Forex VS Futures

Trading Discussion
1

Hello all. I’ve been exploring day trading as a possible new career. I don’t have $25,000 lying around so I can’t trade stocks, so I’m waffling back and forth between futures and Forex.

I was first interested in Forex but while I was looking for online courses I came across a good review for Day Trading Academy, whose focus is mainly on S&P E-Mini futures. The price of their course is pretty steep, but it seemed to be highly recommended, so I decided to look in that direction. But as I continued to research I came across some information that kind of put the kibosh on DTA for me.

Back to Forex. I was first interested because of the low opening balance requirement and (blush) because being a foreign currency trader sounds kinda sexy. Also because Forex is a 24-hour market, I can trade in the evening without having to adjust my schedule at my full-time job. So I went back to Forex, found Babypips.com, and started working hard at learning.

As I’m going through the school and following the threads, though, I gotta say I ain’t crazy about the whole zero-sum thing. It would seem to severely limit my profit potential, especially when I think that I’m pitting myself and my little laptop against the big Banks, hedge funds, and investment firms. And the Bots.

Now, I’m looking at day trading, not swing. So I’ll be looking at short-term trades that I’m going to have to get into and out of quickly. Today in one of the threads I came across this quote from another Forum member here:

"Most if not all professional traders suggest futures trading if the strategy is dependend on order execution. Futures trading is way better regulated and the price comes from a central exchange.

So bottom line is futures trading would suit best then with a short term system, but not everybody is playing with huge sums of money so then fx spot market is an option."

So I’m trying to decide if I’m barking up the right tree or not. Like I said, I was initially attracted to Forex because it doesn’t take a lot of money to get started. But if I plan to have six or seven thousand dollars to open my account with anyway, I can do Futures with that.

I’d like to get a lively discussion going here among traders who have experience in both markets. Pros and cons kind of thing. Is one easier to learn them the other? Does One require more or less time during the day trading to make the same amount of money? Everything I’ve read on profit potential, which admittedly isn’t much, only says that you can make money in both markets. But I can’t seem to find anything more specific than that. Anyone care to weigh in on any of this? I appreciate any thoughts you can give me based on your experiences. Thanks.

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Hello @musicguy1967, this is an interesting post. There are not too many people here who trade both forex and futures. I happen to trade forex, futures, stock options and futures options, so my first comment is that there isnt any reason why you cant do both.

I dont agree that futures are better than forex for short term trading or order execution is different. Both have very liquid markets, both can be short term traded, both can have similar spreads and liquidity/illiquidity, and futures arent any more professional than Forex. Both markets have institutional and retail traders.

You may not realize this but there are Forex futures that give you the same exposure as trading Forex. For example the future /6E is the EURUSD and 1 futures contract is equal to 1 Forex lot.

There are pros and cons, similarities and differences for each vehicle, but none are what you mentioned above. Its a large topic that you need to research out.

If you are just getting started trading then the futures market is not the place you want to be. The nominal values you are trading will be too large since mose Forex futures are $100,000 or $125,000 worth of notional. With an FX broker you can trade down to $1,000 worth of notional granularity. That is definitely the place you want to be until you have traded for a number of years and have a rock solid, consistently profitable trading strategy.

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Thanks for the response and the info. Yeah, I’ve heard about Forex futures, haven’t really looked at them closely. I was actually thinking about the S&P e-mini if I were to go with Futures. Everybody in that realm seems to think it’s the stuff. I’m probably going to stay here in Forex, but I’m just trying to gather as much information as I can while I’m collecting capital. Thanks again, have a great day.

Anyone else? :grin:

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@musicguy1967 Keep in mind the e mini sp500 represents over $130,000 of notional value. These are huge products that you dont want to trade until you have a large ammount of capital and you have a tried and tested strategy.

I would highly suggest you go through the Babypips school here, open a Forex account, spend time in the forums here, and maybe even start a journal in the Trading Journal forum to track your progress and ask questions to the community as you go.

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welcome to Babypips

nothing personal, but your total inexperience is showing there

$6,000 - $7,000 isn’t nearly enough to trade futures, as a beginner

i know there are some people on trading forums and even some people writing on websites (usually selling something) who say it is, but they’re wrong

the e-mini S&P moves at $50 per point

if you trade it, for fast intraday trades, with a 10-point stop, your risk exposure would therefore be $500 per trade

with a $6,000 account, that would be more than 8% of your account

way too high

i’m assuming from your post that you’ve looked around some websites and maybe read a few trading books, so you’ll already know not to risk more than 1% of your account on each trade?

with a $6,000 account, that would be $60 per trade risk, as a maximum, and i think you’ll see that with an instrument whose movements represent $50 for a single point, that isn’t really going to be possible?

the beauty of forex is that you can trade very small position-sizes

not so with futures - there’s nothing less than 1 contract

you’re not

sorry

1 Like
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I think you’ll find CFDs and Spreadbetting occur on other instruments as well :slight_smile:

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Hmmm Kind of like saying “no offense,” isn’t that? You know, "No offense, but I’m about to say something offensive. But you’re not allowed to be offended because I said ‘no offense.’ " :wink:

Yes, I’m quite aware of my inexperience. That’s why I’m on here asking questions and trying to learn. Yes, I was given the impression you could trade futures with just a few thousand dollars and still manage my risk intelligently. Incorrect, huh?

