Basically, there are indeed two types of foreign exchange to act: the trade on spot forex market, a cash market and the trading of currency futures, so futures contracts on currencies. The possibility of acting foreign currency’s pairs by CFDs or similar instruments, I leave at this point just before times out. I personally use both of the above mentioned possibilities. For me, the “historical” reasons. When I entered the short-term trading, I began with the trading of index futures and currency futures. Since the currency futures somehow better, where I stayed with these instruments, later I expanded my activities on the Forex market. Before I get to the grounds, I’d like a few facts of these markets to make (not exhaustive).
| Forex Market | Derivatives |
| No central trading place, but inter-bank trading | Central Stock Exchange – CME, Chicago Mercantile Exchange |
| Currently still unfavorable low regulating surveillance | Regulated by U.S. authorities, particularly the National Futures Association (NFA) and SEC (Security Exchange Commission) |
| In general, no fees for this variable spreads | Fixed fees per contract and transaction |
| The protection of the account is from broker to broker, very different | Customer accounts are usually “segregated accounts”, i.e. from the assets of the broker protected and thus even with a bankruptcy of the broker |
| Broker, acting as market makers, take an order for one of their customers usually the opposite position. | Orders are on the electronic GLOBEX system “gematched. Buyer and seller can thus “directly to each other” |
If one looks at these facts, speaking at the first glance, some evidence to act more currency in the futures market. But the fact is that the access is accomplished in trading on the Forex market to much easier than trading of futures contracts. Contract selection, the note of rollover dates for medium-term positions, variable margin requirements for intraday trading and overnight positions are matters about which newcomers have to make in the Forex market is no thought. The fact that the Forex market offers a lot of currency pairs, was one of the reasons to extend my trade there. I always grab back to currency futures as a trading instrument if I want to act small intraday movements or outbursts: one tick spread is okay, a spread of three pips or more such trades, making uninteresting. If I strive for medium-term positions, I always do in the Forex market. Not to underestimate the issue is position size. Due to the huge liquidity in the Forex market are very large positions possible, the – dare I say time to – not when trading of futures contracts can reasonably be or filled with considerable slippage. I am not yet come up against such limits, but you never know. This criterion is certainly not so relevant for Forex beginners who are still looking for a broker. What is relevant even for beginners, however, is the fact that many forex brokers offer trading with small accounts / amounts. Minimum deposits are usually so small that you ensure that in most futures brokers could not even act in a single futures contract!
So from the Forex market covers a very wide range and is therefore equally interesting for beginners and professionals. Until further notice, I will certainly act in both markets, I could also imagine, in the future only in the Forex market to be active.
