Foreign Exchange Vs Futures
The foreign exchange market is the biggest and the most liquid market of the world. This market basically deals in trading various currencies of the world. Future trading on the other hand deals in contracts to purchase or sell a foreign currency in a specific date in future, but the price for which is set today. In other words, a future trading is just similar to forward exchange deals which are tailor made to the client requirements and needs for the amount of funds and due date of deal. Foreign exchange market and future market differs in many ways. The information on foreign exchange vs futures given in this article will let you know its differences.
Given below are some of the differences between foreign exchange and futures:
Non-stop marketForeign exchange market is a non-stop market. This facility allows traders to execute trade in their own chosen time whether its morning, noon or night. This flexibility in timing enables the s traders to react to the immediate news happenings by trading immediately. However, such facility is not available in the future market which only works during business hours and not for 24 hours a day. This is one major difference between foreign exchange and futures.
Superior liquidity in foreign exchange than futuresComparing foreign exchange and futures, we realize that foreign exchange offers greater liquidly than the future market. Foreign exchange market has a daily turnover of about $ 1.5 trillion. It subsequently absorbs a large trading volume and the transaction sizes are huge too, in comparison to future market. However, futures market, provides only limited liquidity with a lesser trading volume.
Foreign exchange uses simple and easy price quotesThe information on futures vs foreign exchange further reveals that foreign exchange uses simple and easy price quotes than futures. In future trading, price quotes have added complications of time factor and interest rates between various currencies. However, foreign exchange market does not require such adjustments of future calculations and consideration for the interest rate of future deals. This however, distinguishes foreign exchange from future trading.
Commission free tradingFutures trading charges trading commissions, exchange fees and clearing fees. While trading in foreign exchange market charges no commissions, exchange fees or clearing fees accept the spread which is the difference between the ask price and the bid price. This also distinguishes foreign exchange from future trading.
High execution quality and speed in foreign exchangeTraders in foreign exchange market can experience high execution quality and speed due to its high trading ratio as compared to future market. Future market does not provide instant execution or price because of lesser volume of trading and liquidity. Yet this is another difference between foreign exchange and futures. Expand your knowledge of trading by imbibing the above information on foreign exchange vs futures.