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daedalus

Futures Vs. Forex

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Have you ever watched the way the tail and the dog are manipulated sometimes GJ.

 

I got interested in Volume on Currency Futures back when I used to trade EUR quite a bit. In the end I decided that it had one value -- I could spot one particular manipulation where futures where used to distort cash prices (and then the rubber band was released).

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In terms of the wholesale markets it's very simple. Cash (spot) FX is the dog. Futures are the tail. Tail doesn't wag dog in this particular case. End of story.GJ

 

And retail FX is ... a flea on the dog (dog's name is Spot!).

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Have you ever watched the way the tail and the dog are manipulated sometimes GJ.

 

I got interested in Volume on Currency Futures back when I used to trade EUR quite a bit. In the end I decided that it had one value -- I could spot one particular manipulation where futures where used to distort cash prices (and then the rubber band was released).

 

Relationship doesn't equate to cause and effect mate. I am comfortable standing by my comments.

 

gj

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FX has less manipulation than futures? Seriously?

 

:confused:

 

I've seen it all here now.

 

:roll eyes:

 

Well if you trade FX on an ECN like IB IDEALPRO, then I think it's fair to say there is no manipulation at the execution level. As for the market making/liquidity being sent into IB, that I don't know for sure.

 

Just in case you were confusing the manipulation of spot FX FCM bucket shops to that of the manipulation of the floor/pit in Futures, which I sort of think are two separate issues.

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It's not just trading in front of news. There are many other ways forex is way more manipulated than futures:

  • Giant random spikes to take out stops
  • If a trader is too profitable, execution slows down
  • Unable to withdraw money if account is up
  • Absolutely no regulation
  • Trading against the broker, who controls the quotes

 

I really dont know how you actually believe futures are more manipulated than forex. The CME and your broker are just facilitators of trade, while you are literally trading against the broker in forex, who just happens to control the quotes. That doesn't seem like its on the up and up to me. I have never heard of one trader say that they cant get executed on globex because they are too profitable.

 

And to think, that there are a group or traders that just go around hunting stops is laughable. Now price might seem that its gets attracted to your stops and then reverses, but it's ludicrous to think the pros/pits traders are out to get you. Its the function of where you are putting your stops. If you put them in obvious areas, well, then how can you say they are stop hunting? Even if they are, there are still many more ways forex is rigged against the retail trader.

 

Mostly agree with all the FCM related points, but again FX retail spot can be done through a real ECN like IB or HotSpot and then these are no longer concerns.

 

As for professional future traders hunting stops, apparently Paul Rotter claims to have done just this but also says that once traders learned not to place their stops at obvious places (round numbers?) it made this harder to do. So I guess it does/did happen at one point.

 

But that said, there are still bigger market microstructure issues, such as CB intervention that can happen at any time without any warning and which can move spot prices. I don't know if I'd call this being out to get the little guy, clearly its for the purpose of measured economic strategy for various nation states, but it is certainly a more volatile market than the FX futures one would think.

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Seriously, mate.

 

How do you think using an unregulated, uncentralized ECN is safer than a regulated currency futures market like the IMM at the CME?

 

Do you really know who is behind the market moves at your ECN? That price feed is manipulated like a bookie moving the betting line in order to attract bids.

 

Simple enough really.

 

Maybe some forex pros will come aboard to dispell this myth once and for all.

 

This would be very hard to do on an ECN. In IB's case, their liquidity providers are known and are major banks. They are clearly listed on their site. Strangely though HotSpot keeps this secret.

 

That said, to really manipulate the price feed on an ECN would invite arbing, and that arbing would keep the spreads very close to the rates on EBS and other ECNs. I am pretty sure the rules of market microstructure would ensure this.

 

However these rules fail when working with FCMs because their agreements prohibit arbing and scalping and enable them to basically do whatever the heck they want. They can quote you that the dollar is worth less than the Peso and guess what, your account is blown out. They could literally do this with no reprisal at the legal level.

