Why not trade FX futures?

Broker Discussion Forex Brokers
1

I trade equities and am considering trading FX.

I am very curious as to why so many traders trade with “brokers” who are not brokers, but bucket shops. A genuine broker never takes the other side of your trade.

As far as I can see, FX futures are a much better option.

  • much tighter spreads
  • deal with a real market not the “broker”
  • the futures market is established and properly regulated
  • much less risk of the broker going bust.

I’d be interested to know any reason why FX futures are not a much better option.

Cheers

ST

2

I suspect leverage has something to do with it,

with the spot fx market and retail brokers have introduced mico, mini as well as the standard accounts, meaning traders can start trading with very small amounts of money.

Im sure there will be other reasons for and against, whether a broker trades aganst me or not, i dont care, someone down the line has to take the other side of the trade. Broker or Mr / Mrs X. I concentrate on my trades.

N

3

n_aftab,

Thanks for your thoughts. FX futures has plenty of leverage and also has mini contracts.

Your point about traders starting with limited capital is probably the main reason why retail traders don’t trade FX futures.

If you are comfortable trading against your broker, that’s fine. But many traders have had bad experiences. Genuine brokers cannot gain at the expense of their clients.

Cheers

ST

4

Because those brokers cater to the small forex trader, and offer the things we want. Mainly small lot sizes and small min. account balances.

I opened my first forex account with $50. If I went to a “real” broker they would have laughed at me and told me I was wasting their lime… :slight_smile:

Market makers are not evil, they are legitimate brokers who provide a legitimate service, and there is nothing wrong with using one.

5

I’m not sure what its like currently, but even as close as 18 months ago liquidity was very patchy on the crosses, even during London business hours.

You’re ok if you’re trading Euro, Yen & maybe Swiss (majors) during peak London hours, but it can plod around at certain times during the trading day. The situation regards gaps might have improved also, but you might want to be careful if an event risk influences the market whilst the futures are quiet & flopping around in the doldrums.

The spreads argument doesn’t really hold up these days with the increased & improving competition in the (retail) cash market + the transition of liquidity is smooth across the different business centers with 24/5 access.

The big advantage of futures is the regulation.
But if you’re looking to trade a variety of product with half decent liquidity, you might want to ask a few questions first & ensure it’s up to speed.

6

I plan to learn how to trade fx future. Can anyone tell me which broker should I choose and where can I get some learning resources like here? Thanks, guys!