Short term trading currency futures? Are you kidding me? It's much less liquid, there's more slippage, in short it's more expensive.
Why would anyone trade spot fx
- Thread starter ChkitOut
- Start date
If you just want to speculate on EUR/USD, then 6E is fine and in many/most cases the best option.
But:
The ability to adjust position size exactly to the exposure you want is important when your positions is not just a major cross, but exotic or a basket consisting of more than two currencies.
I'm following close to 50 crosses, and my trading rarely includes Cable and Euro although USD/JPY, USD/CAD, AUD/USD do appear. But I mostly have signals triggered in more exotic crosses like CHF/PLN, EUR/ILS, GBP/CAD, NOK/SEK, AUD/NZD etc. For positions using these crosses there simply are no futures, or the spread when replicating a spot position with several futures is far worse than the interbank market spreads. The liquidity is also far worse.
So, for simple outright strategies futures is fine. But if you're doing more sophisticated stuff you have to trade spot. Period.
But:
The ability to adjust position size exactly to the exposure you want is important when your positions is not just a major cross, but exotic or a basket consisting of more than two currencies.
I'm following close to 50 crosses, and my trading rarely includes Cable and Euro although USD/JPY, USD/CAD, AUD/USD do appear. But I mostly have signals triggered in more exotic crosses like CHF/PLN, EUR/ILS, GBP/CAD, NOK/SEK, AUD/NZD etc. For positions using these crosses there simply are no futures, or the spread when replicating a spot position with several futures is far worse than the interbank market spreads. The liquidity is also far worse.
So, for simple outright strategies futures is fine. But if you're doing more sophisticated stuff you have to trade spot. Period.
I'd run...yes even sprint to CME Globex currency futures...nothing like the peace of mind from regulated futures trading!
Given that you trade crosses that have no liquidity and high transaction costs on the CME it makes perfect sense for you to trade spot.
But the number of guys who are trading spot that should be in the futures market is incredible. It is simply marketing might overpowering common sense.
But the number of guys who are trading spot that should be in the futures market is incredible. It is simply marketing might overpowering common sense.
A related question is "Why would you fund a spot account limited to trading currencies?". You can trade currency ETF's in a stock trading account, or currency contracts in a futures trading account, with the benefit of being able to trade many other instruments from those same accounts, including cross-asset spreads, options, etc.
I would only consider dedicating funding to currencies in a spot FX account if I had some fundamental edge in currencies. Otherwise, if you are using a technical system, currencies are just another squiggly line on a chart and don't merit any special treatment from other asset classes.
I would only consider dedicating funding to currencies in a spot FX account if I had some fundamental edge in currencies. Otherwise, if you are using a technical system, currencies are just another squiggly line on a chart and don't merit any special treatment from other asset classes.