Futures trading in the Forex market is a very profitable field. Trading futures requires looking at different aspects compared to regular Forex trading. Investors look into areas like history and objective views. Other aspects that set both fields apart are fees, margin necessities, liquidity, practicality, and the technical and informational resources available for each service.

Regular Forex vs. Futures Trading
Futures trading is said to be more viable then regular Forex trading. The futures market is generally more liquid and is often said to be more profitable for traders. It is however more complicated to analyse then regular currency trading. One of the main advantages with futures trading is that there are no commissions and the depth of information available from agencies and available websites.

Futures Trading in Currencies vs. Futures Trading in the Stock Market
In the stock market it is necessary to engage all trading through a broker or agent in matters of transactions and also receiving price quotes. Futures trading in Forex however have no middleman or agent so these costs are absent. This in turn increases investor’s margins and decreases losses if incurred. These extra brokerage fees do skim away at investor profits and can add up to a significant amount for high volume traders.

Investors are advised to make portfolios to track past investments and track profits on various trades done. This serves as a tracker to allow investors to speculate on future investments.

Both futures generally work in the same manner. The key difference is that Forex futures are not traded in a centralized exchange, instead it is available in many different exchanges around the world. The majority of Forex futures are however done through the Chicago Mercantile Exchange and its partnering brokers.

Investors who wish to preview past market trends can visit Forex charts which aid in forecasting future results. Trend forecasting can never be 100% accurate and returns are not always guaranteed but this is common for any kind of trading. This is why it is important for investors to continually monitor “predicting oscillators” in the charts to anticipate swings and fluctuations.

Despite there being no commission or transaction fees traders and investors will still lose a bit of their margin in the spread. The spread is the percentage difference in the buying and selling price of currencies. This is common in both regular Forex Trading and Forex futures trading. However Forex futures trading is still considered the most lucrative form of trading according to research.

Both futures trading in stocks and currencies have their upsides and downfalls. Research and assessment show that futures trading in currencies are far less volatile then stock market trading. This, both reduces the chances for high profits or high losses. Risk-averse traders may find more comfort in Forex futures trading as a result of this. It is also shown to be more profitable in the long run compared to the stock market. It is also used by many to hedge currency fluctuations.

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When starting out in Forex currency trading, there are two basic approaches to analyze the Forex market. These two approaches are Fundamental analysis and Technical analysis. The main elements of these Forex trading styles are explored below.

Technical analysis is the most likely choice for a beginner Forex trader. It focuses on the study of price movement through charts. These charts are used to identify trends and patterns. With this information, they then predict what is most likely to happen in the future, using past events. The theory behind technical analysis is that all market fluctuations is reflected in the currency, thus by examining price action, all trading decisions can be made. Being able to identify trend in the early stages in the key to technical analysis

For example, a basic chart shows the past relationship between any two currencies the investor has chosen. It shows the peaks and troughs in the relationship, and after experience a chart should help the investor predict future currency movements.

Some of the indicators used when applying technical analysis are resistance, support, moving averages, Bollinger bands, trend lines and pivot points. When using price based indicators there are few recommended by traders. They are the relative strength index (RSI), commodity channel index and stochastic oscillator.

If a beginner, this is probably the least likely style to use. Fundamental analysis consists of examining economic, social and political data. They also look at macroeconomic indicators such as inflation rates, economic growth rates and interest rates. The key idea being fundamental analysis is that if a country is doing well, this should also mean their currency is doing well. Most beginners choose not to take on fundamental analysis immediately is because it is a long gruelling process with vast amounts of research to be done. As well as that, an overload on information is possible.

Part of fundamental analysis is examining anything that can affect the currency of a country. For example, news coverage, GDP (Gross Domestic Product) changes, political events, inflation predictions, current events, government reports, retail price data, current events and changes in interest rates.

The impact of economic conditions in a country can affect the value of their currency. For example, government budget deficits or surpluses. The market can react negatively to government deficits whereas the market reacts positively to government surpluses. Another economic condition that can affect a country’s currency is trade. For example, if the trade flow for a country suddenly reduces, it can have negative effect on the currency of that country. Analyzing and trading currencies based on fundamental analysis is only good for a long term currency investor.

Market psychology and trader perceptions can influence the market in a variety of ways. This article has explained the differences in the two forex trading styles available, choosing which is best for the trader, is up to their wants and needs.

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The Forex Market:

Trading national currencies in a market is known as FOREX. The Forex market is a place for individuals, businesses, financial institutions, the public sector and nations to make a profit off the varying currency prices. This is done through judging which currencies rise and fall against other currencies. These currencies are traded in pairs. This generally means that every currency will pair against every other currency and have a price. For example if you are trading between sterling pounds and US dollars and both currencies fall 10%, you are in the same spot as you were before. You wouldn’t make a loss if you used either currency to buy the other because their ratio will be similar.

The Forex Market however is not as complicated as the stock market. Although, a greater deal of knowledge is required as you don’t study companies, but rather you study nations. The Forex Market is an over-the-counter market. This means it a global market with no centralized trading area. The Forex Market will be available to anyone twenty-four hours a day, five days a week.

Since the Forex market is not widely publicized, not much information is readily available. Thus, not many people will fully understand it. As well as that, since the profit margins are extremely small, many people will not think entering the forex market is worth the risk.