 

IB IDEALPRO could not do this from what I can tell, or more accurately their liquidity providers could not do this. If an expert here can say otherwise I am all ears.

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Use brokers who provide

'Customers Segregated Accounts' with Banks

and keep check on the credit rating of the particular bank

 

This is what I do with the money market account to transfer deposit to brokers affiliated trading accounts

 

I am not sure if this is adequate though.

 

Guess I'm real late to this thread..

 

If you want the best protection with retail spot fx, use IB's IDEALPRO. They are insured through Loyd's of London and have a high credit rating from S&P (for whatever that is worth, if you've been paying attention to counterparty ratings lately in this industry at the banking level you know what I mean).

 

But seriously, they are as safe as you can get with retail FX and as transparent as you can get. HotSpot is 2nd, but they are too secretive about liquidity, and don't insure their accounts.

 

I believe because IB accounts are futures/stock accounts they are effectively covered by laws that require insurance to a certain amount. I am probably badly bungling this explanation so someone with better knowledge can step in.

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I'll borrow a prior quote of yours to relate to this.

 

"But news events aren't exactly manipulation IMHO and anyone stupid enough to get caught in that situation deserves to lose their money."

 

STUPID is the common denominator. If you don't have a hedging plan you have no business trading futures. Thank god I was paper then and saw what could have happened without a proper business plan! The vehicle makes a difference, but the plan is what can make or break a trader. :)

 

How are you hedging your FX Future trades? Using negatively correlated spot pairs? Or I would think the better choice would be FX options from the same place (CME)?

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differences between forex and futures trading, futures traders often find it a natural transition into forex trading. Market liquidity, pricing structure, available leverage and open hours are just some of the differences.

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differences between forex and futures trading, futures traders often find it a natural transition into forex trading. Market liquidity, pricing structure, available leverage and open hours are just some of the differences.

 

:confused:

 

Differences?

 

Market liquidity - futures have plenty of volume

Pricing structure - if anything, futures are more transparent than FX

Leverage - you can control an ES for $500, how much more leverage could one possibly want?

Hours - can trade around the clock if you wanted, but just like FX, has high volume areas

 

I'm missing what you are calling differences.

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May I ask a silly question?

 

since spot and fx futures prices follow each other, are the support

and resistance levels to watch the same?

 

For example: when trading spot forex, some currency pairs show a tendency to rebound to round numbers more than others. If a "spot" pair rebounds when hitting a round number, what happens to the correspondant futures fx pair at the same moment?

 

should one treat Fx Futures as "Spot prices + forward points" for charting and trading purposes?

 

thank you,

 

cheers,

 

johnlucas

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May I ask a silly question?

 

since spot and fx futures prices follow each other, are the support

and resistance levels to watch the same?

 

For example: when trading spot forex, some currency pairs show a tendency to rebound to round numbers more than others. If a "spot" pair rebounds when hitting a round number, what happens to the correspondant futures fx pair at the same moment?

 

should one treat Fx Futures as "Spot prices + forward points" for charting and trading purposes?

 

thank you,

 

cheers,

 

johnlucas

 

 

I used to trade the 6E(EURUSD future) and 6B (GBPUSD future) quite bit. Many of my trading opportunities occurred early (betwen 6am and 8am EST). So, often times I would be in a position during an 8:30 am EST news release. It was not uncommon for the spot FX price to swing 50, 100, 150 ticks in the seconds and minutes after the news, while the price of my futures contract barely wiggled. In other words, while the Futures and Spot price will track one another, they will not always move lock step.

 

The futures may sell at a premium or discount to the spot - do not think it is always or even most commonly at a premium to the spot market.

