Difference between forex and currency futures dubai
Read on to discover some of the key characteristics of each investment opportunity. Access to the Market: The Forex market is famously accessible, and with 24 hours per day, 5 days per week access, there is virtually always time for a trade. The weekend markets are also technically open, although weekend trading is something that most Forex traders forego. The options market is tied to the stock market, so trading is essentially limited to normal trading hours 9am to 4: Everything about Forex is quick.
When conducting Forex trades, everything happens almost immediately. Trades are executed straight away, with none of the delays that have become commonplace among options trades, or within many other markets too. When it comes to the speed of trading, Forex has a distinct edge.
This is a key concept that can make a big difference in terms of profit potential. However, leverage must be approached in a responsible manner in order to minimise over-exposure and significant losses. With currency trading, leverage levels can range from 50 to times the initial investment, while options-related leverage ratios are often smaller.
This means that Forex investors have the ability to make significantly greater profits in a short amount of time, all with less upfront investment. However, the leveraged investment must be carefully watched in order to minimise disastrous results.
Forex trading, on the other hand, operates within a marketplace that is essentially a group of traders and computers who create a web that bypasses marketplace norms. Which investment option delivers the edge when it comes to risk management?
This really depends on the type of trader you are, and how you decide to play the game. Forex traders must enact position limits, which means that the online trading software will automatically create a margin call when the margin amount exceeds the value of the trading account in dollars.
This is an automated safeguard that ensures that the trader keeps losses in check. In addition, keep in mind that with Forex you can determine the amount of time between trades, whilst options only provide a specific time period in which to trade before the options expire.
Here is one area where other investment opportunities find it quite difficult to compete with the Forex marketplace. From Monday to Friday, currency traders have around-the-clock access to a network of other traders who can facilitate currency swaps. This contrasts sharply with the futures market, which relies on the opening and closing bells of the stock exchange to bookend the trading day.
If important news comes in from Japan, Europe, or virtually anywhere around the globe while the US futures market is closed, the next morning may present market volatility for futures traders. In contrast, Forex traders have the ability to react immediately to any global events that may cause a shift in currency value.
To cut to the chase, the Forex market is the largest and most liquid marketplace in the world. To the trader, this means that currency positions can be liquidated and stop orders completed without much concern for slippage with the exception of trading within severely volatile markets. The Forex market does not work within a specifically regulated and centralised marketplace.
When trading in futures, commissions and other related fees are simply part of the course, and must be considered when creating a financial plan based on your investments. While there is always going to be some level of risk within any investment opportunity, the process of investing in currencies through a reputable trading firm automatically provides some risk mitigation in the form of position limits. Online trading platforms will automatically create a margin call if the predetermined margin exceeds the amount of trading capital within the related account — thereby minimising losses and protecting your investment.
When investing in futures, you may be liable for significant deficits if the position is liquidated at a loss that is larger than what you had in your related account. Though the concept of leverage can be both a good thing and a bad thing, having access to high leverage positions can enable you to make serious profits with a minimal upfront investment.
Forex traders often allow up to a to 1 leverage ratio, though most new traders should start with a much lower ratio to hedge against the potential for losses. As in most things, there is no one winner when it comes to determining which is better — Forex or futures.