Whats the main difference between FX futures and FX?

The shills for forex retailers are dumbing down on Moneytec, at least if this recent post on the beginners forum of that board is a guide:
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I am reading a lot of literature on trading (some of it not forex trading) and I do not understand this little detail. Forex is much more liquid that any other trading, it has the biggest leverage, works 24/6 and you could earn a lot of money. Why do people still trade stocks, futures, options and other stuff that is less potent than Forex? Any ideas? What keeps them away from forex?
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[Caution: quoted poster is not intentionally satirical.]
 
Quote from FredBloggs:

they all make their quotes to please them and screw you. that fxcm chart says it all.
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You are very wrong. The FXCM chart does not hold for all spot fx brokers. Some have high standards and hold them dearly. Transparency is very important in this respect.

This, together with the unique advantages of spot fx over futures (like many pairs, low spread/commissions, no minimum tradesize, small account size, etc, etc) make spot fx the preferred choice.
 
Quote from 65Matt:

Spot FX - mysterious upward spike right before an downtrend that stops most of their customers out
FX Futs - downtrend

This pic is from 1/7/05
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This picture appears over and over again in many markets, not just FX. It doesn't happen all the time but under certain conditions is happens often ....

This characteristic appears to be a behavioral characteristic of markets .... perhaps for the reasons you state or for some other reason.
 
Quote from TradingWise:

You are very wrong. The FXCM chart does not hold for all spot fx brokers. Some have high standards and hold them dearly. Transparency is very important in this respect.

This, together with the unique advantages of spot fx over futures (like many pairs, low spread/commissions, no minimum tradesize, small account size, etc, etc) make spot fx the preferred choice.
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youre wrong.

name one SPOT fx broker?

you are NOT trading the SPOT market. how can you be successful if you dont even know what you are doing?

you mention TRANSPARENCY. as you are trading always against ONE party, there is NO transparency. so how come its so important?

a spread of even 2 pips is still going to work out as more expensive than most futures commissions.

sorry - but you clearly dont seem to understand what you are doing here. sorry if that sounds rude.
 
Quote from FredBloggs:

you're wrong.

name one SPOT fx broker?

you are NOT trading the SPOT market. how can you be successful if you don't even know what you are doing?

you mention TRANSPARENCY. as you are trading always against ONE party, there is NO transparency. so how come its so important?

a spread of even 2 pips is still going to work out as more expensive than most futures commissions.

sorry - but you clearly don't seem to understand what you are doing here. sorry if that sounds rude.
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I believe Oanda and IB are honest spot FX brokers. IB does not take the other side of your position, Oanda does, but hedges their net exposure. This way I'm not trading against my broker (oanda), as the net exposure is hedged and thus Oanda does not have ANY interest in stopping me out.

I have no need for transparency in the way you mean it. I don't get a kick about seeing the exchange data that some other guy filled my order, I just want to open the position. The spot fx market is over the counter trading, so I accept that my brokers price may not always be to the pip equal to others out there. That's fine, as long as large discrepancies are avoided. This is where the trust in the market maker comes in, I believe Oanda holds an honest business model and strives to provide forex trading by high standards. They offer transparency, like historical spreadsstatistics, and respond to inquiries by forum/email or phone.

Next to that, the advantages like one unit increments are just unmatched. I can trade any size I want, any!

The spread I 'pay' for trading EUR/USD is 1.5 pips. I believe this is very competitive. Other pairs show larger spreads, but most of these pairs can not even be traded on FXfutures. Next to that, spreads are continually being lowered.

I believe exchange trading holds other risks, just check out this story. How horrible, I get what I click at my broker.
 
OK, perhaps I should make this as simple as possible. Which do you prefer:

1). Trading on a recognized exchange (i.e. CME, whetever) where your broker must answer to the CFTC, and where real volume/tick data is available, and every bloody transaction is recorded in T&S?

or

2). Trading against your SpotFX ...ahem... shop?

Now that is a question to ponder upon...

Good luck... :D

PS. Of course if you are playing about with a $500 account this is all moot...
And if you have half-a-mil+ you may then trade Spot with a reputable shop like Citi or UBS...
 