 

I am a breakout trader, so to speak, and breakouts on the futures tend to be more reliable than breakouts on spot (this does not mean that false breakouts do not occur on futures, of course they do). Usually, the spot breaks out, and if the move is sustained, the futures will follow. Often, the spot breaks out from S/R and quickly reverses, while a look at the futures chart wil show that the futures never did chip away at the corresponding S/R level. I should add that this was my experience when I primarily traded futures only. I have only recently started paying much attention to the currency markets again as result of my daughter's interest. I do not know if the spot still tends to lead on breakouts or not, though if I had to bet based upon what I've noticed the last month or so, I'd have to say that most of the time, spot will break before futures, though, as in everything, not always.

 

Best Wishes,

 

Thales

Edited by thalestrader

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No surprise this forum is filled with futures cheerleaders. Probably lots of those people earned a good living from those futures exchanges trading their other products, and like a GM or Chrystler employees they are very proud of their company and drive only American made cars when in fact everyone knows it is of lower quality. As for me, I must admit Forex is much better choice than futures. I opened a $300 account with Oanda earlier this years. Forex is especially good because you get to control the tick size like grains of sand. YOu can make each tick be very little money with a micro account, or alot of money with the huge leverage that you are offered. This is not so with Futures, which are more like rocks or bricks. In other words, each tick is like a big chunks. That may be ok with some, but for beginner traders who don't want to spend lots of money learning the market, it can be too much. Also, the grains of sand trait of Forex makes it easier to trader longer time frames, which will require smaller position size.

 

The beauty of Forex is that it goes both ways, it give you very high leverage too, so you can have the big chunks as well.

 

And Forex is more liquid. It is the most popular market, traded all over the world.

 

I'm not too concerned with the less regulation in Forex. Forex is becoming more regulated. And Oanada seems to be a trustworthy company and comes highly recommended by traders.

 

Here is info from Oanda site about it's reliability:

Why Trade Forex Online with OANDA? - OANDA FXTrade

 

OANDA has offered online currency exchange information since 1996 and forex trading services since 2001.

OANDA is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM) and is a member of the National Futures Association (NFA # 0325821).

 

Financial regulations require OANDA to maintain capital reserves at specified levels. OANDA’s reserves exceed these levels many times over.

Our investors are industry and technology leaders confident in OANDA's technology and its use of that technology to redefine currency trading.

We manage risks with sophisticated hedging algorithms and strict hedging policies. Any net exposure above predefined thresholds is hedged with third-party banks at the current market spread. Hedging mechanisms are real-time, fully automated and always on.

OANDA is never exposed to customer losses.The FXTrade platform automatically closes positions with a margin call before a customer’s losses can exceed their balance. Customers will never owe us money (we guarantee it in our customer agreement).

OANDA is a trusted partner in the forex market, providing forex rates used by financial institutions and the big four accounting firms. Our FXTrade technology is a proven white label forex platform for financial institutions.

Edited by AbeSmith

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No surprise this forum is filled with futures cheerleaders ... As for me, I must admit Forex is much better choice than futures. I opened a $300 account with Oanda earlier this years. Forex is especially good because you get to control the tick size like grains of sand. YOu can make each tick be very little money with a micro account, or alot of money with the huge leverage that you are offered. This is not so with Futures, which are more like rocks or bricks. In other words, each tick is like a big chunks. That may be ok with some, but for beginner traders who don't want to spend lots of money learning the market, it can be too much. Also, the grains of sand trait of Forex makes it easier to trader longer time frames, which will require smaller position size. ... [/i]

 

Hi Abe,

 

Very good points indeed (and I mean that about your entire post and not just the part I quoted above).

 

I was answering another poster's question concerning the relationship between futures price and spot price, and I did not intend to come across as a futures cheerleader.

 

I too think forex offers a great opportunity, especially for the beginner. I have no problem with the bucket shop business model. My daughter is learning to trade using forex microlots. I think folks coming to this forum who are considering trying to learn to trade would be fortunate to stumble across your post and to give a small micro or mini account a try. After all, if you cannot double a $25 microlot account without blowing it up, you will likely not be able to double a $2500 or $25000 futures account without first blowing it up.

