Spot vs Futures

[N Rothschild]

For aslong as ive been a trader i have never worked out why on earth people trade spot forex market.

take any retail forex broker, whats the spread on euro or cable, couple of points lets say?

say you buy 1 100k lot, 2 point spread..thats a $20 commision. One futures contract, about 3-5$ commision depending on your broker..

And the more size you trade the more rediculas its get.

10 lots..$200 commision on spot or $50 or so futures.

people can talk about leverage but the margin on a forex contract on CME is only about 2,000 dollars, thats leverage a plenty! 50:1

why oh why do you all trade spot lol

 

[BSD]

Beats me too, doesn't make much sense does it, as on top of that you get crappy fills of off freely invented prices and other whatnots from the bucket shops offering "spot" FX, which in reality is just a punter trading against his bookie for all intents and purposes of those here who aren't a hedge fund trading in the real interbank market.

 

[MrGecko]

Depends on what you use instead of futures, reasons might include:

* Tighter spreads (0.5 pts in some cases), especially in crosses
* Lower comms (no nasty Exchange/NFA fees, entry level rates of $30 pm)
* Deeper liquidity
* rollover

 

[MrGecko]

Oh, and tax.

 

[N Rothschild]

Depends on what you use instead of futures, reasons might include:

* Tighter spreads (0.5 pts in some cases), especially in crosses
* Lower comms (no nasty Exchange/NFA fees, entry level rates of $30 pm)
* Deeper liquidity
* rollover

maybe if you have access to the interbank market not a forex bucket shop. and there is more than enough liquidty in futures unless your trying to move huge size

 

[Rhody Trader]

say you buy 1 100k lot, 2 point spread..thats a $20 commision. One futures contract, about 3-5$ commision depending on your broker..

people can talk about leverage but the margin on a forex contract on CME is only about 2,000 dollars, thats leverage a plenty! 50:1

Your spread argument assumes futures have no spread, but they do. All markets have a spread. If you're going to argue that the futures spreads are narrower than spot, then I'd come back with I've seen zero and even negative spreads on ECN quotes.

The other advantage of spot is position size flexibility. A "micro" futures contract is circa 10,000 units, which is about the same as a spot "mini" contract. Spot micros are 1000 units and there are brokers which don't have fixed contracts at all, so you can trade exactly the size you want to match your risk management requirements.

There used to be a good lack of regulation argument against spot, but that's changing (at least in the US).

 

[BSD]

If you're going to argue that the futures spreads are narrower than spot, then I'd come back with I've seen zero and even negative spreads on ECN quotes.

Totally agree but that's the real interbank market where this Brit FX billionaire Joe Lewis probably trades, but not at these bucket shops with their dodgy fills that pose an insurmountable problem for scalpers at least.

They're probably ok if you trade longer term although even then I'd go for futures simply because I know I'm seeing the same price like everyone else and not what my bucket shop has chosen as the flavour of the moment.

;-)

 

[Rhody Trader]

Totally agree but that's the real interbank market where this Brit FX billionaire Joe Lewis probably trades, but not at these bucket shops with their dodgy fills that pose an insurmountable problem for scalpers at least.

You can trade mini contracts via an ECN, so it's not just for the big boys.

 

[fxgunner]

Spot can definitely be better... just not on a retail platform. need institutional spreads and make sure the commission is lower than futures fees. also want to make sure your spreads are quoted in sub-pips, instead of full pips which makes the prices even better

 

[N Rothschild]

why is everyone posting up saying spot is better if you have access to interbank..pretty irrelevant for the average joe trader

 

[fxgunner]

why is everyone posting up saying spot is better if you have access to interbank..pretty irrelevant for the average joe trader

Because spreads are tighter and commission lower than futures

 

[N Rothschild]

wow right over the head! how many traders you dont work for an insitution do you know who have access to the interbank market? so my point still stands..

 

[hazelj80]

you dont have to access interbank for it to be better. you just have to know how to trade period. you either do or you dont. But I like spot fx. . I wont trade fx any other way. for me, personally, it benefits me the most

 

[N Rothschild]

you have to know how to trade for spot to be better? lol

 

[hazelj80]

we can just guess which one is better! ha!

 

[N Rothschild]

ive laid out quite clearly why futures are better in the original post, did you read it?

 

[hazelj80]

yeah, leverage. that's why i like spot. i can trade the same 14 pairs with better leverage and my style takes advantage of that. it's not better in all ways. i can make my money over here, you make your money over there in futures. more power to you. i trade off a daily chart so I'm not whining about a commission or spread like most scalpers over i spot ill do

 

[hazelj80]

oh yeah, futures isn't 24 hrs really also...forget that!

EDIT: shouldn't be so harsh but my trade style wont allow that. if banks are open 24-5, why not take advantage of it? just my opinion.