So tell me why I should trade currency futures instead of forex?

Quote from traderNik:

You're asking why you should trade futures as opposed to a scam forex market? I don't get it. The difference is that one is a scam and the other isn't, right?

Do you know the difference between an ECN model for forex trading and a bucket shop model? If not, you should find out. Maybe someone here will have the time to post an explanation for you, but it would probably be better if you did the searches necessary.

You can trade forex but I believe you need to make sure you're doing it through an ECN, like IB has for its IdealPRO trading (not sure about Ideal, please do your own DD).

Hopefully someone who knows more than I will give you the details, but I would have thought that if you read a bunch of different people saying 'retail forex is a bucket shop scam' (which it clearly is - after all, you are trading against your broker and getting your quotes from the broker as well - sound fishy?), then you would simply avoid retail forex?
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Uh yeah.

I want to start really small, tho, with mini lots or something similiar sized, and it seems like the only way this would be profitable is with Oanda (who allows any lot size and charges no commission and has small spreads on EUR/USD). However, Oanda has 3 major problems that I've seen:

1. My connection in the demo game seems to drop a lot, especially when I have positions open, and they don't allow you to place orders over the phone. So if this ever happened with real money and my position went significantly against me (like it did last night), I would be irate.

2. They are not an ECN and stops get triggered by them widening their spreads. All aboard the failboat!

3. No trailing stops, so pretty much I could never walk away from my computer while I had a position open.

I would consider using IB for forex, but I heard their smallest order size is $25k, which is more than I want to do right now, and they also charge a commission. However they are ECN and seem to be one of the better brokers based on the reviews I've read here.

All of the ECN forex brokers I've seen have wider spreads AND charge a commission, which means that when I'm learning and I have such small lot sizes that 1 pip = $1, I'm not going to be making any money after I pay the spread and a commission (my profit targets are almost always under 10 pips).

So that's why I made this thread. Also I don't know much about futures so I was hoping to get some more info there.

Thanks.
 
Here is the easy answer to your question: Don't trade futures unless you have $20K+ in capital. The minimum tick size in futures for EUR is $12.50. Your tick size in cash can be $1.00 or less. True, you don't have to put up much capital (margin) for each trade, but unless you are a pro trader who can immediately start trading profitably, stay away from futures. Yes, cash FX is a scam, but some bucket shops are better than others.
 
Quote from IronFist:

The forex forums are full of "noooo! don't trade forex! It's an unregulated scam/bucket shop/etc. Trade currency futures instead!!!"

So tell me why I should do this. What is the difference? Is this market open 24 hours a day then like the forex market? Can I get a practice account somewhere? Do forex trading strategies work in with currency futures?
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____________________________________________________

Go for it - try it out - that way you can learn it from you and no one else - seems that your mind is made up no matter what....

Proverbs 1:5 - let the wise listen and add to their learning,
and let the discerning get guidance

Proverbs 9:9 - Instruct a wise man and he will be wiser still;
teach a righteous man and he will add to his learning.

Proverbs 12:15 - The way of a fool seems right to him,
but a wise man listens to advice


"remember that when the bucket shops tout the forex market as trading trillions
each day, this is spread across hundreds of currency crosses. No individual
retail forex broker comes close to the liquidity of the CME and Globex. When you
have an account with a fx retailer, you trade its prices or not at all, subject
additionally to the retailer's willingness to honor its prices -- and that is
all the liquidity available to the customer. There isn't any more, as liquidity
in other FX houses or ECN's is not transferrable. You are not trading in the
spot market - you are trading against a bucket shop, so in reality there is no
liquidity.Globex has the third highest liquidity of ANY fx platform. Only EBS
and Reuters FX beat it for liquidity. Remember that 1 Globex Euro futures
contract is worth $125,000 notional currency, and with around 150,000+ contracts
trading daily thats nearly $19BN trading on that one currency pair all in the
same place, accessible by all - unlike EBS or Reuters. Forex has a lot of $
business done for every currency cross in the world aggregate combining all
transactions on all the disparate platforms and firms, but when you look at each
pair individually at each firm, you start to understand that spot forex isnt as
liquid as they want you to think.If you put execution speed into the mix as
well, globex will beat ANY fx platform including EBS - HANDS DOWN for execution
speed. The OTC cash forex market is mostly used by traders or institutions who
have genuine need to do business there for what ever reason, as in banks who
need to deal in cash, spots or forwards as part of their business, but the
markets that they access, such as EBS are generally closed to the majority of
retail clients - hence why your average retail trader ends up dealing with
bucket shops without really understanding the difference. Futures also carry
less risk than the OTC market - forex bucket shops are really the bottom of the
pile - slow fills, massive counterparty risk (refco fx anyone), etc..."

taken from
http://www.trade2win.com/boards/forex-discussion/21432-currency-futures-ib.html
 

Attachments

Quote from IronFist:
I want to start really small, tho, with mini lots or something similiar sized, and it seems like the only way this would be profitable is with Oanda
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But you already know that Oanda is a retail bucket shop, right?
Quote from IronFist:
They are not an ECN
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That's right. They're a bucket shop.
Quote from IronFist:
I would consider using IB for forex, but I heard their smallest order size is $25k, which is more than I want to do right now, and they also charge a commission. However they are ECN and seem to be one of the better brokers based on the reviews I've read here.

