Futures vs. Forex

Futures

  • Fixed Capitalization – Only so many contracts issued making liquidity and execution much more cumbersome.
  • Limited Participant – Only so many players to create market.
  • Limited Trading Hours – One central trading floor.
  • Higher Commissions – Pay to have order executed, plus a spread.
  • Expiration – On every contract must make a decision or pay legal obligation.
  • Premium Erosions – Closer to expiration the more time value erodes from price of contract placing a deadline for decision.
  • Fast Markets – Due to events they could be a lopsided market and not enough buyers or sellers to match orders forcing specialist to close market and price to be adjusted. Fast Markets cause bankruptcies for investors

Forex

  • No Fixed Capitalization – All the money in the world is traded.
  • International Banks – Provide liquidity.
  • No Central Trading Floor – Market open 24/6.
  • No Commissions – Lower overheads for market to trade because its web based. The FCM and RB are compensated for their services through the spread between the bid/ask prices.
  • No Expirations
  • No Premiums
  • No Fast Markets – Always buyer or seller because of size of market. Superior Liquidity