The global foreign exchange market is the largest, most active market in the world. Trading in the forex markets takes place nearly round the clock with over $1 trillion changing hands every day. It is the main event.


The benefits of forex over currency futures trading are considerable. The dissimilarities between the two instruments range from philosophical realities such as the history of each, their target audience, and their relevance in the modern forex markets, to more tangible issues such as transactions fees, margin requirements, access to liquidity, ease of use and the technical and educational support offered by providers of each service. These differences are outlined below:

- More Volume = Better Liquidity. Daily currency futures volume on the CME is just 1% of the volume seen every day in the forex markets. Incomparable liquidity is one of many advantages that forex markets hold over currency futures. Truth be told, this is old news. Any currency professional can tell you that cash has been king since the dawn of the modern currency markets in the early 1970's. The real news is that individual traders from every risk profile now have full access to the opportunities available in the forex markets.


- Forex markets offer tighter bid to offer spreads than currency futures markets. By inverting the futures price to compare it to cash, you can readily see that in the USD/CHF example above, inverting the futures dealing price of .5894 - .5897 results in a cash price of 1.6958 - 1.6966, 8 pips vs. the 5-pip spread available in the cash markets.

- Forex markets offer higher leverage and lower margin rates than those found in currency futures trading. When trading currency futures, traders have one margin rate for "day" trades and another for "overnight" positions. These margin rates can vary depending on transaction size. 

- Forex markets utilize easily understood and universally used terms and price quotes. Currency futures quotes are inversions of the cash price. For example, if the cash price for USD/CHF is 1.7100/1.7105, the futures equivalent is .5894/ .5897; a methodology followed only in the confines of futures trading. Currency futures prices have the added complication of including a forward forex component that takes into account a time factor, interest rates and the interest differentials between various currencies. The forex markets require no such adjustments, mathematical manipulation or consideration for the interest rate component of futures contracts.

- Forex trades are ofetn commission free. Currency futures have the added baggage of trading commissions, exchange fees and clearing fees. These fees can add up quickly and seriously eat into a trader's profits.

In contrast, currency futures are a small part of a much larger market; one that has undergone historical changes over the last decade.

- Currency futures contracts (called IMM contracts or international monetary market futures) were created at the Chicago Mercantile Exchange in 1972.

- These contracts were created for the market professionals, who at that time, accounted for 99% of the volume generated in the currency markets.

- While some intrepid individuals did speculate in currency futures, highly trained specialists dominated the pits.

- Rather than becoming a hub for global currency transactions, currency futures became more of a sideshow (relative to the cash markets) for hedgers and arbitragers on the prowl for small, momentary anomalies between cash and futures currency prices.

- In what appears to be a permanent rather than cyclical change, fewer and fewer of these arbitrage windows are opening these days. And, when they do, they are immediately slammed shut by a swarm of professional dealers.

These changes have significantly reduced the number of currency futures professionals, closed the window further on forex vs. futures arbitrage opportunities and so far, have paved the way to more orderly markets. And while a more level playing field is poison to the P&L of a currency futures trader, it's been the pathway out of the maze for individuals trading in the forex markets.


If you are interested in trading currencies online, you will find that the Forex market offers several advantages over equities trading.

24-Hour Trading

Forex is a true 24-hour market, which offers a major advantage over equities trading. Whether it's 6pm or 6am, somewhere in the world there are always buyers and sellers actively trading foreign currencies. Traders can always respond to breaking news immediately, and P&L is not affected by after hours earning reports or analyst conference calls.

After hours trading for U.S. equities brings with it several limitations. ECN's (Electronic Communication Networks), also called matching systems, exist to bring together buyers and sellers - when possible. However, there is no guarantee that every trade will be executed, nor at a fair market price. Quite frequently, traders must wait until the market opens the following day in order to receive a tighter spread.

Superior Liquidity

With a daily trading volume that is 50x larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the FX markets. The liquidity of this market, especially that of the major currencies, helps ensure price stability. Traders can almost always open or close a position at a fair market price.

Because of the lower trade volume, investors in the stock market are more vulnerable to liquidity risk, which results in a wider dealing spread or larger price movements in response to any relatively large transaction.

Profit Potential In Both Rising And Falling Markets

In every open FX position, an investor is long in one currency and short the other. A short position is one in which the trader sells a currency in anticipation that it will depreciate. This means that potential exists in a rising as well as a falling market.

The ability to sell currencies without any limitations is another distinct advantage over equity trading. In the US equity markets, it is much more difficult to establish a short position due to the Zero Uptick rule, which prevents investors from shorting a stock unless the immediately preceding trade was equal to or lower than the price of the short sale.



