes the likelihood any one fund or bank to control a particular currency very slim. Banks, Hedge funds, FCM's, governments, retail currency conversion houses, and large net worth individuals are just some of the participates in the spot currency markets the liquidity is unprecedented.

At the mercy of Analysts on TV
Have you watched TV lately? Heard about a certain Telecomm stock and an analyst of a prestigous brokerage firm accused of keeping their recommendations "BUY" when the stock was rapidly declining? It is the nature of these relationships. No matter what the government does to step in and discourage this type of activity, we have not heard the last of it. IPO's are big business for both the companies going public and the brokerage houses. Relationships are mutually beneficial and analysts work for the brokerage houses which need the companies as clients. That catch-22 will never disappear. Foreign exchange, as the prime market, generates billions in revenue for the world's banks is a necessity of the global markets. Analysts in foreign exchange don't drive the deal flow, they analyze.

7800 stocks vs 4 major currency pairs
There are approximately 4,000 stocks listed on the New York Stock exchange. Another 2,800 are listed on the NASDAQ. Which one will you trade? Got the software? Got time? Got milk in case you have aged significantly when you finally find your trade? In spot currency trading you have 6 major markets, 24 hours a day 5.5 days a week. You have approximately 34 2nd tier currencies to look at in your spare time (if you are so inclined). Concentrate on the majors, find your trade. Spend your afternoon on the golf course, or with your kids instead of with your eye doctor trying to diagnose why you are seeing double.

Commission free
Simply put- No commissions. No clearing fees, no exchange fees, no government fees, no brokerage fees. Sure there may be different names for different fees at different places, but in spot currencies no commissions means just that- NO COMMISSIONS.

Same price for broker assisted trades
No premium for calling in orders, whether or not you trade via the phone, use market orders, stop orders, limit orders or even contingent orders. In spot currency trading you do not have to worry about extra charges. Ever wonder why a securities brokerage house charges you more if they have to guarantee you a price than if you give them a market order with no price qualifier? Well you don't have to worry about it if you trade spot currencies.

Trade off of your profits
Ever been up on a stock and wished you could leverage that profit and get in a little more of the issue? In spot currency trading you can. Use your open profits to add to your positions. As you gain experience, experiment with pyramid trading strategies. The options are endless because the market is cutting edge.

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Disclaimer - I am not a commodity trading advisor. The information on this site is for trading education only. There are no trading recommendations for any one individual made on this site and this information is paper trades for trading education. All trades are extemely risky and only risk capital should be used when trading.

U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.