Why Trade Forex: Forex vs. Futures

Why Trade Forex: Forex vs. Futures Lesson No 27

So we’re not just looking at the stock market, but also the FX market. And you know what’s cool? The FX market has a number of advantages over stocks.

But wait, there’s a lot more to it! There are a lot of great things to discover.

Liquidity

Imagine the forex market as a massive store where $7.5 trillion in goods are purchased and sold every day. It’s like the largest store on the planet! This makes it quite simple to trade and purchase or sell a variety of items without difficulty.

Now, the futures market is like a lot smaller supermarket, dealing with only approximately $30 billion every day. That is far less than the enormous FX store. So, the futures market is similar to a small shop next to a large currency store.

Let’s learn about what makes the massive forex store so excellent. The finest thing is that it is always open for business, ready to buy and sell goods. Unless things get a little crazy, it typically goes smoothly. So, to put it simply, imagine the FX market as a large store that never closes, making trading extremely simple and basic!

24-Hour Market

Okay, let’s learn about when you can trade. So the trading day begins at 5:00 p.m. EST on Sundays, when Sydney opens its doors. Then, at 7:00 p.m. EST, Tokyo takes part, followed by London at 3:00 a.m. And at 8:00 a.m. in New York, they join the fray. The trading fun continues until 4:00 p.m., when the Eastern Standard Time party ends. It’s like a worldwide trading race with distinct start and end timings!

Here’s something awesome, even before New York’s trading day ends, Sydney is preparing for the next round. It’s like a continuous, nonstop 24-hour market!

For traders like you, this is a superpower. You can act quickly when there is good or negative news. Consider this, if anything significant occurs in the United Kingdom or Japan when the US futures market is closed, the next day’s opening can be quite exciting.

Sure, there are overnight futures markets, but they aren’t as active as the spot forex market, which operates around the clock. It’s a 24/7 trading party!

Minimal or no commissions

Assume you are a new trader in the forex market. Many people now use these fascinating Electronic Communications Brokers (ECBs). These brokers may occasionally request a small fee known as commissions. But here’s the good news: these commission fees are quite low as compared to what you’d have to pay in the futures market.

Consider this, you are entering a club (the forex market), and there is a small fee at the door (commissions). However, this charge is significantly lower than what you would pay to join another club (the futures market). So joining the forex club is not only more popular, but it is also more cost-effective.

Brokers struggle hard in the forex market. They’re all competing to offer the best deals possible. So, when you trade in the forex market, it’s as if you’re in the middle of a wonderful competition where you can obtain super fantastic offers at really low costs. It’s almost as if you always win!

Price Certainty

Okay, now we’ll look at how forex trading works. When you trade forex, things move quickly, and you may be confident in the prices under normal circumstances. Now, futures and equities markets do not guarantee pricing or execute trades quickly.

Even with computerised trading and certain guarantees about how quickly things will happen, there is still a lot of risk about getting the pricing you desire for futures and stocks when you place market orders. The pricing you see from brokers may reflect the last trade and not always the price you’ll receive when your order is placed. So, in forex, you have the advantage of fast execution and price accuracy, which you may not find in other markets.

Guaranteed Limited Risk

Alright, let’s understand risk management in trading. Traders must establish position limits based on how much money they have in their account. This helps to keep things safe.

The trading platform is advanced, which reduces risk in the spot FX market. If you’re about to spend more money than you have in your account, it will automatically notify you, known as a margin call. This way, you avoid accidently going too far and keep things under control.

Let’s discuss what happens with your trades. If you have any open positions during normal market conditions, they will be closed immediately. However, in really quick markets, your position may close beyond the amount you set to prevent losses.

In the futures market, things can be a little harsh. Your trade may be closed at a loss that exceeds the amount in your account. And, guess what? You are responsible for any remaining balance.

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Imagine a fight between Forex and Futures, Mr. Forex appears to be the unbeaten champion based on the score! Now, let us introduce you to the true winners who are making moves in the forex market. It’s like shining a spotlight on the trade market’s heroes!