Cash Forex versus Currency Futures

As a potential new trader, it is important for you to understand the differences between cash Forex and currency futures. In currency futures, the contract size is predetermined. Futures traders exercise leverage by utilizing a performance bond or margin to control a futures contract. “Margin” is money deposited by both the buyer and the seller to assure the integrity of the contract.

With liquidity in mind, the futures market may seem limiting because the data flow comes to a stop at the end of the business day (just as it does with the stock market), thus disrupting your perception of the market. For some traders this could lead to a certain level of anxiety. For example, if important data comes in from England or Japan while the U.S. futures market is closed, the next day’s opening could be a wild ride.

In contrast to the futures market, the spot Forex market is a 24-hour, continuous currency exchange that never closes. There are dealers in every major time zone, in every major dealing center (i.e., London, New York, Tokyo, Hong Kong, Sydney, etc.) willing to quote two-way markets. The size of this market, a $1.5 to $3.5 trillion dollar per day market gives you near perfect liquidity. Because of the advantages of sheer volume and daily volatility, the excitement of this market is unparalleled.