Why Choose Forex: Forex vs. Futures

It's not limited to just the stock market; the forex market offers numerous advantages over the futures market, much like its advantages over stocks.

But there's more—much more!

Liquidity

The forex market boasts a daily trading volume of $6.6 trillion, making it the world's largest and most liquid market. This market has the capacity to handle trading volumes and transaction sizes that dwarf any other market.

In contrast, the futures market trades a mere $30 billion per day. Thirty billion? That's peanuts! The futures market simply can't match the forex market's relatively limited liquidity.

The forex market is consistently liquid, allowing for the liquidation of positions and execution of stop orders with minimal or no slippage, with the exception of extremely volatile market conditions.

24-Hour Market

The forex market operates 24 hours a day, starting with the opening of the Sydney market at 5:00 pm EST on Sunday. The Tokyo market opens at 7:00 pm EST, followed by London at 3:00 am EST. Finally, New York opens at 8:00 am EST and closes at 4:00 pm EST. Before New York trading closes, the Sydney market reopens, creating a seamless 24-hour market.

As a trader, this continuous operation allows you to react instantly to favorable or unfavorable news. If significant data emerges from the United Kingdom or Japan while the U.S. futures market is closed, the opening of the next day could be quite volatile.

While overnight markets for futures contracts do exist, they are still thinly traded compared to the spot forex market, despite ongoing improvements in liquidity.

Minimal or No Commissions

With the increasing popularity of Electronic Communications Brokers in recent years, some brokers may charge commissions. However, these commission fees are negligible compared to what you'd pay in the futures market. The intense competition among spot forex brokers often results in the best quotes and very low transaction costs for traders.

Price Certainty

When trading forex, you enjoy rapid execution and price certainty under normal market conditions. In contrast, the futures and equities markets do not offer price certainty or instant trade execution.

Even with the advent of electronic trading and limited execution speed guarantees, prices for futures and equities on market orders remain uncertain. Broker-quoted prices often represent the LAST trade, not necessarily the price at which the contract will be filled.

Guaranteed Limited Risk

Risk management in the spot forex market is facilitated by position limits, which are set relative to a trader's account balance. Risk is minimized because the trading platform's online capabilities will automatically trigger a margin call if the required margin exceeds the available capital in your account. Under normal market conditions, all open positions will be immediately closed (during fast market conditions, your position could be closed beyond your stop-loss level).

In the futures market, there is a risk that your position may be liquidated at a loss greater than the balance in your account, and you would be responsible for any resulting deficit in your account. That's certainly not desirable.