 

Best Wishes,

 

Thales

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I opened a $300 account with Oanda earlier this years. Forex is especially good because you get to control the tick size like grains of sand. YOu can make each tick be very little money with a micro account, or alot of money with the huge leverage that you are offered.

 

It's much easier emotionally for most people to blow 10 $300 accounts than it is to blow 1 $3000 account, and frankly that is why micro lots exist. I'm not saying micro accounts are bad, I'm just saying that it can also be looked at as a negative. It really depends on the mentality of the trader, just like anything else.

 

I think that micro accounts are usually advertised as something for inexperienced traders, but really they are better for traders who have at least some experience, because it is still possible to lose the same amount with micro accounts as it is with normal lot size, or futures, but the perceived risk is less (to a newbie). I have read threads on Babypips and other forums where someone claims to have turned a $25 micro account into a $25,000 account, and I don't doubt them, but I think that for every person who has done that, there are 100 or 1000 who have blown up many micro accounts. Of course, this is the same as saying that for every 1 person who is a profitable trader in general, there might be 100 or 1000 who are not profitable. So my point is that, just as Thales said that if you can't be profitable with a micro account you probably can't be profitable with a normal sized account, the opposite is true. If you can't be profitable with a normal sized account, a micro account won't somehow make you a better trader.

 

And as an aside, to Thales: This post is not directed at you regarding your daughter's forex account. That is none of my business, just to be clear.

Edited by diablo272

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Hi Friend Diablo272,

 

Great points!

 

It's much easier emotionally for most people to blow 10 $300 accounts than it is to blow 1 $3000 account.

 

I would also add that it is easier on the wallet to lose $300 repeatedly over several years than to blow a $3k grubstake inside of a few months.

 

So my point is that, just as Thales said that if you can't be profitable with a micro account you probably can't be profitable with a normal sized account, the opposite is true. If you can't be profitable with a normal sized account, a micro account won't somehow make you a better trader.

 

While you say, "the opposite is true," I imagine what you mean is that "the opposite is also true." In which case, you and I are in complete agreement. My point was not that a micro account would make you a better trader. My point was that for the new and typically underfunded trader, a small account offers an opportunity to learn your craft using real money (rather than sim or demo trading, which, in my opinion, is useful only to learn how to use a particular platform, and teaches nothing about trading) while risking, say $3.00/trade instead of $300/trade.

 

It really depends on the mentality of the trader

 

And this, of course, is what will determine whether a particular trader ever becomes consistently profitable or remains consistenly a loser to at best marginally profitable trader.

 

Best Wishes,

 

Thales

Edited by thalestrader
spelling

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I would also add that it is easier on the wallet to lose $300 repeatedly over several years than to blow a $3k grubstake inside of a few months.

 

Good point, I didn't give much consideration to time while writing my previous post.

 

While you say, "the opposite is true," I imagine what you mean is that "the opposite is also true." In which case, you and I are in complete agreement. My point was not that a micro account would make you a better trader. My point was that for the new and typically underfunded trader, a small account offers an opportunity to learn your craft using real money (rather than sim or demo trading, which, in my opinion, is useful only to learn how to use a particular platform, and teaches nothing about trading) while risking, say $3.00/trade instead of $300/trade.

 

Yes, that is what I meant to say, and I agree with what you're saying here as well.

 

Have a good weekend!

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And Forex is more liquid. It is the most popular market, traded all over the world.

 

 

AbeSmith I don't disagree with your post I have a couple accounts with FX bucket shops (actually they are spread betting accounts...same thing except no tax). The complete flexibility in position sizing is nice.

 

It is worth pointing out that most retail traders get no access to the underlying liquidity as you are essentially taking a bet with your bookie. This doesn't bother me (or most other people I imagine) but I do know people that have had difficulties when there size has increased.

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