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Questions between FX/Futures.
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Questions between FX/Futures.

  #1 (permalink)
Trading Apprentice
Colby, KS
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: ES
 
Posts: 11 since Jul 2015
Thanks: 5 given, 1 received

Questions between FX/Futures.

Bare with me, my toes are barely touching the water still. From what I can find on my own, I want to make sure i'm understanding this correctly. At first, I was head over heels into the futures market, es of course. I've learned a lot so far, but recently checked into forex a bit and I've got some questions.

I'm using ninjatrader as a reference to prices/fees, using ES futures and USD/EUR forex.

To trade 1 contract of ES I am automatically out at least $3.40 fees with 1 tick equaling $12.50 profit/loss.

1 trade of USD/EUR is literally like $0.10 fees total, is that right? With 1 pip equaling $8-10 profit/loss. (Could be completely wrong, I'm a lot newer to the forex stuff)

With this being said, it seems forex is a waaaaay better value with a higher profit chance per trade(given the trade is peachy haha), but may be more volatile.

Just trying to get some feedback if i'm researching and thinking this correctly. I really am trying to do this myself and not ask for handouts. Thanks in advance!

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  #2 (permalink)
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  #3 (permalink)
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Phoenix AZ
 
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Abrockman View Post
Bare with me, my toes are barely touching the water still. From what I can find on my own, I want to make sure i'm understanding this correctly. At first, I was head over heels into the futures market, es of course. I've learned a lot so far, but recently checked into forex a bit and I've got some questions.

I'm using ninjatrader as a reference to prices/fees, using ES futures and USD/EUR forex.

To trade 1 contract of ES I am automatically out at least $3.40 fees with 1 tick equaling $12.50 profit/loss.

1 trade of USD/EUR is literally like $0.10 fees total, is that right? With 1 pip equaling $8-10 profit/loss. (Could be completely wrong, I'm a lot newer to the forex stuff)

With this being said, it seems forex is a waaaaay better value with a higher profit chance per trade(given the trade is peachy haha), but may be more volatile.

Just trying to get some feedback if i'm researching and thinking this correctly. I really am trying to do this myself and not ask for handouts. Thanks in advance!


The value is derived from a robust trading plan that the trader actually follows. Without that, trading something that is less expensive than something else just means going broke slower.

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  #4 (permalink)
Trading Apprentice
Colby, KS
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: ES
 
Posts: 11 since Jul 2015
Thanks: 5 given, 1 received

Going broke slower means a lot to anyone new I'm sure haha.

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  #5 (permalink)
Elite Member
Leeds UK
 
Futures Experience: Intermediate
Platform: FXTrade
Broker/Data: Interactive Brokers, CapitalSpreads, Oanda
Favorite Futures: GBP/USD
 
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Abrockman View Post
To trade 1 contract of ES I am automatically out at least $3.40 fees with 1 tick equaling $12.50 profit/loss.

"ES" is the mini-S&P 500 futures. This is derived from a stock index, and not intrinsically connected with forex trading at all.

Possibly you mean "6E"? That's EUR/USD futures (and a tick represents $12.50, as you say).

These may help:
http://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500_contract_specifications.html
http://www.cmegroup.com/trading/fx/g10/euro-fx_contract_specifications.html


Abrockman View Post
1 trade of USD/EUR is literally like $0.10 fees total, is that right? With 1 pip equaling $8-10 profit/loss.

Nope - there's spread as well?

With spot forex, on one "lot" of 100,000 on EUR/USD a single pip movement represents $10.

Edited to add: here's a recent thread discussing "spot forex" and "forex futures" which will help you - it starts off with essentially the same question that you're asking (I think): https://futures.io/forex-currency-trading/28489-currency-future-vs-spot-currency.html


Last edited by Tymbeline; July 19th, 2015 at 06:46 PM.
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  #6 (permalink)
Trading Apprentice
Colby, KS
 
Futures Experience: Beginner
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Favorite Futures: ES
 
Posts: 11 since Jul 2015
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Thanks for the response, I actually was separating the futures index and forex entirely, not looking at the 6e at all. Simply the difference between trading ES only or Forex EUR/USD only. And from what i've seen on forex, the spread values(commission as I think of it, a fee for trading) shouldn't be more than $0.10 unless i'm understanding that wrong. Now where I see the benefit in this is more on the losing side of things.

