Forex is a popular form of trading, and it does have it’s advantages. There are however some key benefits of trading Futures vs trading Forex. There is a real problem with Forex trading when it comes to individuals having a level playing field.
Forex markets aren’t as regulated as the Futures markets and can be manipulated. This means that there is a higher level of security for Futures traders given the market regulation. Below are some of the larger benefits of trading Futures over Forex.
There is no fixed pricing for Forex trades costs can vary for each trade. There is also not a “true price” when it comes to what your broker reports to you. The broker who provides access to the exchange and the ability to execute trades has a hold over Forex traders. Brokers are able to provide their own price called the spread.
Futures traders are able to receive their data directly from the exchange itself. This happens without the need for a middleman controlling price. What this means is that Futures traders are always able to trade the true price which is highly beneficial. There are other unknown fees in Forex trading such as carrying costs and interest rate charges.
Futures traders know exactly what the transaction costs of a trade are at the time of placing a trade, there are no nasty surprises.
Forex is not a centralised exchange, this means that there is a need for a middle man between the trader and exchange. Therefor transparency is reliant on the broker who facilitates the execution of trades. Brokers actually have the capability to trade against you if they so choose. It is completely legal for a broker to not place your trade onto the market, but to ‘take the other side’.
Transparent and fair
The Futures markets are centralised and cleared directly via the exchange. This means that all information is available to anyone to see, in real time. All information is completely transparent and true, unlike with Forex.
Both institutional traders and small individual traders are equal in the Futures markets. This creates a level playing field that is not existent in Forex trading.
Volume is a large factor in decision making for many traders. Volume can help confirm potential trades. For example, if there is a lot of volume pushing price up, that means there is support and can indicate a strong move.
Forex is not centralised or as regulated as Futures, creating an issue when attempting to measure volume. Because that data is coming from various sources it is not as reliable as the information coming from the Futures markets.
Every Futures trader is able to see the same information coming from the exchange and thus has a big advantage in this regard
Many markets available to trade
The Futures markets are broad and there is a lot of choice when it comes to choosing what to trade. Futures traders have access to Indices such as S&P500, NASDAQ, Gold and Oil, and much more. A Forex trader is completely limited to the currency markets and offers little diversity.
Benefits of trading currency Futures over Forex
If you’re only interested in trading currencies, it is actually possible without using the Forex markets. For all the reasons above we feel that it makes sense to trade currencies via Futures contracts than to do so via the Forex markets.
A level playing field
The Futures markets are highly regulated and don’t lend themselves to manipulation. For example, there isn’t the possibility of an insider trader fluctuating price based on inside information.
Futures are highly regulated and highly transparent. We feel this creates a real level playing field for all traders.
The bottom line
Although Forex markets are one of the most traded globally there are many benefits to choosing Futures as an alternative. If you want to learn more about trading Futures and why we chose to trade them over any other form of trading, join us for our next FREE web class.