How does Online Day Trading Currency Futures at the CME differ from the FOREX spot market?
Online Day Trading of currency futures or the spot FOREX market with a good day trading system can be very challenging, yet a very rewarding and profitable way to earn an income and build wealth over the long term. SPOT FOREX [http://www.invictatrader.com] (foreign exchange) markets have been around for a long time since banks existed. Currency futures markets are fairly new but growing rapidly too with the onset of twenty four hour round the clock electronic trading on the CME's Globex platform.
It is very important to understand the difference between trading the spot forex market over the counter and trading the currency futures traded on the Globex platform from the CME Group or it is very easy to lose money while learning to trade either. Spot forex trading is done over the counter (OTC) through almost any bank, while currency futures are traded on a central exchange like the CME Group with the availability central counter party clearing, which offers peace of mind to some traders. Trading currency futures at the CME are definitely a lot better suited to the online day trader who is usually working with a small amount of capital in his or her trading account along with low margin requirements also.
In the over the counter markets there are several layers for an online day trader [http://www.invictatrader.com] to peel off to be able to get the benefit of the same price an institution or hedge fund manager might get. In the futures markets there is a central counter party doing all the clearing which takes off the credibility issue of the traders trading these contracts right away off the table. This is the biggest advantage available to the small online day trader as he or she will get the same price a large fund or institution will pay for the same currency at any particular moment. In the OTC forex markets you have the flexibility of trading an odd dollar amount which you cannot do in the futures markets as they have fixed size contracts that trade on the CME futures exchange. To overcome this issue the CME has started offering different size contracts available to traders trading different account sizes.
And with futures trading available almost 24 hours a day now, the appeal of the forex market that trades 24 hours a day is not so appealing any more to the online day trader. The other biggest advantage of trading the currency futures contracts is the commission a trader pays for trading them which is normally around $5 for a round turn per contract. Forex trading usually has a minimum spread of 2 to 3 pips on each side of a trade which translates to $40 to $60 for every round turn per lot. Plus in forex a trader is never sure of the price he or she is paying as the price shown to a small trader is only an average of prices traded at several large banks and institutions. On the other hand the price at the CME exchange is the only price at that particular moment in time available to all trading at that time, whether it be a small trader, a mutual fund manager or even a large institutional trader.
Because of the advantages outlined above it is best for an online day trader to trade the most liquid currency futures contracts at the CME like the Euro, Japanese Yen or even the British Pound until they have an account big enough to be able to trade directly with the big banks and financial institutions on a bank's platform itself. Also the dealers in the OTC forex markets have an unfair advantage over the online day traders with small accounts as they always get a better price than what they offer to their clients and they know where all the stops are also.
It is very important to understand the difference between trading the spot forex market over the counter and trading the currency futures traded on the Globex platform from the CME Group or it is very easy to lose money while learning to trade either. Spot forex trading is done over the counter (OTC) through almost any bank, while currency futures are traded on a central exchange like the CME Group with the availability central counter party clearing, which offers peace of mind to some traders. Trading currency futures at the CME are definitely a lot better suited to the online day trader who is usually working with a small amount of capital in his or her trading account along with low margin requirements also.
In the over the counter markets there are several layers for an online day trader [http://www.invictatrader.com] to peel off to be able to get the benefit of the same price an institution or hedge fund manager might get. In the futures markets there is a central counter party doing all the clearing which takes off the credibility issue of the traders trading these contracts right away off the table. This is the biggest advantage available to the small online day trader as he or she will get the same price a large fund or institution will pay for the same currency at any particular moment. In the OTC forex markets you have the flexibility of trading an odd dollar amount which you cannot do in the futures markets as they have fixed size contracts that trade on the CME futures exchange. To overcome this issue the CME has started offering different size contracts available to traders trading different account sizes.
And with futures trading available almost 24 hours a day now, the appeal of the forex market that trades 24 hours a day is not so appealing any more to the online day trader. The other biggest advantage of trading the currency futures contracts is the commission a trader pays for trading them which is normally around $5 for a round turn per contract. Forex trading usually has a minimum spread of 2 to 3 pips on each side of a trade which translates to $40 to $60 for every round turn per lot. Plus in forex a trader is never sure of the price he or she is paying as the price shown to a small trader is only an average of prices traded at several large banks and institutions. On the other hand the price at the CME exchange is the only price at that particular moment in time available to all trading at that time, whether it be a small trader, a mutual fund manager or even a large institutional trader.
Because of the advantages outlined above it is best for an online day trader to trade the most liquid currency futures contracts at the CME like the Euro, Japanese Yen or even the British Pound until they have an account big enough to be able to trade directly with the big banks and financial institutions on a bank's platform itself. Also the dealers in the OTC forex markets have an unfair advantage over the online day traders with small accounts as they always get a better price than what they offer to their clients and they know where all the stops are also.
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