Futures vs. Forex 2

Tighter spreads than Futures and Commission free trading…



This is true but you are not paying less. Watch the video “Futures vs. Forex – Spreads” and you will see exactly what I mean. To put it bluntly…the spreads are HIGHER in the Forex market and this more than goes over any commissions you pay to a broker.



Earnings are not reported to the IRS…



I’m not an accountant. I can tell you that if you try and hide money you will probably get caught. The Forex is designated to be a foreign investment. However, if you are a US citizen and you live in the USA, you will probably be subject to taxation on these profits.



Just an FYI…



This last year (2007) I got a statement in the mail from my Futures broker Open E Cry. None of my Forex brokers sent me a statement. After talking to them and to my accountant I was sure that I had to claim those profits as income. If I didn’t do it I would have been considered a tax evader.



24 hour market…



This is true for both spot 4X and currency futures. They are open for trading in the US Sunday evening @ 16:00 EST and close Friday afternoon @ 16:00. The brokers usually refer to the stock market’s hours of Monday through Friday, 9:30 – 14:30 EST and group futures along with that. The big Dow, S&P, NASDQ and other major indicies that are traded in the pit are open during these hours only. As for currencies, the times for spot 4X and Futures are the same.



Free data feed, charts and easier technical analysis than Futures…



All of this is not true. I don’t mean that the charting and data is not free. I mean that there are many futures brokers that offer free charting and data feeds as well. Let’s tackle this one by one…



Data Feed…



Most reputable futures brokers get compensated from the commission only. They have no motivation to skew the data or manipulate price in any way. They make money whether you do or not. That is the way a true broker works. The price you get is what they get directly from the exchanges. There are no ifs, ands or buts about it. It is a true market without an interrupting force.



Since most spot 4X brokers are market makers there is a great deal of price manipulation that can take place. They make money from the spread and they also profit from what you loose. A market maker gets the data from the exchanges and banks just like futures brokers do. However, since they are not regulated the same as futures brokers are, they have much more room to do what they like to the price they give you. Brokers with fixed spreads have it set so you will see a minimum spread of say 3 on the GBPUSD when their quotes give them .5. This gives them what I consider an unfair advantage over the retail trader. Also, during news times this goes absolutely insane. Just pull up a few broker platforms during a news report and you will see exactly what I mean. Their prices are different and vary enough to cause great suspicion. For more info on how a market maker works read my document on brokers.



Charts and Technical Analysis…
This is a flat out lie. If anything charting from futures brokers are more true to the real market price than from a 4X market maker. Since there is no motivation to manipulate the price on the futures side, the price shown in the charts is a true life quote and not what your 4X market maker wants you to see.

Technical analysis is the exact same. Fibonacci, Gann, ABCD patterns, trend lines, pivots and any technical indicator out there are all the same in ANY market you trade. The only thing that is different in certain situations is volume which can give futures traders a HUGE advantage in that market.

Some market makers will say that trading the futures vs. spot is different. Really? Then tell me which one of the below charts is the GBP Future and which one is the GBPUSD…


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As you can clearly see they are nearly identical.


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Next let’s look at the USDJPY vs. the JPY future…






Ah ha! We’ve finally got a difference…or do we? What you have here is a nearly exact mirror image of each other. When the USDJPY goes up the JPY Future goes down. The difference in the two is that the JPY future increases when the value of the Yen increases. In the USDJPY, since the JPY is the secondary currency, when the Yen increases in value the USDJPY price will decrease. Same principle but the charts are backwards. It’s not a problem…it’s just a little different.

Well that’s about it for the Futures vs. Forex debate. I hope this little bit of information has helped and educated you as to the real differences in the two markets
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Good fortune to you!



كاتب المقال : Elbert Wade Box, Jr.