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Grantx intro
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Grantx intro

  #11 (permalink)
Market Wizard
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Grantx View Post
Another question; I have heard it a few times now that forex traders move to futures trading and find it more reliable and steady. What are the benefits of futures as opposed to spot forex? So far my understanding is that you can trade a wider variety of instruments, central exchange, and fixed lot sizing. What makes it more appealing to you as a trader? It seems so complicated, theta, gamma, decay curves....I picked up a book in the library the other day on futures trading techniques and I just couldn't work out what was being said.

Thanks

I never traded FX live but I looked into it - to me the single biggest advantage is that with futures you have the so-called DMA (Direct Market Access) which means you are connected to and looking at the live order book that everyone else buys and sells into.

With FX you may be looking at where the price is and a guy sitting next to you but with a different broker may be looking at a different price. You are always at somewhat of a disadvantage because the FX brokers give you a price to buy or to sell marked up with their own margin. Some are better than others but you can't escape the logic.

This is my understanding of the difference in terms of price. Of course the variety is also true. You have much more than just currencies with futures.

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  #12 (permalink)
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I never traded FX live but I looked into it - to me the single biggest advantage is that with futures you have the so-called DMA (Direct Market Access) which means you are connected to and looking at the live order book that everyone else buys and sells into.

With FX you may be looking at where the price is and a guy sitting next to you but with a different broker may be looking at a different price. You are always at somewhat of a disadvantage because the FX brokers give you a price to buy or to sell marked up with their own margin. Some are better than others but you can't escape the logic.

This is my understanding of the difference in terms of price. Of course the variety is also true. You have much more than just currencies with futures.

Dont you go through a broker when trading futures and take into account spread? How do you get access to the market and what is the most popular platform? Can one trade a demo account with futures?

Apologies for all the newbie questions.

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  #13 (permalink)
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Grantx View Post
Dont you go through a broker when trading futures and take into account spread? How do you get access to the market and what is the most popular platform? Can one trade a demo account with futures?

Apologies for all the newbie questions.

Sure, you do go through a broker when trading futures.

The difference with FX is that a futures broker charges a set amount of fees, so you always know what your cost per trade is in advance. But they don't get involved in determining where you enter the market. You decide that.

With FX there is this added 'spread' which may or may not be variable, so you no longer have a say in exactly where you enter the market. They enter the market for you at the price they offer, should you decide you want to go ahead with the trade.

The FX brokerage general mechanism, as I understand it, is that in order for you to trade, the FX broker needs to take the opposite side of your trade. This means if you buy they are the ones buying and then selling it to you. If you sell they are the ones selling and buying it from you. Which is why many people are distrustful of the whole process.


As for the most popular platform, judging by the users of this forum I'd say it's NinjaTrader. Anyone correct me if I'm wrong.

Yes you can trade demo, in fact I'd say it's highly recommended at the start.

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  #14 (permalink)
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xplorer View Post
Sure, you do go through a broker when trading futures.

The difference with FX is that a futures broker charges a set amount of fees, so you always know what your cost per trade is in advance. But they don't get involved in determining where you enter the market. You decide that.

With FX there is this added 'spread' which may or may not be variable, so you no longer have a say in exactly where you enter the market. They enter the market for you at the price they offer, should you decide you want to go ahead with the trade.

The FX brokerage general mechanism, as I understand it, is that in order for you to trade, the FX broker needs to take the opposite side of your trade. This means if you buy they are the ones buying and then selling it to you. If you sell they are the ones selling and buying it from you. Which is why many people are distrustful of the whole process.


As for the most popular platform, judging by the users of this forum I'd say it's NinjaTrader. Anyone correct me if I'm wrong.

Yes you can trade demo, in fact I'd say it's highly recommended at the start.

Awesome. Thank you for that info. A set entry fee seems mighty fine. In fx on gold for instance you never know exactly what its going to cost and one has to be careful of the BID/ASK view when looking at charts and setting stops and limits. Ive been caught setting an entry on the BID only for it to be triggered in on the ASK, 40 pips away from where I meant it to be triggered!

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  #15 (permalink)
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Grantx View Post
Awesome. Thank you for that info. A set entry fee seems mighty fine. In fx on gold for instance you never know exactly what its going to cost and one has to be careful of the BID/ASK view when looking at charts and setting stops and limits. Ive been caught setting an entry on the BID only for it to be triggered in on the ASK, 40 pips away from where I meant it to be triggered!

Exactly. In fact you also made me realise: the other big advantage is that in normal market conditions, with futures there is no spread most of the time.

What I mean by 'no spread' is that most of the time if you can buy at 1 price, you can sell at the price immediately below it (next tick).

This usually changes when big events are happening (e.g. Non-Farm Payrolls data releases, Central Banks or Fed announcement, Tier 1 data releases, etc.) but, other than that, you don't have the bid/ask spread issue you mentioned above.

