moving from Spot FX to FX futures

[MajorDutch]

Hi All

While the markets are closed I have been doing some research into moving from Spot FX to FX Futures. I don't want this to be a SB bashing thread.

I only trade cable so the futures contract I am looking at is the front GBPUSD contract so at time of writing this is the Sept GBPUSD traded on CME Globex. The broker I am planning on using is IB.

Now what I am primarily concerned with is correlation, clearly the spot and the front future are going to be highly correlated but my questions to the experienced out there are:

1. the edge I am trading has been backtested and forward tested on spot FX, how correlated is the future against the spot? I am guessing as the futures expiry approaches the correlation is tighter?

2. Are there any other nuances / things I need to look out for?

3. anyone know where SB companies get their spot FX price feed from, do they use the front FX future or do they have some form of feed from say Reuters 3000 interbank system. This would help me as if I know they use Spot FX futures feed then I should be ok with my edge.

I pulled up a 5min chart of Sept FX v. SB spot FX and they were pretty much identical, that said we are close to the future expiry.

any thoughts..............

 

[tuscan]

That's very interesting matter for me also, It is not a big discovery but I think the major difference between exchange-traded front future and spot "market" appears on 1M chart, so for 'scalping' kind of strategies I think spot and future are two different worlds, futures on 1m is like more liquid and detailed

"the edge I am trading has been backtested and forward tested on spot FX, how correlated is the future against the spot?"
so if 1M data was used in your backtesting the outcome might be different especially if that is kind of higher frequency strategy
but I'm not an expert just my thought

 

[Rossini]

Hi All

While the markets are closed I have been doing some research into moving from Spot FX to FX Futures. I don't want this to be a SB bashing thread.

I only trade cable so the futures contract I am looking at is the front GBPUSD contract so at time of writing this is the Sept GBPUSD traded on CME Globex. The broker I am planning on using is IB.

Now what I am primarily concerned with is correlation, clearly the spot and the front future are going to be highly correlated but my questions to the experienced out there are:

1. the edge I am trading has been backtested and forward tested on spot FX, how correlated is the future against the spot? I am guessing as the futures expiry approaches the correlation is tighter?

2. Are there any other nuances / things I need to look out for?

3. anyone know where SB companies get their spot FX price feed from, do they use the front FX future or do they have some form of feed from say Reuters 3000 interbank system. This would help me as if I know they use Spot FX futures feed then I should be ok with my edge.

I pulled up a 5min chart of Sept FX v. SB spot FX and they were pretty much identical, that said we are close to the future expiry.

any thoughts..............

1. Extremely.

2. Commission, if you haven't been paying comms, then I would make sure you factor that in to your bottom line. When you have done this is the cost to trade any better than what you are paying now with spot FX?

3. There is no exact price for spot FX as it is an OTC product. So prices, and feeds will vary.

.....................

What is your motivation to move from spot to futures?

 

[Martinghoul]

Do you know how spot FX and futures differ?