Advantages of Trading FX Futures over Spot FX? Do they trend similar Technically?
- Thread starter kent
- Start date
My experience is totally the opposite: I can see no advantage to spot, and wish I'd switched earlier. (Probably of no relevance to you, since I switched wanting volume.)
In my opinion, if you're going to trade with a counterparty market-maker, Oanda is certainly one of the better ones. But they're still a counterparty market-maker, and their spreads certainly aren't what they used to be, especially on currency-pairs like GBP/JPY. (I was initially with Oanda before switching to IB, and still have demo accounts there which I sometimes "play" with to test new things.)
I've never looked at it, but I'll be surprised if it doesn't move exactly the same. All the HFT arbitrageurs will surely predicate that any differences between the two will be tiny and last no time at all?
Robert Morse
Sponsor
Not sure what you mean by "reliable". If you are asking about the depth and liquidity of the FX options on the CME, I'm not sure. I have clients that trade FX futures and one that trades options. The one that trades options has a big account and trades everything. He never complained to me. Keep in mind, that the SPOT FX market is the primary and much bigger than than the futures market. With that said, if your AUM is not large enough to be an Eligible Contract Participant (ECP), I would stick with futures.
That used to work on FXCM, 1 chart from elsewhere, 2 seconds to get in guaranteed prices back then, so always got what I clicked on, boom 50pt move in 20seconds and out, then they started requoting me
but changed since then so live, no lag at all 
I swing trade futures and spot FX. Some of the old timer market wizards swing trade spot FX and have commented you can get screwed in futures also by bad brokers our picked off by HFTs. I use a regulated broker that has not ever been fined. I pay a bit more in commissions which keeps the volatility from spiking in the spread. Never had any trades were I felt that I was robed or cheated - but than again I spent about 2 years learning the FX game before trading it.
Last edited:
I have noticed that not ever Forex broker even offers Forex options, where I have traded Currency futures long time and options on futures, never really had much problems in non wild markets. I have found even when you can partake in something, not always good to do so. Most of my trading is very long term cept for rollovers, spreading and few intraday scalps each day in handful of currencies.
Thank you Bob
Some good points already made. Two more:
- first and most obviously there is a wider choice of spot fx than in IMM futures
- if you are holding overnight the interest rate margins on spot FX are ridiculous.
Let me elaborate. When you buy USD you are effectively borrowing GBP (and being charged interest) and lending USD (and being paid interest). But on the GBP interest you are paying say LIBOR + 1%, and on the USD deposit you are earning LIBOR -1% or in practice nothing.
So if GBPUSD vol runs at about 9% a year that's 0.22 units (2% / 9%) of Sharpe Ratio gone just in this form of costs. That's before thinking about the cost of trading or rolling.
FWIW I wouldn't touch retail spot fx. My last shop traded FX on IMM forward dates, so basically like a future.
GAT
Thanks all, I guess I am still not getting it or did not ask good question.
Let me try again and let me give an example trade in Spot FX and associated cost and give me a comparing trade in Forex Future and give me pros and cons of both.
Consider this Spot FX trade on GBP/JPY on a Sunday night/evening EST open trade. 1000$ for margin required. 1 Std Lot long trade opened around 2 EST or around London Open Hour. I donot predict but my trade goes to 50 pips and 10$ per pip and I get out at $500.00 and if it goes -ve I get out -25 Pips.
If I have to trade a forex future (day trading only) no trades held beyond few hours and no overnight trades unless profit locked. Show me an example of FX future trade with the above condition so that I can see the pros and cons of Spot Fx Vs Fx Futures in these 2 trades. If there is no significant or specific advantage over FX futures, why should I choose it instead of trading spot fx (assuming I have a good broker).
Thanks again...
Let me try again and let me give an example trade in Spot FX and associated cost and give me a comparing trade in Forex Future and give me pros and cons of both.
Consider this Spot FX trade on GBP/JPY on a Sunday night/evening EST open trade. 1000$ for margin required. 1 Std Lot long trade opened around 2 EST or around London Open Hour. I donot predict but my trade goes to 50 pips and 10$ per pip and I get out at $500.00 and if it goes -ve I get out -25 Pips.
If I have to trade a forex future (day trading only) no trades held beyond few hours and no overnight trades unless profit locked. Show me an example of FX future trade with the above condition so that I can see the pros and cons of Spot Fx Vs Fx Futures in these 2 trades. If there is no significant or specific advantage over FX futures, why should I choose it instead of trading spot fx (assuming I have a good broker).
Thanks again...
Erm, did u want us to answer that question? You kinda just answered it yourself.
But I have been reading Posts by traders who moved from Spot Fx to Futures that futures are much better and I am trying to find any reason/justification for that and I am not able to see any so far. Thanks..( Those who trade by using volume (which is not available in Spot fx) and I donot use/need volume. I am a pure Tech trader based on my own semi automatic trading/signal system).