Discover your trading personality and we'll create a customized course to boost your forex trading skills. So what are some of the big differences? Risk is minimized in the spot forex market because the online capabilities of the trading platform will automatically generate a margin call if the required margin amount exceeds the available trading capital in your account.
Why traders choose FOREX.com
Keep that in mind as well. The leverage is better with the spot forex market than it is with a futures market in general, although that can vary. Leverage can be a good thing. It can be a bad thing. Basically, the more leverage you have, the more money you can potentially make with a smaller account.
But on the flip side, the more money you can lose with smaller size account as well. However, I will say that the advantages of the spot forex market, especially for beginners, is that you are able to trade many lots micro lots and what that allows you to do is to trade with a smaller trading account.
Well, if you trade the futures market, then you have to commit more money than you would in the spot forex market with a micro lot or many lot. So kind of cool that you can trade these platforms to market with less money to help you ease into the psychology of having to trade with real money.
So I am not a tax professional. This can potentially make a big difference at the end of the year as to how much money you actually end up putting in your pocket. So if you found value in this video, spot forex vs futures, if you learned something new or something thought-provoking, please feel free to go ahead and share this video by clicking on the share button below.
Also, subscribe to the Youtube Channel so that you can get notified everytime I release a new trading video. Click the thumbs up icon. And even leave the comment. I love your comments by the way, really enjoy those. Click on the image in the top right-hand corner of this video or in the description below the video. Once you do that, I will personally email the video to you with the rubber band trade strategy.
Just send me an email at Barry TopDogTrading. Just fill out the yellow form at the top of the sidebar o n the right. As with the equities market, the types of trading method is dependent upon the unique preferences of the individual when it comes to both techniques and time frames.
Day traders generally never hold positions overnight and can be in and out of a trade within a matter of minutes seeking to jump on an intraday swing. To read more see Analyzing Chart Patterns: Many, if not all the aspects of technical analysis for equities can be interchangeable with the futures market, and thus, trading between the two asset classes can be an easy transition for day traders.
Swing traders are traders who hold positions overnight, for up to a month in length. They generally employ technical analysis spanning a longer time frame hourly to daily charts , as well as short-term macroeconomic factors.
Finally, there are the position traders who hold onto a position for multiple weeks to multiple years. For these individuals, technical analysis may take a back seat to macroeconomic factors. Position traders are not concerned with the day-to-day fluctuations on the contract prices, but are interested in the picture as a whole.
As such, they may employ wider stop-losses and differing risk management principles than the swing or day trader. Note however, these are generalized definitions and the differentiating characteristics of traders are not black and white. At times, day traders may employ fundamental analysis, such as when Federal Open Market Committee data is released.
By the same token, position traders may employ technical analysis tools to set up entries, exits, and trailing stop losses. Furthermore, the time-frames utilized by traders are also quite subjective, and a day trader may hold a position overnight, while a swing trader may hold a position for many months at a time. Much like in the equities markets, the type of trading style is entirely subjective and varies from individual to individual.
Similar to the equities market, traders of FX futures employ both technical and fundamental analysis. Technical analysis by nature, examines price and volume data, and subsequently, similar methodologies are prevalent across both the equities and the futures markets.
However, the biggest analytical contrast between the FX trader and say, a stock trader, will be in the way they employ fundamental analysis. Fundamental analysis in the stock market may emphasize scrutinizing the accounting statements of a firm, management discussion and analysis, efficiency analysis, ratio analysis and industry analysis.
Depending upon the analyst, broader macroeconomic principles may take a backseat to company specific characteristics. However, traders of FX futures and FX in general , must be absolutely familiar with macroeconomic principles and forecasting techniques.
The trader must understand the principle determinants of business cycles within a country, and be able to analyze economic indicators , including though not limited to , yield curves , GDP , CPI , housing, employment and consumer confidence data. For example, both the Canadian and Australian dollar are susceptible to movements in the prices of commodities- namely those associated with energy. Trading forex futures, much like any speculative activity, is risky in nature.
But the trader must respect the power of the margin in amplifying losses as well as gains , conduct necessary due diligence, and have an adequate risk management plan prior to placing their first trade.
What Are Forex Futures? Futures Margins Futures clearing houses require a deposit from participants known as a margin. Contracts Specifications and the Tick Each futures contract has been standardized by the exchange, and has certain characteristics that may differentiate it from another contract.