Spot Forex vs Futures Market Trading

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spot forex vs futures
Spot Forex vs Futures Market Trading, Best Spot Forex vs Futures Market Trading Advice

Choosing what’s best and works for one’s trading method is one of the many factors that contribute to winning the market, whether it’s on spot Forex vs futures market, etc.

This blog post (and video) will give you some pieces of advice as to what to choose between spot Forex vs futures that will tremendously help you in your trades.

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Breaking Down Our Spot Forex vs Futures Strategy

Welcome my friend to this video on spot forex vs futures currencies, spot forex trading, spot forex markets and a comparison between the two, some pluses and minuses; each have their own advantages and disadvantages. We’ll walk through the difference of spot forex vs futures today so you can make a decision on what’s best for you. But I find that there are some of these things that a lot of people don’t think about or maybe know about and you need to before you make a decision. So let’s go through some of those. First of all, let me give a side note. You can also trade currencies with exchange-traded funds and exchange-traded notes. The problem that I find with a lot of them is that the price action is a bit different and they have a lot of gaps in between the bars. Those are not technical gaps.

It’s just the way that the markets trade. So not real crazy about exchange-traded funds and notes. Even though they’re the really high volume ones surprisingly that I’ve seen for currencies. So I look at the spot forex on the left and then we’ve got the futures on the right. We’ll look at the euro today since that is such a high volume market and I also put the MACD down there in the bottom just so you can compare how the indicators would look as well as price action. Now, as you can see, I’ve got my global crosshairs on here, so we’ll just scroll over bar by bar real quick and you can see, by the way, this is a daily chart, well it gets some Internet stuff, too. But as you can see it’s pretty much the same right now.

Difference Between Forex and Futures

Not exactly, but very much the same from bar to bar. Not too much difference there. Indicator, looking pretty much the same. We’ll scroll forward here, again, go forward here so you can see in advance. So, like for example, this bar right here, you don’t get a spike top reversal bar what we call there, but it’s green and one red on the other, not a big difference. The overall price action is pretty much the same with very minor differences. Now, that’s not always true, but it is true most of the time. So let’s go down to a five-minute bar. Now, we’re looking at a five minute on the spot forex on the left and futures on the right. And as you can see, they are a bit different in here.

There are times when they will be different and the active trading times are pretty close to the same. You can trade either one of these 24 hours a day. So what are some of the big differences? All right, well first of all, even though they have generally the same price movement, but they will have a little difference, both trade 24/7, that’s number two. Now, those are similarities, but one of the big differences as number three where the futures are traded on a central exchange and the spot forex is not, and that does make a difference. In other words, people will tell you the spot forex has all this amazing volume, incredible volume. That is true, but you don’t have access to all that volume because you are not trading all throughout all of the exchanges around the world and through all the banks.

Spot Market vs Future Market – What You Need to Know

Therefore, you have the volume or the liquidity that’s made available to you by your broker. And that should be part of your consideration in choosing a forex broker as well as spot forex broker. Number two is that in general, although this has improved, the spot forex regulatory, standards, and brokers standards have not been nearly as good as that as for the futures market. Now, fortunately, we’ve seen a lot of changes in that, so that’s been good. But even here, as of late, we’ve seen a few problems with that. Keep that in mind as well. The leverage is better with the spot forex market than it is with a futures market in general, although that can vary. So one of the things that that means, well that’s a double-edged sword, right? Leverage can be a good thing. It can be a bad thing.

Basically, the more leverage you have, the more money you can potentially make with a smaller account. But on the flip side, the more money you can lose with smaller size account as well. So we’ve got to really take that into consideration, especially for beginning traders. However, I will say that the advantages of the spot forex market, especially for beginners, is that you are able to trade many lots (micro lots) and what that allows you to do is to trade with a smaller trading account. And that’s a good way after you’ve been learning trading and you’ve been paper trading, simulate trading, demo trading, whatever you’ve been doing. After you’ve got it down, good, you think your methods working, you’ve proven it to yourself in practice and you’re ready to start trading with real money.

Wrapping Up Our Spot Forex vs Futures Discussion

Well, if you trade the futures market, then you have to commit more money than you would in the spot forex market with a micro lot or many lot. So kind of cool that you can trade these platforms to market with less money to help you ease into the psychology of having to trade with real money. And I think that’s one of the advantages there.

One of the things that a lot of people don’t tell you is that at least here in the United States, is that there may be tax benefits to trading the futures market over against equities that would include exchange-traded funds or the spot forex market. So I am not a tax professional. I’m not giving you tax advice on that. I’m just saying that that’s a possibility and to talk to your CPA or a tax professional about that. This can potentially make a big difference at the end of the year as to how much money you actually end up putting in your pocket.

Rubber Band Trade Strategy

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BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.

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