Compare Forex Futures Providers

The global forex market is the largest market in the world with more than 5 trillion dollars traded daily.

However, the forex market is not the only way in which you can participate in the international currency market.

There are other options such as forex futures whose market operates an average of $ 100 trillion daily. They are futures contracts in which the product is the exchange rate between two currencies.

What are Forex Futures?

They are contracts between two parties to buy or sell a specified amount of a currency at a price set at a forthcoming date. They were first made by the Chicago Mercantile Exchange (CME Group).

The most popular contract in currency futures is for the EUR / USD pair, although contracts on other pairs gradually increase.

It is worth mentioning that there are also currently E-Micro forex Futures that are contracted for a volume 10 times less than typical contracts.

Unlike forex where contracts are traded through currency brokers and banks or liquidity providers, they are traded on exchanges, which imply that the price is centralised, this being an important difference with the forex market already that the price will be practically the same regardless of the broker used by the trader.

The market that offers the most liquidity in currency futures is CME Group in Chicago, followed by NYSE Euronext, Tokyo Financial Exchange (TFX) and the Brazilian Stock Exchange, Commodities and Futures (BM & FBovespa).

The Most Used Pairs

Undoubtedly, the pairs most used are occupied by those formed by the currencies of the G10 countries and of them the majority are E-mini and E-micro contracts.

The Specifications of the Contracts

Futures contracts must include the terms in which the contract is made (evident) and among these specifications must be the size of the contract, the minimum price of increase and the corresponding value of the tick.

These specifications are necessary for the trader or investor to determine the size of his position, the capital requirements as well as the potential benefits and losses of the operation. Take for example the data for a futures contract on EUR / USD shown in the table above.

According to these data, if you trade with 1 contract on the EUR / USD purchase at 1.2568 and the price moves to 1.2570, it will represent a value of 25 USD in favour of the trader (each tick is 0.0001 (or pip) and has a value of 12.5 USD).

Termination of a Contract

There are primarily two ways in which a contract is resolved. Most traders clear their original position before the end of the last day of contract termination, i.e. take an opposite position of the same size, implying the closing of the original position and the resulting profit or loss it is taken or added from the trader’s account.

The other more common way, even to a much lesser extent, in which the contract is terminated is to keep it until the end, at which time the agreement must be formalised.

Very few contracts involve both a buyer and a seller. The most usual thing is that the trader’s counterparty is a bank or exchange house where even the purchase and sale agreed with the broker can physically take place.

Comparison Forex vs. Forex Futures

Both forex and forex futures are based on trading on exchange rates between currencies although there are notable differences between the two:

► The sport forex market has more liquidity.

► Regulation of the futures market is much stronger and more stable, and there is also a centralised “physical” market.

► They can be traded with modest leverage while forex offers the possibility of using large leverage, leading the trader to be able to obtain high profits (and also large losses).

► Trading involves paying a commission to the broker and possibly other commissions that affect currency exchange. The traders of the forex spot market, however, generally do not pay any commission to be subject to the payment through the spread of the exchange rate between the pair operated.