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Trading forex futures - Why?

  • #21
  • Sep 12, 2010 10:18am Sep 12, 2010 10:18am
Which brokers trade future forex?
  • #22
  • Sep 12, 2010 11:30pm Sep 12, 2010 11:30pm
Quoting Deevz

So, we know there is the spot forex market as most of us trade it....
That's the problem, we don't!

Have a look at what you're actually trading when you say 'spot forex market', then you'll see the dis/advantages of the respective 'markets', marketmakers, and brökers.
  • #23
  • Edited Sep 13, 2010 12:55am Sep 12, 2010 11:38pm | Edited Sep 13, 2010 12:55am
Here is a summary of the differences -

Spot Forex
No central exchange
Less regulation
Counterparty risk
No commissions/spread
Huge leverage
24 hour volume
Very little money to start

Forex Futures
Central exchange
More regulation
Exchange is counterparty
Commissions/small spread
Good leverage
Volume can dry up (especially on e-micro)
Most brokers require $5K

Spot is good for swing trading and Futures is good for day trading, but it can't be said that you can't do both on either. Just watch out for contract expiry on Futures

EDIT: Read The Fools' and Pipmutt's clarification of what the spot market really is here - http://www.forexfactory.com/showthre...41#post4017241
  • #24
  • Sep 12, 2010 11:49pm Sep 12, 2010 11:49pm
Quoting bbakker

Firstly futures is a deliverable contract, spot isn't.
Spot is, mostly 2 days settlement.


Anyway, here's a link for the OP, one of many that a Google search will bring up, but like I say we're not actually trading spot anyway so it's all a bit irrelevant!
  • #25
  • Sep 13, 2010 12:06am Sep 13, 2010 12:06am
Quoting pipmutt
Spot is, mostly 2 days settlement.


Anyway, here's a link for the OP, one of many that a Google search will bring up, but like I say we're not actually trading spot anyway so it's all a bit irrelevant!
I have had trades open for longer than 2 days on spot and never had the currency land on my doorstep
  • #26
  • Edited 12:21am Sep 13, 2010 12:10am | Edited 12:21am
Quoting bbakker

I have had trades open for longer than 2 days on spot and never had the currency land on my doorstep
My point exactly, you're not actually trading spot, which is why all these comparisons and distinctions which people make between what they call spot, and futures, are totally meaningless!



"Less regulation"
Banks are regulated to the extreme.

"Counterparty risk"
None, deposited funds are fully insured

"No commissions/spread"
Commission and spread, sometimes huge spread!

"Huge leverage"
No leverage

"24 hour volume"
Only for a few select customers

"Very little money to start"
Sure, if you want to pay tourist rate!



That's the spot 'market' for ya!

Now have a look at what we're trading!
  • #27
  • Sep 13, 2010 12:21am Sep 13, 2010 12:21am
Quoting pipmutt
My point exactly, you're not actually trading spot, which is why all these distinctions which people make between what they call spot, and futures, are totally meaningless!

"Less regulation"
Banks are regulated to the extreme.

"Counterparty risk"
None, deposited funds are fully insured

"No commissions/spread"
Commission and spread, sometimes huge spread!

"Huge leverage"
No leverage

"24 hour volume"
Only for a few select customers

"Very little money to start"
Sure, if you want to pay tourist...
But mine was a comparison, whereas you just took spot and put your spin on it. Anyway... does it really matter?
  • #28
  • Sep 13, 2010 12:26am Sep 13, 2010 12:26am
Quoting bbakker

But mine was a comparison, whereas you just took spot and put your spin on it. Anyway... does it really matter?
Of course it matters! And it's not 'spin', it's what the spot market actually is!

It's only really relevant though in discussions like this, when people need to compare so-called spot against futures. If they have a look at what they're actually trading then the pros/cons become obvious, and understandable.
  • #29
  • Sep 13, 2010 12:33am Sep 13, 2010 12:33am
Quoting pipmutt
Of course it matters! And it's not 'spin', it's what the spot market actually is!

It's only really relevant though in discussions like this, when people need to compare so-called spot against futures. If they have a look at what they're actually trading then the pros/cons become obvious, and understandable.
I have counter arguments for each point such as "no leverage". What is 400:1 on a micro account then, or even the proposed maximum of 50:1 that will be implemented in the US? Anyway I can't be bothered to waste my time over such trivial matters and I'd rather be focusing on my trades.

I wish you success with your trading
  • #30
  • Sep 13, 2010 12:35am Sep 13, 2010 12:35am
Quoting bbakker

I have counter arguments for each point such as "no leverage". What is 400:1 on a micro account then, or even the proposed maximum of 50:1 that will be implemented in the US? Anyway I can't be bothered to waste my time over such trivial matters and I'd rather be focusing on my trades.

I wish you success with your trading
Sigh, you slightly miss the point here, you're not trading spot, period. If you understood that simple point then you might begin to realise the pros/cons of trading what you are actually trading and who you're trading it with, then threads like this probably wouldn't keep popping up all the time!

Don't worry about it, it's a mistake lots of people make......
  • #31
  • Sep 13, 2010 12:37am Sep 13, 2010 12:37am
Quoting pipmutt
Sigh, you slightly miss the point here, you're not trading spot, period.

