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Intro to Forex
  What is Forex Trading
  How to get started in Currencies
  History of Forex
  A Primer On The Forex Market
  Forex vs Futures
  Forex Introduction
  Forex vs Stocks
  Getting Started in Forex
 VIEW MORE INTRO TO FX..

Fundamentals of FX
  What is a PIP?
  Country Currency Codes
  Reading Prices
  What Pairs are Traded?
  Forex Glossary
  FX Publications
 VIEW MORE FUNDAMENTALS..

FX Market Awareness
  Speculating
  Risk Awareness
  The Spot Market
  The Forces of Forex
  Market Snapshot
 VIEW MORE MARKET INFO..

FX Technical Analysis
  Fibonacci Numbers
  Advanced Indicator Manual
  Trading Systems which work
  Demo Before You Dive In
 VIEW MORE TECHNICAL..

FX Trading Tools
   Risk Probability Calculator
  Pivot Point Calculator
  Economic Calendar
  Interest Rates Calendar
  Real-Time FX Charts
  Live FX Prices & Quotes
  Forex Movers & Shakers
 VIEW MORE TRADING TOOLS..

FX Trading Strategies
  Keep An Eye On Momentum
  Is Guessing a Strategy?
  Trading On News Releases
  The Memory Of Price
  Trading Trend Or Range?
  Pivot Strategies: A Handy Tool
 VIEW MORE STRATEGIES..


FOREX Education

What is the Difference between Forex and Futures?

Highly Trending markets
Because the foreign exchange market does not close, it isn't dramatically impacted by buying programs and cannot be easily manipulated, the Forex market offers some of the smoothest trends available in any market. No other market can come close to the amount of monetary volume and participation as the Forex market making it a haven for traders not having to deal with gaps and price movements, erratic spikes and other choppy market conditions more commonly experienced in the futures markets.

No Commissions
Though some speculators are unaware, ALL financial markets have a spread (the difference between the bid and ask price). In the futures market you are not only paying the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread. Ticker prices in the Futures market typically signify the last traded price, not the price at which you will be filled. In the Forex market, you are paying what's referred to as a PIP or PIP spread. In plain English, as best we can interpret, what you are paying is the difference between the bid and the ask price. The retail forex market is very loosely regulated, so the way a lot of brokerage firms make their money is to trade the accounts between other accounts within their firm. By doing this, you are eliminating an exchange that would add fees to your trades. You are still getting your bid or ask price, there just isn't someone running to the floor as it's all done internally.

Better Leverage
Trading in the spot currency markets provides advantages over trading currency futures contracts. One of the main advantages for traders trading spot currencies is the margin rate or leverage that clients are given. In spot currency trading customers receive one low margin rate for trades done 24 hours a day. In currency futures trading the client has one margin rate for "day" trades and one margin rate for "overnight" positions. This can become a hassle for traders and decreases the overall tradability of the currency futures markets. Margin rates in spot currency trading vary from around 1% to 5% depending on the size of transactions a particular trader initiates.

24-hour Trading
Since the Forex market, in a sense, "follows the sun" around the globe the market rarely experiences periods of illiquidity. What this means is that any trader in any time zone can trade Forex at any time during the day or night! You no longer have to wait for the market to open when news has already hit the streets or have to stop trading because the CME, CBOT or other American futures pits have closed for the day. This gives the Forex trader added flexibility and continuous market opportunities that just aren't available in futures. To explain the global effect on the Forex market, there are three main economic zones that are linked throughout the world. For instance, when the Pacific Rim markets such as Japan and Singapore begin to slow, the European markets of England, Switzerland and Germany begin, followed by the North American markets of the United States, Canada and Mexico. As the North American markets begin to slow down for the evening, the Pacific Rim starts their trading day. This example shows that you are no longer limited to trading the comparatively short trading day offered by US markets alone.

Forex vs Futures Trading is continued on the next page, so please click here.



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Disclaimer: Trading Futures, Options on Futures, and off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.