Quote from TradingWise:

I believe Oanda and IB are honest spot FX brokers. IB does not take the other side of your position, Oanda does, but hedges their net exposure. This way I'm not trading against my broker (oanda), as the net exposure is hedged and thus Oanda does not have ANY interest in stopping me out.

I have no need for transparency in the way you mean it. I don't get a kick about seeing the exchange data that some other guy filled my order, I just want to open the position. The spot fx market is over the counter trading, so I accept that my brokers price may not always be to the pip equal to others out there. That's fine, as long as large discrepancies are avoided. This is where the trust in the market maker comes in, I believe Oanda holds an honest business model and strives to provide forex trading by high standards. They offer transparency, like historical spreadsstatistics, and respond to inquiries by forum/email or phone.

Next to that, the advantages like one unit increments are just unmatched. I can trade any size I want, any!

The spread I 'pay' for trading EUR/USD is 1.5 pips. I believe this is very competitive. Other pairs show larger spreads, but most of these pairs can not even be traded on FXfutures. Next to that, spreads are continually being lowered.

I believe exchange trading holds other risks, just check out this story. How horrible, I get what I click at my broker.
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ok.

i could be wrong, but i doubt o&a or ib are putting your position in the spot market though. you need MILLIONS to be able to do this.

who wants to take the other side of a $2000 trade? not the interbank market thats for sure

even paying 1.5 pips a spread (assuming $10 a pip) is gunna be SLIGHTLY cheaper than ib ONLY if you decide to pay the spread - which you can control more by using limits.

exchange will ALWAYS be safer than otc - especially for retail pikers like us.
 
Quote from FredBloggs:

ok.

i could be wrong, but i doubt o&a or ib are putting your position in the spot market though. you need MILLIONS to be able to do this.

who wants to take the other side of a $2000 trade? not the interbank market thats for sure

even paying 1.5 pips a spread (assuming $10 a pip) is gunna be SLIGHTLY cheaper than ib ONLY if you decide to pay the spread - which you can control more by using limits.

exchange will ALWAYS be safer than otc - especially for retail pikers like us.
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Maybe we've got a different definition of the 'spot market'. When I open a position and Oanda takes the other side of my trade, it means I just traded the spot fx market. Spot fx is decentralized, it's over the counter. There's no central place where you have to trade spot fx for the trade to qualify as 'spot fx'.

Oanda does not have to hedge my $2000 trade size. Oanda hedges the net exposure. You are correct that not every excess dollar can be hedged due to minimum interbank tradingsize, but these amounts of risk can be controlled by a good riskmodel.

I'm not a picker, only a swingtrader. If you are a picker and want a market to the pip equal everywhere, fx futures is indeed the way to go. If you're fine with a few pip discrepancy here and there, I think fx spot is the way to go because of the many advantages discussed earlier.
 
For short term intraday trader such as who cares 2pips, 3pips or Oanda's narrow spread etc, I strongly doubt the advantage of FX spot trading.

I subscribe eSignal FXspot and Globex FX futures quote. Reading them side-by-side, I easily conclude FXspot intraday trading is no way to go. EURUSD, the globex futures usually has only 1 pips, and moves smoothly except a certain specific time the economical number is out. Even during such normal market condition time, FXSpot value jumps up and down 3pips or more. Surely, eSignal FXspot quote is collecting and gathering from multiple market maker or bank, but the comparison to the futures quote, the roughness and the spread is out of problem.

I send a limit order or stoplimit order, then some other traders often eats that order. There's no slippage most of the time. FXSpot, you always trade on the price the shop says. It's always market order, and always slippage. You always pay the spread. Futures market, you can, but you don't have to.

That's the big difference.
 
The bottom line:
FXspot shops make money by providing the spread to their customers .
It's simply obvious that they don't offer the free service to their clients.
FXfutures brokers make money by charging commision to their custmers.

The trading cost you pay to the futures broker is transparent. The trading cost you pay to the FXshop is not transparent.
It's like you wish they won't suck from you.

I do not belive FXspot trading is cheaper than futures market, and I don't like the hidden cost that is the spread and price move FXshops quote.
 
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