Make money with trading options49 comments
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Over the past few months of teaching with Online Trading Academy , a question has come up more and more often with new students. Futures or spot forex? Believe it or not, nearly every decision we make in trading much like life has potential positive things and potential negative things associated with that decision. Both a positive and a negative. Being a well-rounded trader using multiple asset classes allows us to take advantage of every type of market, being trending or sideways channeling.
The most significant difference between a futures account and a spot forex account are the actual things that you can trade. With a futures account, you can trade stock market indexes, bonds, metals like gold and copper, cattle, wheat, even currencies!
However, your choice of currencies is a bit limited. When considering the choices available for trading with a spot forex account, in the United States we are limited to trading just currency pairs some foreign countries allow trading in metals in their forex accounts. A second very significant difference between the two markets is the amount of actual dollar risk it takes to trade them.
More contracts would obviously add more dollar risk. There are several e-micro futures contracts you could trade to make your dollar risk even less, but these are only on a few currency pairs.
In addition, the volume on these contracts is pretty low. When trading in the spot forex market, trading micro lots at most brokerage firms will allow you to trade with stops that actually cost you as little as one dollar! Yes, you read that right. Yet another major difference in these markets is the cost to trade, based on the margin required to buy one contract in futures or a lot in spot forex.
The cost to purchase one contract in the futures markets varies by several factors: Some lots are much cheaper, some are more expensive.
So there you have a few of the big differences. The very basics are: With a spot forex account, you get to trade only currencies, but more of them. In the futures market, generally your expenses will be higher when measured by dollar risk, amount needed to trade, and cost to do the individual trades. Spot forex then has the benefit of being cheaper to trade and learn the skills. As stated earlier, every decision you make in trading has potential positives and negatives, and it is up to you to decide which is better for your circumstances.
Disclaimer This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter.
Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.