Note: the above is certainly true with the most liquid and popular futures instruments (there are many), but I can't vouch for all futures products.

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  #16 (permalink)
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Grantx View Post
So you are saying that I cannot trade futures under the spreadbetting umbrella and benefit from tax exemption?


You can spreadbet on either spot prices or futures prices, and benefit from the tax exemption, if you're UK-resident.

The spreads you'll pay by doing that are typically slightly bigger than the commissions you pay for trading futures through a futures broker, so your overall dealing costs tend to be a little higher, but if you're consistently profitable, the tax saving more than compensates for that.

Spreadbetting companies are similar to counterparty forex brokers. There are good ones and bad ones. Nowadays they're well regulated, though, and the spreads aren't as big as they were 5 years ago.



Grantx View Post
I have heard it a few times now that forex traders move to futures trading and find it more reliable and steady. What are the benefits of futures as opposed to spot forex?


In my opinion the availability of volume is the main advantage, and the facility of not trading through a counterparty market-maker is another.

Whether forex futures are the best futures to trade is a different matter again.

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Thanks for all your help so far. Ive installed Trader Workstation from IB and now start the process of trying to understand what the heck is going on. This is so different to Forex! I have access to so much!

Almost spilled my coffee when I read "if you can buy at 1 price, you can sell at the price immediately below it (next tick)."
IB have a round trip of $6 ($3 to get in and $3 to get out). If I buy a contract at $10 and it moves 1 tick in my favour, that means I have made a total of $4? Am I correct?

Thanks again everyone for your help so far

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  #18 (permalink)
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Grantx View Post
Thanks for all your help so far. Ive installed Trader Workstation from IB and now start the process of trying to understand what the heck is going on. This is so different to Forex! I have access to so much!

Almost spilled my coffee when I read "if you can buy at 1 price, you can sell at the price immediately below it (next tick)."
IB have a round trip of $6 ($3 to get in and $3 to get out). If I buy a contract at $10 and it moves 1 tick in my favour, that means I have made a total of $4? Am I correct?

Thanks again everyone for your help so far

Assuming we're talking about trading 1 contract (everyone should start with 1 at the beginning), how much you make with 1 tick profit depends on 2 things, mainly
  1. The futures instrument you're trading
  2. Fees/commissions

1 tick on the S&P500 index (a.k.a the ES) is worth 12.50$
1 tick on the Crude Light oil (a.k.a. CL) is worth 10$
1 tick on EUR/USD is worth 6.25$ (used to be double until recently)
1 tick on the 30 years US Treasuries is worth a juicy 31.25$ (moves slow though)

All of the above minus fees/commissions of course.

Some of the above products have also "micro" denominations, which means the tick value is a fraction of the one stated, which can be more suitable for some beginners.

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  #19 (permalink)
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Grantx View Post
Almost spilled my coffee when I read "if you can buy at 1 price, you can sell at the price immediately below it (next tick)."
IB have a round trip of $6 ($3 to get in and $3 to get out). If I buy a contract at $10 and it moves 1 tick in my favour, that means I have made a total of $4? Am I correct?

Was just re-reading this bit and I wanted to clarify something

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


The screenshot above shows the Depth of Market (or ladder) for the ES. The 2 price levels that are highlighted by the rectangle are the inside bid and inside offer. As you can see, there is no spread between them.

This is a typical situation for most liquid futures instruments.

Having said that, if you were to buy at that moment in time, you would buy at 1933.75
  • If you immediately changed your mind and wanted to get out (assuming price has not moved in the meantime), you would sell at 1933.50 (1 tick loss)
  • If price moved 1 tick in your favour and then you got out, you would exit at break even (0 ticks gained)
  • In order for you to have 1 tick profit, having bought at 1933.75 you would need for the price to move 2 ticks upwards, so that you would be able to sell at 1934.00.

All of the above always needs commissions factored in.



Essentially there's never only one price, there's always the price at wich you enter and the price at which you exit the market.

Does it make sense?

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  #20 (permalink)
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xplorer View Post

Does it make sense?

Hi xplorer, thanks for taking the time to answer.
If I understand correctly:
  • I buy a contract at the 1933.75 level. This is just a price level, the contract per tick is $10 (to keep it simple)
  • I am now behind by the initial $10 + $3 entry commission. Making a total of $13 that I need to now recover to get to breakeven.
  • Price advances one tick. I make $10. But I'm still down $3 because of initial entry commission.
  • Price advances another tick. I'm now in profit by $7.
  • If I sell on that 2nd tick, I pay a $3 commission exit meaning I'll be up a total of $4.

Problem for me right now is that I dont even know what that depth of market chart means. I don't want to annoy anyone on this forum with such newb questions. If you would kindly point me in the direction of a basic tutorial or something I would really appreciate it. I can then come back with something a bit more intelligent to ask.

By the way, how good are those videos in the elite section of this website? I obviously don't have access to them at the moment. Are there beginners to advanced topics covered?

Thanks

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