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Chapter 2, Part III. There is quite different story with the futures market... Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 14, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    And now we will turn to particular qualities of futures market and its differences from FOREX.

    MYTH #1 FOREX market is greatly more liquid than futures market…


    Yes, we’ve talked about it already. Approximately $1.5 Trillion on spot FOREX market versus $100 Billion of average daily trading volume of FX futures on Chicago Mercantile Exchange (CME) in 2009.​


    MYTH #2 … that’s why FOREX has higher price certainty and orders execution than futures market.


    The major question here is as follows: does this liquidity really lead to faster and sharper execution of your orders? Not quite. I give you just an example that could really happen on the FOREX market, especially if you trade large volumes. It not necessary will happen, but it could. When using the CME electronic futures contracts, price doesn’t have to “trade through your limit order” for you to get a fill—you simply get filled as price trades at your order level. And what about spot FOREX brokers, what they really could do to your order? They can fill you, in fact, at any quote that is suitable for them. Why? Because the FOREX market does not have the central place, where all orders are moved to by market participants, and you can’t prove that this is not “market” price, when you get filled with 30 pips slippage, for example. Although this is very rare if you use a good broker, it still could become a reality, just because of the structure of the FOREX market. That’s not what happens when you trade the CME electronic currency futures. All bids and offers are placed in one market and you have direct access to all the bids and offers. Where your order gets filled depends on what orders are available, not upon whether someone else wants or does not want to fill your order. On spot FOREX rather, your broker (for example some small bank or little brokerage firm) could decide not to fill your stop loss order, just because it has not received quotes from its own counterparty (larger bank) and so on. When the quotes come in, the market could be far away from the stop price and you will be filled with slippage. This is not a typical situation for small accounts, but the structure of the FOREX market does not exclude that. And you should know that this, in fact, is possible.​
    #1 Sive Morten, Dec 14, 2013
    Lasted edited by : Feb 6, 2016
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