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FOREX vs Futures : Where To Invest

February 6th, 2010

Our trendy futures market originated in the 19th century when farmers began selling contracts to deliver agricultural merchandise at a later time. They did this to aim to anticipate market needs and to smooth the provision and demand throughout the off-season.

The futures market has changed dramatically since then, in current times the futures market is now not restricted to agricultural products. This worldwide commodities market currently includes such things as manufactured product and financial merchandise furthermore agricultural products. A futures contract is a guarantee {that a} certain product will be sold at a fastened value on a sure date.

When speculators play the futures market there is no expectation of the merchandise being delivered and the particular merchandise aren’t even important. It’s truly simply the contracts themselves that are traded and the price of those contracts is in constant fluctuation.

In every futures contract there are two positions an extended position and a short position. The short position is crammed by the vendor and the long position is the buyer. Futures accounts are settled on a daily basis.

As an example a farmer enters into a contract with a grocer to sale him 1000 bushels of corn at $ten a bushel. At the top of the required time the contract is settled, if this market worth of corn is at $9 a bushel the farmer can understand an further profit of $1000 greenbacks on the contract and the grocery store can have lost the identical amount. In this situation the farmer currently sells his corn at $nine a bushel on the open market however his loss is covered by the take advantage of the contract. The grocery store now will buy his corn for $9 a bushel however in point of fact he is still paying $10 a bushel as a result of of the price of the contract. If he had not entered into a contract he could have bought his corn for $nine and saved $1000. But if the price of corn had risen considerably to $thirteen a bushel he would have saved himself $3000.

Speculators strive to guess the direction of the market fluctuations and make a profit by buying and selling contracts.

FOREX

The FOREX market has various blessings over the futures market. Since it’s the largest financial market in the globe it’s way larger than the futures market. The FOREX market is also so much more fluid, that makes it easier to execute stop orders with very very little slippage.

The futures market is sometimes solely open 7 hours on a daily basis where as the FOREX exchange is open 24 hours every day five days a week. This additional time makes the FOREX market more fluid and permits traders to require advantage of this by trading at any time instead of watching for the markets to open.

There are not any commissions in FOREX trades; the brokers build their profit through the spread. This can be the gap between the currency obtain price and selling price. In futures contracts the trader should pay commission fees on every transaction.

Due to the extremely high volume of trades within the FOREX market most transaction are executed almost immediately, this permits for higher value management of your trades. In future contracts the worth the broker quotes will be from the last transaction and your price may be considerably different.

In the futures market debits are a continuing chance due to daily fluctuations. The FOREX exchange has several built-in safeguards in the trading system that helps defend the traders.

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What The Forex Markets Did Today

December 16th, 2008

12-16-2008

The Fed today cut the main US interest rate close to zero for the first time ever in an effort to revive the credit markets and promote more liquidity. The rate was lowered to somewhere between zero and .25%. Well which one is it? Anyway, all was done in an attempt to loosen up credit markets to give a boost to the economy as they’ve done before. And it worked, as the DOW ended trading today up 359 points from yesterday. But as you probably well know, as interest rates of a given currency go down, so does the value of said currency against all the others. And sure enough the USD went down 300 pips against the Pound, 200+ pips down against the Aussie and about 300 more pips down from the Euro. The dollar dove against every major currency, and even the recently surging Japanese Yen. And all with just Ben Bernanke’s few wrords. It didn’t even matter what the charts and indicators looked like.

What is always amazing to me about the Forex market, is how long the price trends last. The Euro against the dollar shot up for its gain for a solid two hours before hitting resistance. And it still shows no signs of slowing. With tight stop losses and careful trading anyone could have taken advantage of some portion of today’s move, even a novice trader. Today was an example of the market’s predictability. But remember, it is very seldom that it is that predictable. Remember to always stay on top of your forex indicators(stochastic, mac d, Williams)while trading, but always remember to see what’s going on in the world news before you trade.

Check out CMS’s Forex update for 12-16-2008: