What Is the Difference Between Forex and Futures

The forex market is the current investment destination for the investors’ community, and the futures trading is based on the speculations made by the investor about the particular stock commodity, he is trading into rather than buying the stock itself.  The futures’ trading is basically designed to trade in oil and natural gas commodity.

Let us identify the various differences between forex and futures’ trading.

1. Highly Trending markets
   The foreign exchange markets are recognised by a market operating 24 hours a day, 6 days a week i.e. it doesn’t close and thus the stocks/ options in forex trading cannot be easily manipulated.  Forex market is considered the most liquid market in terms of high cash flow which is not found in other financial markets. And thus, it is considered to be the desired destination for the investors’ to participate and earn voluminous monetary gains, during gaps and price movements, inconsistent spikes, etc.
2. No Commissions
   Most of the analysts overlook the financial spread present in the market on a regular basis. Usually this spread is characterized by the bid and ask price. When an investor is involved in Futures’ trading, he not only pays the price (which is the difference between the ask and bid price), but simultaneously pays the commission charges to the broker. In addition to this fee structure, the investor is also required to pay the clearing and exchange fees.  On the other hand, in Forex market, the investor is required to pay the PIP (or “Percentage in Point”) which is the smallest price movement of a traded currency. In other words, PIP is the difference in the ask and bid price.
3. Better Leverage
   Spot currency trading is considered a better option that future contracts’ trading. The investors’ specially focus on the benefits earned from margin rate or leverage rates while trading in Spot currency.  In spot currency trading customers receive one low margin rate for trades done 24 hours a day. However, in the Futures’ trading, the investor deals with positions acquiring margin rate that appear during day trading and also the margin rate during overnight trading.  This can become a hassle for traders and decreases the overall tradability of the currency futures markets.
4. 24-hour Trading
   Forex market, which operates throughout the day all around the globe and that rarely experiences any non-cash flow scenario, allows the trader to trade in any time zone. You no longer have to wait for the market to open when news has already hit the streets. Unlike futures’ trading, the investor attains better flexibility with continuous market exposure in forex trading. The forex market is also differentiated into three economic zones and that acts as a bridge between the different nations of the world. These zones are a) the Pacific Rim market which includes Japan and Singapore, b) the European markets including England, Switzerland and Germany, and last but not the least c) North American markets that includes U.S., Canada and Mexico.

The forex market is the current investment destination for the investors’ community, and the futures trading is based on the speculations made by the investor about the particular stock commodity, he is trading into rather than buying the stock itself.  The futures’ trading is basically designed to trade in oil and natural gas commodity.

Let us identify the various differences between forex and futures’ trading.

1. Highly Trending markets
   The foreign exchange markets are recognised by a market operating 24 hours a day, 6 days a week i.e. it doesn’t close and thus the stocks/ options in forex trading cannot be easily manipulated.  Forex market is considered the most liquid market in terms of high cash flow which is not found in other financial markets. And thus, it is considered to be the desired destination for the investors’ to participate and earn voluminous monetary gains, during gaps and price movements, inconsistent spikes, etc.
2. No Commissions
   Most of the analysts overlook the financial spread present in the market on a regular basis. Usually this spread is characterized by the bid and ask price. When an investor is involved in Futures’ trading, he not only pays the price (which is the difference between the ask and bid price), but simultaneously pays the commission charges to the broker. In addition to this fee structure, the investor is also required to pay the clearing and exchange fees.  On the other hand, in Forex market, the investor is required to pay the PIP (or “Percentage in Point”) which is the smallest price movement of a traded currency. In other words, PIP is the difference in the ask and bid price.
3. Better Leverage
   Spot currency trading is considered a better option that future contracts’ trading. The investors’ specially focus on the benefits earned from margin rate or leverage rates while trading in Spot currency.  In spot currency trading customers receive one low margin rate for trades done 24 hours a day. However, in the Futures’ trading, the investor deals with positions acquiring margin rate that appear during day trading and also the margin rate during overnight trading.  This can become a hassle for traders and decreases the overall tradability of the currency futures markets.
4. 24-hour Trading
   Forex market, which operates throughout the day all around the globe and that rarely experiences any non-cash flow scenario, allows the trader to trade in any time zone. You no longer have to wait for the market to open when news has already hit the streets. Unlike futures’ trading, the investor attains better flexibility with continuous market exposure in forex trading. The forex market is also differentiated into three economic zones and that acts as a bridge between the different nations of the world. These zones are a) the Pacific Rim market which includes Japan and Singapore, b) the European markets including England, Switzerland and Germany, and last but not the least c) North American markets that includes U.S., Canada and Mexico.