Hi there. Im a South African living in the UK, and have been trading forex for the past 12 months now.
I am currently signed up with FXCM using their marketscope platform. I have never traded a futures contract before and Id like to learn about it.
Apologies for kicking off my intro with questions..... heres my first one:
Is it the same as a forex trade ie. find a position on the chart, enter a long or short, and close the position out seconds/ minutes/ hours later?
Welcome to FIO! If it's futures you want to learn to trade you have certainly come to the right place. It is good to see another South African on the forum. I am a South African still living in South Africa
In terms of the question you asked, yes, it is exactly the same basic process. There are differences in margin requirements etc. One of the biggest differences you will notice is that they trade on a central market. This gives you all sorts of awesome goodies that you do not get with trading forex, like accurate actual volume traded etc.
If you would like to learn more about trading futures, becoming an Elite member of this forum is probably the best money you would ever spend on your trading education, especially for someone starting off.
Good luck on the journey!
The following user says Thank You to Popsicle for this post:
Thank you Popsicle and rocksolid68 for the warm welcome.
My 2nd question is you have 'Emini ES' and 'ES' as your favourites futures. Does that mean you only trade one index/future/contract/thing... (sorry I dont know what to call it), or do you trade currency pairs, commodities etc. as well? In forex, I trade across a few different pairs as long as they are not directly correlated. So if Im long Gold Ill try not to be long on USD at the same time.
Also, I had a look at the cmegroup E-mini NASDAQ 100 Futures Quotes website, and it has different months with last change prices. I really have no idea what Im looking at there. Do I have to hold a contract to maturity?
Also...if the exchanges are centralised, do I have to trade with a particular provider to get access to a certain market? So for instance here in the UK if I want to trade S&P500 and also USDZAR futures (is there a futures for this pair?) then can I go through a single provider?
Im going to look into the elite option once I get a better understanding of futures trading and whether its for me.
Both Emini ES and ES are the same thing. It is a futures contract over the S&P 500 equities index. At the moment I only trade that, but I am slowly also getting into trading the Crude Oil Future (CL). There are also futures for Gold, Silver, Wheat, Soybeans, Natural Gas, US Treasury Bonds etc. etc.
A future is basically a contract to buy a specific asset (e.g S&P 500 equities index, Crude Oil) at the given price in the future.
Having said that, if you buy a futures contract, you don't have to hold it to the end. In fact most of the traders on this forum are intraday traders. They buy and sell during the day and ensure that they hold no position when the market closes. In other words their position is flat. In that aspect it works exactly the same as forex trading.
You can use one provider to get access to most of the most popular futures, and there many.
As far as currency pairs go, I have not seen a future for the USDZAR yet, but there are futures over currency pairs available. The 6J futures contract is a future over the JPYUSD pair for example.
Futures works in something called ticks. It is analogous to pips in Forex but they have a fixed $ value.
The ES for example moves in ticks of 0.25. This means that the price will move from 2182.00 to 2182.25 to 2182.50 when moving up for example. Each tick is worth $12.50. In other words if the ES moves from 2182.00 to 2183.00 it has moved 4 ticks. This makes up a one point move in the ES which is worth 4 ticks x $12.50 per tick = $50 for every contract you are holding.
The tick value and increment are different for all futures contracts but they operate on the same principle. Crude oil (CL) for example moves in ticks of 0.10, each worth $10. 10 ticks make up one point, so a move in Crude Oil of one point would be worth 10 ticks X $10 per tick = $ 100 for each contract you hold.
Hope this helps.
The following user says Thank You to Popsicle for this post:
Fixed - for example if you were trading (CME) Euro Futures (which correlate with the EUR/USD you know from forex), as far as I know the smallest position-size you can trade is one contract (kind of like "one lot" in spot forex), and that's $6.25 per tick, for the Euro.
Similarly the e-mini S&P (called "ES") is $12.50 per tick, per contract; the e-mini Nasdaq ("NQ") is $5 per tick; oil ("CL") is $10 per tick.
You can trade multiples of those contracts, but not subdivisions of them, as some counterparty forex-brokers with high-granularity of position-sizing allow. But those aren't really trades, per se, because the "broker" is your counterparty.
To trade 10p/50p etc. per tick ("pip") you need spot forex somewhere like Oanda where you can trade small lot-sizes, or spreadbetting, or CFD's.
If you're in the UK, a possible attraction of spreadbetting might be the fact that no income tax or capital gains tax is charged by HMRC on profits, and you can spreadbet on spot prices and/or future prices. But this isn't futures trading, per se, of course.
The following user says Thank You to Tymbeline for this post:
Very interesting. Thanks for explaining the lot sizing.
The spreadbetting is definitely an attraction for me due to tax reasons. So you are saying that I cannot trade futures under the spreadbetting umbrella and benefit from tax exemption?
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.