What similarities and differences can you find between the Foreign currency trading (Forex market) or the Currency Futures Market?
A 24 – hour market
As compared with futures market and unlike it, currency market is a 24 – hour market. It is open 24 hours a day, 7 days a week and 365 days in a year. But a currency futures market is open only during its business hours, so that the traders have to wait to trade in the futures market unlike the forex market and it’s boring if you have to wait to trade when you have bucks to invest.
Superior liquidity
Forex market is a high liquidity market. It has more than $1.3 trillion turnovers a day which is very different and is unmatched with the futures market. Both the trading volume and transaction sizes are huge when compared to the futures market. The futures market has an average of $30 billion a day, which is unmatched if done comparison with forex and also it has a less trading volume.
Very simple and easy price quotes
Regarding the time factor, the currency futures trading has added obstacle of interest rates between several currencies, the forex market doesn’t need any sort of adjustments of calculations in the future and deliberation for the interest rate of deals in the future.
High execution quality and speed
A forex trading platform has a high trading ratio as compared to the currency futures market so that a forex trader can experience high execution quality and speed. As the currency futures market has lesser trading volume and liquidity, that’s why the future market is unable to offer rapid execution.
Higher Leverage
You can get a leverage of up to 100:1 in forex market whereas you get a leverage of about 2% when you are talking about the currency futures market.
Forex markets offer tighter bid to offer spreads
You can get tighter bid to offer spread in the forex market when compared to the currency futures market.
Consistent Margins
In forex trading, traders have one margin rate for trades placed 24 hours a day. Your margin requirement can be less than 1 percent depending on the trade size. Depending on the market volatility, the margin rate may be different in currency futures trading. It can be higher at the night as the market is closed and the brokers are always looking for an opportunity to cover their risks.
Higher Risk
One of the most noticeable factors in the foreign currency market is that it has a huge risk. It is the riskiest of all investment vehicles and is appropriate mostly for the experienced traders and who have a good knowledge regarding the FX market> Higher leverage and volatility found in this market increase the traders risk of loss manifold. There’s a potential of losing more; maybe your original sum of investment too. So that, it’s better advised to do a good research before you enter in the foreign currency trading system or the FX market.