Don't worry about it, it's a mistake lots of people make......
What market are we trading then? The currency market?
  • #32
  • Sep 13, 2010 12:39am Sep 13, 2010 12:39am
clarify with distinction between "retail spot forex" and "interbank spot forex"
"If The Fool persists in his Folly he will become wise." - William Blake
  • #33
  • Sep 13, 2010 12:43am Sep 13, 2010 12:43am
Quoting The Fool
clarify with distinction between "retail spot forex" and "interbank spot forex"
So retail spot forex is the deliverable and interbank spot forex is not then. I will edit my post to stipulate interbank
  • #34
  • Sep 13, 2010 12:47am Sep 13, 2010 12:47am
Quoting bbakker

What market are we trading then? The currency market?
Retail, with a marketmaker, whose pricing is supposedly loosely derived from the underlying spot price and influenced by his book.

Compare his offering to spot and/or futures then you have something which means something, there's a clear distinction, in effect we're trading an 'artificial' market which marketmakers have conveniently manufactured for us (and themselves!), along with rollover, leverage, tight spreads, micro accounts, etc etc etc
  • #35
  • Sep 13, 2010 12:50am Sep 13, 2010 12:50am
Quoting pipmutt
Retail, with a marketmaker, whose pricing is supposedly loosely derived from the underlying spot price and influenced by his book.

Compare his offering to spot and/or futures then you have something which means something, there's a clear distinction.
they do a neat trick, though, and keep the "retail spot" rate closely in line with the current rate in futures for the same instrument. As to whether it relates closely to the "interbank spot" rate, I haven't the foggiest, but it would have to be close, I suspect...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #36
  • Sep 13, 2010 12:52am Sep 13, 2010 12:52am
Quoting pipmutt
Retail, with a marketmaker, whose pricing is supposedly loosely derived from the underlying spot price and influenced by his book.

Compare his offering to spot and/or futures then you have something which means something, there's a clear distinction, in effect we're trading an 'artificial' market which marketmakers have conveniently manufactured for us.
A fair point and a a clear difference that can be easily confused when such terms as spot market are loosley coined. Thank you for the clarification.

I have edited my original post! Have a great day!
  • #37
  • Sep 13, 2010 12:59am Sep 13, 2010 12:59am
Quoting bbakker

A fair point and a a clear difference that can be easily confused when such terms as spot market are loosley coined.
Absolutely, especially as no-one has thought up a word to describe what we trade, we just call it spot or retail.

Sorry, I wasn't meaning to make it seem like I was picking on you in any way, it was more an attempt to guide the OP to answer his own question!

Have a great trading day!
  • #38
  • Sep 13, 2010 1:02am Sep 13, 2010 1:02am
Quoting The Fool

they do a neat trick, though, and keep the "retail spot" rate closely in line with the current rate in futures for the same instrument. As to whether it relates closely to the "interbank spot" rate, I haven't the foggiest, but it would have to be close, I suspect...
You suspect right, it has to be, they're not in the risk business so obviously need to hedge exposure somewhere. Imagine the arb opportunities otherwise! It would be nice but I guess they're not that dumb, lol

An interesting exercise....get hold of a Reuters 3000 Xtra trial account (social engineering skills help here!) and compare quotes. It's also fun to watch across some volatile data like NFP to get an understanding of just how smoothed and sugar-coated our retail price feeds are, I sat there speechless when I saw it! Interbank? Sod that game, they don't play so nice as yer friendly retail shop!
  • #39
  • Sep 13, 2010 1:23am Sep 13, 2010 1:23am
Quoting pipmutt
You suspect right, it has to be, they're not in the risk business so obviously need to hedge exposure somewhere. Imagine the arb opportunities otherwise! It would be nice but I guess they're not that dumb, lol

An interesting exercise....get hold of a Reuters 3000 Xtra trial account (social engineering skills help here!) and compare quotes. It's also fun to watch across some volatile data like NFP to get an understanding of just how smoothed and sugar-coated our retail price feeds are, I sat there speechless when I saw it! Interbank?...
May i know how far away is retail spot price compared to Reuters 3K ?
In pips...
  • #40
  • Sep 13, 2010 1:49am Sep 13, 2010 1:49am
Quoting songbo

May i know how far away is retail spot price compared to Reuters 3K ?
In pips...
Good question and it was a while ago since I compared the two (I was convinced that the game was rigged and my bröker was out to screw me, turned out I was just a crap-at-trading novice!). From memory they were sufficiently close enough, they must have been for me to continue pursuing retail forex trading as a viable career choice! It wasn't just quotes though, the biggest differences I saw were in price fluctuations and spreads especially during volatile times, quotes dancing around like 50 and 100 pips at a time, crazy spreads, inverted quotes, it was like a mad house, those guys are nuts!

I had some videos but heaven knows where they are now, if I can find them I'll YouTube them and post a link.

Why not have a go at getting a trial yourself, all you've got to do is find a hungry rep who thinks you're serious! I found one who was just about to go on holiday so I had access until he came back, but be prepared for a million follow-up sales calls, lol

Talking of trading, guess I better get some done! Have a great day all......
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