I was wondering if anyone knew how well correlated are spot and futures. Can i just trade futures off spot charts? I trade off tick charts and futures charts don't look as good as spot charts and that would mess up my entires. I want to trade futures due to lower spreads, liquidity and centralized exchange. Any advice?
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Currency Futures Vs Spot
- Thread starter Blinz45
- Start date
As with any FUTURES contract the price is what the traders expect it to be in the FUTURE.
Track the AUDUSD vs the 6AXX contract and you will see the difference (price wise) The movement is "SIMILAR" ex. .0035 down in FOREX whereas a .0030 - .0032 Move in Futures.
But as the First responder said.. WATCH what you trade...
Track the AUDUSD vs the 6AXX contract and you will see the difference (price wise) The movement is "SIMILAR" ex. .0035 down in FOREX whereas a .0030 - .0032 Move in Futures.
But as the First responder said.. WATCH what you trade...
Quote from Blinz45:
I was wondering if anyone knew how well correlated are spot and futures. Can i just trade futures off spot charts? I trade off tick charts and futures charts don't look as good as spot charts and that would mess up my entires. I want to trade futures due to lower spreads, liquidity and centralized exchange. Any advice?
I can understand wanting the security of exchange trading, but if you think that you can get better liquidity and lower spreads through futures, you're totally off base. No market is more liquid than spot forex ($3 trillion in daily volume) and spreads in the major currency pairs are very tight in the spot market. Heck, if you trade through an ECN you can see zero, and sometimes even negative spreads at busy times.
As for correllation between spot and futures prices, they are naturally very, very high - nearly 100%. You wouldn't want to trade futures off the spot tick chart. Even in the longer-term timeframes you'll need to figure out your levels shifting between the two. It's doable, though.
Quote from Rhody Trader:
...No market is more liquid than spot forex ($3 trillion in daily volume) and spreads in the major currency pairs are very tight in the spot market...
Yeah, right! That's the interbank market and no retail trader has access to that! For retail traders the spot FX market is as liquid as your dealer is.
Quote from giles117:
As with any FUTURES contract the price is what the traders expect it to be in the FUTURE.
While that might be the case for other futures, it is most certainly not for the financials. Forex futures prices account for the interest carry involved. Basically, they are priced (through arbitrage) so that one couldn't earn an excess return by holding opposing spot and futures positions. That's why the spread narrows between spot and futures as the later approaches expiration.
Quote from MTE:
Yeah, right! That's the interbank market and no retail trader has access to that! For retail traders the spot FX market is as liquid as your dealer is.
If you use an ECN you are accessing the interbank market, and if you use a respectable non-ECN broker, you have absolutely no problem doing trades whenever you want.
Quote from Rhody Trader:
I can understand wanting the security of exchange trading, but if you think that you can get better liquidity and lower spreads through futures, you're totally off base. No market is more liquid than spot forex ($3 trillion in daily volume) and spreads in the major currency pairs are very tight in the spot market. Heck, if you trade through an ECN you can see zero, and sometimes even negative spreads at busy times.
As for correllation between spot and futures prices, they are naturally very, very high - nearly 100%. You wouldn't want to trade futures off the spot tick chart. Even in the longer-term timeframes you'll need to figure out your levels shifting between the two. It's doable, though.
I sometimes trade spot off futures charts......works for me just fine...but I imagine it depends on your method and technique..I trade momentum, so all I am concerned with is that...not the specifics.
thanks for the responses so far. the main reason i want to trade futures is because i've been through the retail broker bs many times. my current broker is IB and they are an ecn style forex broker but i hear bad things about them. i could just use the IB forex feed and trade futures off that that. i'm a scalper so the correlation will be important. i only trade the eurusd and usdjpy. i was wondering whether those are good to trade off based on tick data from spot.
I traded spot through IB for a little while and found it to be a pain. Maybe it's gotten better since.
If you're planning trading futures through IB, why not just use those prices? If you use spot you would have to do everything in reverse for USD/JPY since the futures are quoted the opposite way around from spot.
If you're planning trading futures through IB, why not just use those prices? If you use spot you would have to do everything in reverse for USD/JPY since the futures are quoted the opposite way around from spot.