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Chapter 2, Part III. There is quite different story with the futures market... Page 4

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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    MYTH #5 Short selling on FOREX is simpler than on futures market.


    Futures contracts, in fact, are just agreements between two counterparties to make a deal in the future. And in every deal there is always present those who want to buy and those who want to sell. It means, that futures trades act as the same as a spot FOREX trade. Each could be fulfilled at once you have counterparty. Because both of them assume simultaneous buying of one currency and selling of the other one, there are generally no rules about shorting in currency futures.

    Of cause exchange traded markets always have greater regulation and sometimes an exchange can stop trading or forbid some operations for some time.​

    MYTH #6 FOREX offers higher leverage than futures market
    MYTH #7 FOREX demands greatly lower start-up assets than futures market

    Partially True

    We’ve already discussed, that you can start trading spot FOREX even with only $5, although we do not recommend it due some reasons that we will discuss later. Obviously is that you couldn’t trade 1 lot with just $5. So it is on futures – to trade 1 lot you need at least an initial margin about 4300-4500$. But currently the CME has launched mini-contracts and micro contracts for mostly traded major pairs. A mini contract is 0.5 lot and a micro contract is 0.1 lot. A micro contract demands just 432$ as initial margin to start trading. This is 30:1 leverage, because the notional value of EUR/USD micro contract on CME is 12,500$. The usual leverage on FOREX is 100:1, but for successful trading you should not use it totally due to market volatility and money management strategy. Large FX brokers offer lower leverage 40:1 or even 20:1. So, as you can see, the difference Futures with spot FOREX is not so great. The new rules for US forex brokers bring the leverage between these two markets even closer.​
    #1 Sive Morten, Dec 14, 2013
    Lasted edited by : Feb 6, 2016
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