Forex vs Currency Futures: which is cheaper for small traders?

[SUPERIOR1]

So it looks like a good retail forex broker, possibly even one that is not an ECN, is the better route. I suppose the liquidity in forex futures also tells which is the better choice.

Forex futures make great sense for options and front months, something not available in currency markets-so there is still a reason to trade them sometimes.









Tango 6, I can't tell if you are sarcastic or not in some of your sentences. I appreciate the advice-great words. I wish more people would know it...I might copy some of your phrasing to pass on.

Full disclosure, I'm not a newbie trade. I consider myself a small trader because I trade retail accounts, but I still trade a good size and have plenty of cash and bonds for security (and prosperity/toys ). I sometimes say I'm a newbie because it's often annoying to say you are an expert on places like this website.

Quote from Tango 6 Alpha:

You are correct.

I don't understand the "Futures Are Cheaper" math in this thread either. Maybe I missed Cost Basis 101 class 10 years ago, but if you can execute a trade through a Bucket Shop for less than $200, then I really don't know how move 0.001 lots with a Futures Broker for less Cost Basis outlay per trade.

Anyway, I'm certainly not the one to be pumping water into Bucket Shops, but you did ask the question. However, I think I might have a better solution for you. You can simply consider this advice from someone who has been around the Retail FX block a time or two over the years.

Its obvious that you don't want to risk more capital on FX trading. The reason is probably has something to do with the fact that you are not yet fully comfortable with trading FX. That's fair and there is nothing wrong with it - we all had to start somewhere and we all had to pay the price of admission into the successful trader ranks somewhere along the line. Nobody simply jumps into FX from off the sidewalk someplace and starts out successful - it does not happen that way. But, I'm going to hopefully give you some advice here that saves you a lot of money.

You will not make money in Retail FX right off the bat, trading against Bucket Shop dynamics (all the stuff you listed above). It going to take some time to get up to speed. So, given that it will take some time to get your Edge honed, why not take that time to also develop your initial capital and when you are ready to get rolling, simply open an account with either CitiFX, or Interactive Brokers.

In the meantime, while you are developing your chops and building an Edge for yourself in FX, you can simply use a Demo Account and a BackTester. By the time you are profitable on Demo and you can BackTest in sample to profitability, then you might have enough initial capital to open up with either CitiFX, or IB. The initial opening balances are higher, but the vast majority of Bucket Shop games won't be nearly as detrimental to your success as a new trader to FX.

This is good advice for getting up to speed while avoiding Buckets.

Hope this helps a bit.

 

[oldtime]

Quote from SUPERIOR1:

So it looks like a good retail forex broker, possibly even one that is not an ECN, is the better route. I suppose the liquidity in forex futures also tells which is the better choice.

Forex futures make great sense for options and front months, something not available in currency markets-so there is still a reason to trade them sometimes.









Tango 6, I can't tell if you are sarcastic or not in some of your sentences. I appreciate the advice-great words. I wish more people would know it...I might copy some of your phrasing to pass on.

Full disclosure, I'm not a newbie trade. I consider myself a small trader because I trade retail accounts, but I still trade a good size and have plenty of cash and bonds for security (and prosperity/toys ).

I thought the question was what is cheaper. If you are asking what is better, I like spot, and I like an ecn as opposed to a market maker, even if they claim they are not a dealing desk.

 

[SUPERIOR1]

Quote from oldtime:

I thought the question was what is cheaper. If you are asking what is better, I like spot, and I like an ecn as opposed to a market maker, even if they claim they are not a dealing desk.

Yes who is cheaper...I guess better/cheaper is the same in finance.

I wonder how many market makers are in currency future contracts...in other words, what would happen if you tried to move really big size. I think volume on some future currency contracts could double if a big firm focused exclusively on currency arb traded currency contracts.

 

[oldtime]

Quote from SUPERIOR1:

Yes who is cheaper...I guess better/cheaper is the same in finance.

I wonder how many market makers are in currency future contracts...in other words, what would happen if you tried to move really big size. I think volume on some future currency contracts could double if a big firm focused exclusively on currency arb traded currency contracts.

yeah well. it's a triilion dollar market so size is the least of your worries.

The future spot arb is going on all the time on the sub atomic time level so it's nothing you need to be concerned about.

But a practical example is the small trader that wants to pyramid. Maybe he starts out with 100k, and if it moves in his favor he can add 75k and if it keeps going he can add 50k and finally 25k and that is a full load.

Same thing on the other side, he starts with 100k and adds 125k as it moves against him then 150k and so on until he is wiped out.

A small trader can't do that with futures because he simply doesn't have enough money.