Foreign Exchange (FOREX) or Currency Trading


U.S. & International Markets: Futures and Options


Market Exchange
Australian Dollar futures & options IMM
Benzene futures CME
British Pound futures & options IMM
British Pound (MIDAM) futures MA
CRB Index futures & options NYFE
Canadian Dollar futures & options IMM
Canadian Dollar (MIDAM) futures MA
Cattle, Feeder futures & options CME
Cattle, Live futures & options CME
Cattle, Live (MIDAM) futures MA
Cocoa (Metric) futures & options CSCE
Coffee futures & options CSCE
Copper futures & options COMEX
Corn futures & Corn options CBOT
Corn (MIDAM) futures & Corn (MIDAM) options MA
Cotton futures & options NYCE
Crude Oil, Light/Sweet futures & options NYMEX
Crude Oil, Sour futures & options NYMEX
Dow Jones & Dow Jones options CBOT
Dow Jones Mini $5 multiplier CBOT
Dow Jones Mini Index $2 multiplier CBOT
Euro FX futures & options IMM
E-mini Euro futures & options IMM
Eurodollar futures & options IMM
Eurodollar (MIDAM) futures MA
Euroyen futures & options IMM
Gasoline, Unleaded futures & options NYMEX
Gold (Kilo) futures CBOT
Gold (100 oz) futures & options COMEX
Gold (MIDAM) futures & Gold (MIDAM) options MA
oldman Sachs Comm. Index futures & options IOM
Heating Oil futures & options NYMEX
Hogs, Lean futures & options CME
Hogs, Lean (MIDAM) futures MA
Japanese Yen futures & options IMM
E-mini Japanese Yen futures & options IMM
Japenese Yen (MIDAM) futures MA
Lumber futures & options CME
Mixed Xylene Futures CME
Mexican Peso futures & options IMM
Municipal Bonds & Municipal Bonds options CBOT
NASDAQ Index futures & options IOM
NASDAQ 100 E-mini futures & options IOM
Natural Gas futures & options NYMEX
Nikkei 225 Stock Index futures & options IOM
NYSE Index Composite futures & options NYFE
Oats futures & Oats options CBOT
Oats (MIDAM) futures MA
Orange Juice futures & options NYCE
Palladium futures & options NYMEX
Platinum futures & options NYMEX
Pork Bellies, Frozen futures & options CME
Rough Rice futures & Rough Rice options CBOT
S&P 500 Index futures & options IOM
E-Mini S&P 500 futures & options CME
S&P MidCap 400 Index futures & options IOM
Silver futures & options COMEX
Silver, New futures & Silver, New options CBOT
Silver, New York (MIDAM) futures MA
Soybean Meal futures & Soybean Meal options CBOT
Soybean Oil futures & Soybean Oil options CBOT
Soybeans futures & Soybeans options CBOT
Soybeans (MIDAM) futures & Soybeans (MIDAM) options MA
Sugar futures & options CSCE
Swiss Franc futures & options IMM
Swiss Franc (MIDAM) futures MA
Treasury Bills (90 day) futures & options IMM
Treasury Bills (MIDAM) futures MA
Treasury Bonds futures & Treasury Bonds options CBOT
Treasury Bonds futures & Treasury Bonds options MA
Treasury Notes, 10 year< & Treasury Notes, 10 year options CBOT
Treasury Notes, 5 year & Treasury Notes, 5 year options CBOT
US Dollar Index futures & options NYCE
Value Line Index futures & options KCBT
Value Line, Mini futures & options KCBT
Wheat futures & Wheat options CBOT
Wheat, Hard Red Winter futures & Wheat options KCBT
Wheat, Hard Red Spring futures & Wheat options MGEX
Wheat (MIDAM) futures & Wheat (MIDAM) options MA


International (non U.S.) Futures and Options

Market Exchange
3 Month Euribor & 3 month Euribor options MATIF
90 Day Australian Bill & 90 Day Australian Bill options SFE
CAC 40 Index futures MATIF
Aluminum futures & options LME
1 Month Euribor futures Eurex
3 Month Euribor futures & 3 month Euribor options Eurex
Euro-Schatz futures & Options on Euro-Schatz futures Eurex
Euro BOBL futures & Euro BOBL options Eurex
Euro Bund futures & Euro Bund options Eurex
Euro BUXL (long bund) futures Eurex
Conf Swiss Bond futures Eurex
DJ Stoxx futures Eurex
Finland's FOX index futures and Fox Options Eurex
Nemax 50 index futures and Nemax50 Options Eurex
Euro Notional Bond futures & Notional Bond options MATIF
Euribor Interest Rate futures & options LIFFE
Euroyen futures & options SIMEX
FTSE 100 Index futures & options LIFFE
Hang Seng futures  & Hang Seng options HKFE
Italian Bond (BTP) futures & options LIFFE
Long Gilt futures & options LIFFE
Nickel futures & options LME
Nikkei Index futures & options SIMEX
All other LME contracts LME
Sterling futures & options LIFFE


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