Is it not a mystery that the forex market is the most massive financial market globally, with more or less $ 6.6 trillion trading volume in just a single day? Today, we will unlock a part of that mystery since we will talk about some of the reasons why a trader would prefer forex instead of futures.
Liquidity and trading volume
As we have mentioned, the forex market boasts a $6.6 trillion daily trading volume. It is safe to say that it is the most liquid market globally if it is also the world’s most massive financial market. We can liquidate positions and execute stop orders without slippage, except, of course, when the market is super volatile.
If we compare the futures market’s size to the forex market, it would already see a defeat when it only has a $30 billion daily trading volume.
The operating hours
The forex market rarely sleeps as it is open 24 hours a day. A trader can choose whether they want to trade in in the Tokyo/ Asian, New York/ North American, or London/ European trading session.
Brokers open shop at 5:00 PM EST Sunday in Sydney, 7:00 PM EST in Tokyo session, 3:00 AM EST in London session, and 8:00 AM EST in the New York session. The New York session closes shop at 4:00 PM EST. It is a 24-hour operation because the Sydney session opens shop right before the New York session closes. If extreme news from UK and Japan arrives simultaneously when the US futures market is still close, this a chaos in the next day’s opening.
Even though things are getting better for the futures market, the trading volume is still thin compared to the forex market.
Commissions and extra charges
The forex brokers will charge zero to very minimal commissions since they gain profit through the bid-ask spread.
As for the futures market, the commission may be a hefty price.
A guaranteed price
A guaranteed price and swift execution is a typical scenario for the forex market. The futures and equity market is quite the opposite since there is no price certainty. The quoted price that a broker gives might not be the price when the contract gets filled. The broker possibly got this quoted price from the most recent trade.
The possible risks
A trader may not eliminate risks in a forex trade just like any other trading type, but it can be avoided through the spot forex market. Thanks to the technology, a margin call is automatic when the required margin is exceeded the account’s available capital. It is a plus that open positions close immediately on a typical day. If it is not an ordinary day because of fast conditions, positions tend to close when exceeding the stop loss level.
Now, let us talk about the futures market. During liquidation, you may notice that the loss might be a tad bit higher than the gains. You are also obliged to pay the account deficit.
The bottom line
We now understand why some people prefer the forex market instead of the futures market — and even the stock market! The forex market have a lot of advantages and benefits that other markets cannot offer.