Trading FX futures versus FX spot - what are the pros and cons?

T

travelingtrader

I was wondering what other traders see as the pros and cons of trading FX futures versus FX spot?

I would guess that the following may be part of the answer:

FX futures
- Pros - always a one pip bid/ask spread, market depth information (bids and asks from other participants), less market maker manipulation
- Cons - smaller less liquid market, less leverage

FX spot
- Pros - larger more liquid market, more leverage
- Cons - wider bid ask spreads, no market depth information, more market maker manipulation

What do you other traders have to add to this? Which vehicle do you prefrer to trade and why?
 
Specific spot forex dealers/marketmakers are offering mini's (10k units) "base 10" (1k units) or even smaller "one unit" increments.

In terms of money mangement and "dialing in your gambling meter" it is much easier to get out of the minumum increment world...

Michael B.
 
Quote from travelingtrader:

I was wondering what other traders see as the pros and cons of trading FX futures versus FX spot?

I would guess that the following may be part of the answer:

FX futures
- Pros - always a one pip bid/ask spread, market depth information (bids and asks from other participants), less market maker manipulation
- Cons - smaller less liquid market, less leverage

FX spot
- Pros - larger more liquid market, more leverage
- Cons - wider bid ask spreads, no market depth information, more market maker manipulation

What do you other traders have to add to this? Which vehicle do you prefrer to trade and why?
More...

fx futures -

you only get 1 tick spread in ec. bp, jy, sf etc typically have 2 & 3 aint uncommon during illiquid hours.

there are no market makers in futures

the manipulation is equal to that of spot. only your 'broker' wont stuff you with futures.

liquidity? i dont think a small retail trader has to worry about liquidity in any of the main fx futures. worry about this when you trade 300 lots+


fx spot -

dont kid yourself you are trading the spot fx market. you are not. you are trading against a broker who quotes you prices loosely based around the spot.

market depth info is next to useless these days anyway.

no volume would be a better con of spot.

i trade fx futures over spot.

why pay $10 on a wider spread when the commission on a r/t futures will easily be half that - if not more.

the futures are also regulated. fx isn't. your broker can shaft you till the cows come home (and they often do) - and you will have no recourse.

hope that helps
 
Quote from FredBloggs:

fx futures -
the manipulation is equal to that of spot. only your 'broker' wont stuff you with futures.
More...

Hi, FredBloggs.

Would you like to share some knowledges on fx futures broker's manipulation behavior?

Thank you.
 
Quote from FredBloggs:

fx futures -


i trade fx futures over spot.
More...

Hi FredBloggs, please which broker do you use to trade futures? cheers.
 
I would also tend to agree with staying with futures. I'm evaluating the options markets and, although they are much less liquid than the sp, I would rather take my chances than try to deal with what essentially ends up being a bucket shop.
 
i use refco for trading fx futures.

a futures broker will not manipulate the market at all - unless filling large commercial orders.

however, all markets are manipulated - even the fx markets, by large commercials, governments, investment banks etc. (niederhoffer details the workings of fx spot in education of a speculator)


fx spot 'brokers' (they arent really brokers in the true sense) simply quote you around the inside spread of the actual spot market. if you have a stop a few pips beyond their current quote, they WILL move THEIR quote to get your stop and take your position. Remember. you are not participating in the real spot market like they are pretending.

Also remember, that you can not move your position between different fx brokers. in other words, they know if your stop is to enter or exit the market. this is like playing poker with someone who knows your hand.

remember - 'trading' fx (unless with futures) has little to do with the actual market. all you are doing is taking a price from someone who makes you a quote in his favor that will be based 2-3 pips either side of the inside (if you are lucky).

think about where an fx 'broker' makes his money!

* he doesnt charge a commission
* you position will more than likely be too small to hedge or offset in the spot market
* yes, he could hedge his whole book in the spot market, but that offsets, rather than makes profit
* so how is he making money? CUSTOMER LOSSES!!!!
 
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