FOREX Benefits Over Futures

From Agricultural to Financial Instruments 

The origins of the modern futures market lies in the agriculture markets of the 19th century. Farmers began selling contracts to deliver at a later date. Agricultural This was done to anticipate market needs and stabilize supply and demand during off seasons.

The current futures market has moved far beyond agricultural products. It is a global market for all kinds of goods, including industrial products, agricultural products, and financial instruments such as currencies and government bonds.

When the futures market is played by speculators, the actual goods are not important because there is no expectation of delivery. Rather, it is the contract itself that is traded, the value of which changes constantly throughout the day and change with respect to the value of the commodity itself. Expectations

Win or lose 

In every futures contract there is a buyer and a seller. The seller takes the short position and the buyer takes the long position. The futures contract specifies a purchase price, a quantity and a delivery date.

Speculators hope to profit from the daily fluctuations in the futures market by buying long (from the buyer) if they expect prices to rise, or by buying short (seller) if they expect prices to fall. Futures accounts are settled every day.

At the end of the contract, the contract itself is regulated. The final contract buyer can now take delivery of his truckload of whatevers. Of course he can choose to just start the process all over again delivered by writing a contract to his whatevers on a certain date at a certain price.

FOREX Benefits 

The foreign exchange market (Forex) has several advantages over the futures market.

More Liquid. FOREX is an extremely liquid market. As the largest financial market in the world it dwarfs the futures market in daily exchanges. This means that FOREX stop orders can be executed. Easier and with less slippage The FOREX is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a day. This makes FOREX more liquid and allows FOREX traders to take advantage of trade opportunities that arise instead of waiting to open for marketing.

Commission-free. FOREX transactions have no commissions. Brokers earn money by setting a spread - the difference between what a currency can be bought at and what it can be sold at. In contrast, traders need a commission or brokerage fee for each futures transaction they pay.

Instant Transactions. Due to the high volume of trade, Forex trades are executed almost immediately. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices as a result of the last trade - not necessarily the price of your transaction.

Guarantees. Final prices in futures are always a little unsure due to market failure and slippage. The FOREX is less risky because of the built-in safeguards in the trading system.

Ron King is a full-time researcher, writer, and web developer. Visit FOREX4U to learn about this fascinating trading vehicle. More