All of the ECN forex brokers I've seen have wider spreads AND charge a commission, which means that when I'm learning and I have such small lot sizes that 1 pip = $1, I'm not going to be making any money
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Knowing what you know, do you have a choice? You have learned that you cannot trade forex at anything other than an ECN broker, because if you try to trade at a retail bucket shop, you are essentially just giving them your money, since they can do whatever they want with your position, refuse to fill you if they want, etc etc.

So now you have this valuable knowledge that most forex noobs don't even bother to get ahold of. Great.

So what is your dilemma? You are afraid you won't make money in the beginning? If you are talking about trading $1000 at a pop (i.e. $1000 full or 'notional' value of position) then maybe you have a problem. However, I don't think it's impossible to trade through IB Ideal with a $5000 account and make money. If you don't have $5000, save until you do. How much money do you have to open an account? If you don't have $5000, trade the simulator for the next 90 days as much as you can, use your micro limits to test your theories, and then if you are winning, do whatever you have to do to get $5000 together and put it in play at IB.

The other option is just to take your $1000 or $2000 or whatever and go to a bucket shop and trade it in micro lots and get a feel for the market, knowing that they are going to rip you off, but considering it a cost of doing business (how you would do this at a shop where they control the quotes and put you on manual execution I'm not sure, maybe someone else can help).

I see you as someone who knows the answer he's looking for, but finds it hard to accept. Don't worry, we all love the action.
 
Quote from IronFist:

All of the ECN forex brokers I've seen have wider spreads
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Which ECNs have you seen? I have never seen wider spreads on the 3 ECNs I use (except for EUR/USD on Oanda).

Also, the futures vs spot question comes up all the time (since no one uses the search function), there are many threads on it.
 
bucket shop: retail fx brokers are bookmakers; since there's no exchange where clients'
orders are placed the broker keeps client losses in addition to charging the spread
price data originates from the bank/s the broker deals with
there may be differences between the demo and real server prices/performance
brokers do not run stops

MetaTrader 4 is very similar to the MetaStock charting program, is offered by many brokers
as a free renewable demo with built-in order entry/accounting
many MT4 brokers offer micro accounts -- min account $200 micro lot = $1000 pip = $0.10
here's one: http://www.alpari-idc.com/
you'll find a great deal of info about MT4, fx trading and fx brokers here -- as one example:
http://www.forex-tsd.com/

a major difference between retail fx and futures is 'overloss' doesn't exist with fx brokers --
check with individual broker:
fxcm: "If the equity in the account drops below the margin required to maintain the open
positions, a margin call will occur and some or all open positions may be closed by the
Trading Desk at the market price. This provides protection against accounts falling below
the account equity, particularly in volatile or fast moving markets."
such is not the case in the futures markets, losses greater than the account margin can
and do occur, Stops won't guarantee positions will be closed in the futures markets

retail forex brokers are regulated by the same authorities regulating the futures markets,
in the US that's the NFA and Commodity Futures Trading Commission
 
Quote from sunsetisles:

Advice from a Pro!
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It's a bit dated since it makes no mention of FX ECNs. Unfortunately, the ECNs (for retail traders) have only been around for a couple years, and are outnumbered at least 100:1 by the amount of shadey dealing desk bucket shops. Unless those broker proportions reverse, "forex" will always be stymied by all of the bad brethren it contains.

The CME vs FX ECN equation is not as clear cut. I trade both and prefer the ECNs, mainly because I trade kiwi & aussie and a LOT can happen between 5-6pm EST for those currencies when the CME shuts down. CME's liquidity on the kiwi book is pretty sparse too.
 
Quote from Compulsive:


. . . No individual retail forex broker comes close to the liquidity of the CME and Globex. When you have an account with a fx retailer, you trade its prices or not at all, subject additionally to the retailer's willingness to honor its prices [about which there's always doubt if the price to be honored favors the customer! and never a doubt when the price is a stop!] -- and that is all the liquidity available to the customer. There isn't any more, as liquidity in other FX houses or ECN's is not transferrable . . .

http://www.trade2win.com/boards/forex-discussion/21432-currency-futures-ib.html
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Reads like something I wrote. I just knew this would turn out to be an intelligent thread.
 
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