Beginner’s Guide to Online Forex Trading – Chapter 14: Forex versus Futures

Beginner’s Guide to Online Forex Trading – Chapter 14: Forex versus Futures

Benefits of Trading in Spot Forex Market:

Trading in spot Forex market offers some critical benefits often overlooked by traders – both novices as well as pros. The differences between spot and futures markets are rather subtle, but make a substantial difference to your bottom line, and can offer huge benefits to all classes of traders. What are those special characteristics of the spot Forex market that give it an edge over other markets?


This is the only market that is literally open day and night. Time differences between the countries and their market timings give you an incredible flexibility. With the markets in the Asia Pacific region, Far East, Europe and North America opening after gaps of 5 to 6 hours one after the other, you get the opportunity to trade 24 hours. Thus, while New York markets are open from 8 am to 5 pm,Sydney and Singapore are open from 2 pm to 11 pm EST,Tokyois open from 7 pm to 4 am, andLondonis open from 2 am to 11 am. It is as simple as that. Before one market closes another is open, giving you a 24-hour trading opportunity. This implies an enviable ability to react to news as they come in, by trading immediately without having to face huge opening gaps the next morning, which no other trader, except a spot Forex trader can enjoy, leaving out the low-volume overnight currency futures trades that are not very liquid and are beyond the scope of average investors.

Market Size

By sheer trading volume, the spot Forex market is way above the other markets. Clocking a daily average of $2 trillion, this market affords the highest liquidity one can imagine and makes the $30 billion futures market appear minuscule by comparison!! Add to this the benefit of near-zero slippage in this market because of such huge liquidity – allowing positions to be liquidated and stop orders executed at the rates you want – you bet, you have the best market to trade in.

Your Price is what you bid or ask

For practically all your trades, you can be sure of the deal being executed at your price, thanks again to the volumes and lighting fast execution speeds. When you are trading equities or futures, you can never be certain of the execution price in spite of electronic trading and some limited speed guarantees available. Brokers can at best quote the last traded price, and not the price at which the contract will be executed.

Zero Brokerage:

As opposed to equities and futures markets, where you end up paying commissions, the beauty of currencies trading lies in the non-existence of ticket costs and middleman commissions, since you always trade directly through an electronic online exchange. The only cost to you as a Trader is in the bid-ask spread when you initiate a trade, and this takes care of the service charges payable to the Brokers. No additional commissions whatsoever!!

Automated Margin Call

One final tricky feature which only the Forex market offers you is Guaranteed Limited Risk. With this feature, a trader can manage Risks by having position limits set relative to the amount in his trading account. In the Futures market, when an open position reaches the trigger point, the trader needs to intervene by adding margins. Otherwise the positions get liquidated at huge losses to the trader. As opposed to this, the trading platform in the Forex market can generate an automated margin call, and also offers the facility of closing open positions immediately, thus minimizing losses to almost nil. The best boon for a trader for Risk Management!!