When two currencies are traded it is known as a currency. This is how the currencies are trade in the Forex market. There will always be a set of currencies that are more popular to trade with. These are high volume currencies and it is unnecessary to study all the currencies as each requires a great deal of study. The main idea behind successfully trading in the Foreign Exchange Market is to create a strategy that works for the investor.

The Stock Market:

The stock market is one of the more traditional ways to create a profit from an investment. The stock market can produce double digit profits compared to the return from bonds, but it is not the easiest market to take part in. Trying to achieve 20% to 30% gains in short periods of time creates a lot of risk as well as uncertainty. The investor would have to perform vast amounts of research, which would still not be a guarantee. This is because it is never known when a company would decide to fold or go bankrupt.

One of the main advantages of the stock market is that a person with little knowledge about it can still make a profit. For example, knowing that blue chip stocks don‘t loose value, would allow the person to invest in it and still create a profit. Another added advantage of the stock market is that it is good for long term investing. Investment trusts and unit trusts are the most popular long term investments.

The differences between the stock market and forex market are significant. The advantages and disadvantage of the stock market and the forex market have been explained. Choosing which one to participate in is up to the trader. It depends on their wants and needs, and the amount of time they wish to invest into trading.

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Since advances in technology, anybody with an internet connection can take part in trading foreign exchange on the Forex market. The following are some reasons why a day trader trading in the stock market would benefit by switching into Forex day trading.

The forex market is open 24 hours a day, 5 days a week unlike the stock market and commodity markets who have set trading hours of only eight hours a day. The longer hours gives a trader more chances to trade in the market. In addition to that, traders can trade any time which is convenient to them through an online account.

The forex market has lower trading costs as well. It has no commissions paid to brokers, low transaction fees and no exchange fees. In comparison, the stock market and the commodities markets incur fees and commissions which have to be paid to the traders, dealers and brokers. This leaves lesser profits for the day trader at the end of the day.

Day traders must always be aware of their capital in hand and how liquid they are so they can act instantly when they see opportunities. Non-liquid buyers will always have cash flow problems and will be too late to act on opportunities. Forex investors or traders looking to act instantly on trades can do so due to the high-liquidity of the Forex market. You are after all playing currencies and nothing is as liquid as currency. It is easy for investors and trader to enter and exit trades without any sort of delay. Timing is very important for day traders as most securities are volatile and a small change in price can result in big gains or losses. This is one of the most attractive features of Forex day trading.

A day trader that is participating in the forex market has the ability to earn income through referrals. The trader can have arrangements created with Forex brokers so that they can earn referral commissions by introducing other people to their Forex broker. Even though this is extra activity, it still gives day traders an extra source of income by getting them to refer their friends to join.

The stock market is open to outside manipulation by companies or stock brokers. However, manipulating the forex market is near impossible to do so. Even if the central back were to intervene, it would be short-lived.

Another advantage of switching to the forex market is that there is more leverage. For example, $100,000 US dollars can be bought for around $10,000 leverage when bought through margins. This allows for higher returns, but with less risk.

The features mentioned above make participating in the forex market an appealing source for potential traders choosing to trade as a full time job. The global foreign exchange market trades in excess of a trillion dollars a day. Due to the massive market size, it shows there is considerable money to be made through the forex market

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In the last 5 to 10 years, the forex market has become popular but only 10% of traders have managed to achieve consistent profits. This is because forex traders have chosen not to implement price behaviour into their research. Technical indicators are a part of forex trading systems. This is because they allow the trader to see different facets of price. Technical indicators consist of data points marked on a chart. These marks are from a formula used on the prices of currency pair.

When trading decisions based only on technical indicators are done, they don’t tend to give correct results. An example of this is, say there is a MA crossover, which creates a long signal. This happens just as the market reaches a resistance level. There is no reason to take the signal if the price then bounces back of the resistance level. This shows that the market does not want to go up. As well as that, regardless of the MA crossover, the market will continue to fall down. This does not mean that technical indicators are not necessary though, they are an important part of trading. It is recommended, that the combination of technical indicators and pure price action should be used when deciding to trade or not. This will create a higher chance for profit.

Because price behaviour influences how an indicator will act, it should be taken into consideration when it comes to making decisions. Price action is what most results from technical indicators are based around. An example of this is, if the price has gone up enough to make the short period MA crossover the long period MA it creates a long signal. Most beginner traders see this as the MA crossover making the price go up. However, this is not true, when it comes to price action it is the opposite way around, the MA crossover signal happened because the price went up. This is why traders should be aware of price behaviour.

There are two ways in which to create a trading system that is full-proof. Each trader has different wants and needs, which is why there isn’t one system that can fit all the traders out there. Thus the trader should create a trading system that suits them best. As well as that, by researching about various trading styles and technical indicators it allows the trader to find a system that suits them best. It is also recommended that from each of the technical indicators chosen, the trader should know exactly how they each work and when to use it in their analysis.

Lastly, the trading system has to have price action included in it. Thus, the trader will only take short signals if the price behaviour tells them the market wants to go down, and long signals if the market wants to go up. After the trader has created their trading system the most crucial part to achieving their full-proof trading system is to follow it rigorously. However, before applying the system into a regular forex account, the trader should test it out with a demo account, where no real money will be lost or gain. Once comfortable the trader can move on to a mini forex account. A mini forex account allows the trader to participate in the market but only with a maximum capital of $15,000. Finally, once being consistently profitable, the trader can create a regular account and use their trading system there

By following the guidelines above, the creation of a full-proof forex trading system, higher rates of return is possible.
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