Why Trade Currency Futures vs Forex?
When compared with spot forex, currency futures trading offers considerable advantages for traders. From transparency on a regulated exchange to the absence of uncertain transaction costs, here are the top 3 reasons why trading currency futures is preferred by many traders over forex.
Transparent & Level Playing Field
There isn’t a centralized exchange when trading forex which leads to limited market transparency. Even though forex is an electronic market, orders are often handled by a “dealing desk.” This includes a middle man who processes the forex orders. This leads to inherent challenges in ensuring a fair marketplace for all participants.
When trading futures, trades are cleared through a regulated central exchange like CME Group or Eurex. This means there is no middle man and trades are posted publicly in real-time, including detailed time & sales information. Futures markets also operate by the FIFO rule — first in first out. This ensures a level playing field for all futures traders.
Accurate Volume Data
Many futures traders rely on volume data when using technical analysis tools, such as Volume Profile, to make strategic decisions. Since futures markets are centralized, volume data is available for all traders. With the absence of a centralized exchange when trading forex, volume data is not readily available from all forex exchanges.
Up Front Pricing
When trading traditional spot forex, variable spreads make price uncertain and the transaction costs can vary with every trade. When trading through a futures broker, all transaction costs are fixed and upfront. The cost of doing business is known from the beginning.
These are just some of the many benefits of trading currency futures over forex.
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