I am curious, though, if anyone out there who has done both would like to comment on which one is easier to make money with. Assuming you have the same account balance with each one. And also assuming you are equally proficient in both.

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Friend, markets are markets, one is not “easier” to make money than another. You will quickly find out that they are all difficult and may take years of losing and learning, which is why we are all encouraging you to trade with a Forex broker where you can practice with very small notional amounts and focus on learning rather than making money, which you will certainly not be able to do for a very long while (years?).

@flamingoproxy is right, the notional in futures is so large that you wont be able to properly manage risk. I wouldnt even think about futures until you have 100k to trade with and are consistently profitable. You are a long ways away from that. Given your inexperience you should spend the next year simply studying and learning about all of this, trade management, risk, markets, trading strategy, trading psychology, etc, etc.

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Ok, so I misspoke. I should have said less difficult. And I’m not ignoring anyone’s advice. As I had said previously, I most likely will stay with Forex. I’m just trying to get a feel for it, is all. And yes, I’m aware it will take quite a bit of doing to become profitable.

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Spot Forex is a less complex trafing vehicle than futures.

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Wow. If that’s true I’m glad I steered away from Day Trading Academy. They’re claiming they can teach you to become profitable trading the S&P E-mini in a few months with just a $2,500 opening account balance. I knew their whole schtick sounded fishy…

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First stay away from anyone who claims they can teach you to be profitable. Only you can make that happen. On top of that, nobody is mastering trading in months, this takes years.

Second, an emini future requires $5,600 in maintenance margin and most brokers add additional margin requirements like TDA’s $10,000 minimum balance futures requirement, so the “trade the emini with just $2,500” isnt even possible. Either you are misreading it or they are selling hot air.

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LOL possible I misread, but considering Marcello’s flashy videos trading with his shades and his laptop in exotic locales, I think I’m gonna go with hot air.

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Lol, sounds like it. You will learn far more from the free information on this website and the BP school than any ultra-expensive salesy website, that I can promise you.

Just a little scenario of what could happen if you tried to day trade a single emini future. You have a shiny new $10,000 trading account. You wake up in the morning, ready to test out your newfound daytrading skills. You check the charts and see a good opportunity to go long and scalp 10 handles out of /es for a a quick $500 profit. You enter the trade and are up 5 handles and you blink and the market suddenly gaps down 10% in a flash crash fashion. You get margin called and not only lost your entire $10,000 but are negative $5000 and have to pull cash out of a credit card at 30% interest to save your butt.

This is a pretty mild scenario, real life situations have been far worse. Dont trust some online salesman. Its your hard earned money, learn all of this for yourself and fully understand what the risks are.

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Mmm appreciate that. I gotta say, though, as much as I think the Pipsology School is a valuable learning tool, even there you get kind of a carefree, “ABC, 123, let’s get pippin’ and make some green” vibe. And as you say, anyone who tries to take something difficult and make it sound easy has an agenda of their own. Who owns this site, anyway? Is it Forex.com? I get a lot of responses to my posts from them…

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BTW I appreciate you taking the time to converse with me. Same to everyone else who has contributed. I’ve already gathered that there’s no substitute for doing your own work and hashing it out, but it’s still nice to get helpful input from those who have been at it for a while.

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You may be surprised that the more difficult you make things, the less profitable you are. I trade completely naked charts with no indicators or anything else, and I wouldnt have it any other way. The information here on BP is purposefully simple so you can digest it, make use of it, and make it your own.

I have no idea who owns BP. I am sure if you message an admin your questions, they can answer.

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18

Slapping hand on table

I KNEW IT!!!

I’ve been going through the fifth grade with all these different indicators and it’s making my head swim. I keep thinking, all this gobbledeygook only tells me what has happened in the past. If I just learn how to read the charts well I don’t need half a dozen squiggles over top of them to tell me that something may or may not happen. Seems to me the candlesticks are all I really need.

Well, that, and a WHOLE lot of practice…

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Lots of people here use indicators so I dont want to alienate 95% of the community. The point being indicators arent inhantly bad, but trying to use them all, and/or thinking success comes through complexity is. You may read about a dozen different indicators and find success with 1 or 2. You may decide to master those and make them a part of your trading style. Nothing wrong with that and a common path I see a lot of people here take.

Or you may not, and find you prefer just candlesicks.

In any case, the only right way is the way that works best for you.

1 Like