1 tick loss of ES =12.50+$4-$5RT=Around $16. Whereas a 1 tick profit is only $8.

1 pip loss of EUR/USD will simply lose however much it is, or gain however much. Minus the much smaller spread fee.

I can't really find an accurate amount of what 1 pip EUR/USD actually is, it depends on lot sizes somehow but that's about all I know. Trying a practice account soon.

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  #7 (permalink)
Trading Apprentice
Colby, KS
 
Futures Experience: Beginner
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Favorite Futures: ES
 
Posts: 11 since Jul 2015
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COMMISSION SCHEDULE 1
EUR/USD - GBP/USD - USD/JPY - USD/CHF - AUD/USD - EUR/JPY - GBP/JPY
Trade Size 1,000 10,000 100,000 1,000,000
Per Side $0.04 $0.40 $4.00 $40.00
Round Turn $0.08 $0.80 $8.00 $80.00


This is from FXCM what i'm basing my Fees off of, a total of 8 cents for a RT of a 1,000 lot EUR/USD trade.

Edit; Forgetting the spread entirely, but still with 1 pip gain/loss the RT is just a whopping $0.11 with a .03 spread on the EUR/USD

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  #8 (permalink)
Elite Member
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Abrockman View Post
I can't really find an accurate amount of what 1 pip EUR/USD actually is, it depends on lot sizes somehow but that's about all I know.

It's $10 per pip, on 1 lot: if you trade a standard 100,000 lot of EUR/USD, then each single-pip price-change wins/loses you $10.

On a mini-lot of 10,000, that would be $1 per pip, and on a micro-lot of 1,000 it would be $0.10 per pip.

Spot forex is normally traded on leverage. For example, if you use leverage of 50:1, then you'd need $2,000 to trade a lot, $200 to trade a mini-lot or $20 to trade a micro-lot.

If you trade through a retail broker such as Oanda, you can vary the size of your trade in units as small as single dollar, if you want to, rather than sticking to whole numbers of lots/mini-lots/micro-lots, and for some people the flexible position-sizing available is an advantage of spot forex over forex futures.

Oanda's spread on the EUR/USD will often be in the region of 1.2-1.3 pips, during most normal trading hours, and they offer time-unlimited demo accounts for practice. Read plenty of reviews and make up your own mind, but there are certainly worse and less well regulated retail brokers than them.

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  #9 (permalink)
Trading Apprentice
Colby, KS
 
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I think i'm understanding it a lot more, but not even close to what I understand with futures. i guess a basic question will lead me to where I need.

Is the RT price to trade a futures contract ($4-5) a lot higher than EUR/USD spot forex? Or will they end up roughly the same in the end?

From what i'm understanding, you can't actually profit with a 1pip gain at all after spread/commission fees. You need like 10 pip gain.

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  #10 (permalink)
Market Wizard
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I am not experienced in Forex and probably should not venture an opinion -- so take it for whatever it is worth.

In Forex you have "liquidity providers" -- essentially, these are the institutions (usually banks) that take the opposite side of the trade and therefore provide the "liquidity" (bids and offers) that you trade against. You are not actually trading on an exchange. (We're not talking trading currency futures on the CME, a different proposition.)

Sometimes these liquidity providers essentially are just trading against you in a market that has them on one side and retail traders on another. In other words, you are not trading in a public market, just taking trades against a large player who is giving you a bid and ask price. Sometimes you are trading against your own broker, and your trades don't get to any larger market, or any other traders, aside from the broker's trading desk. You might be surprised at the price you actually get. This may be due to the spread, which is not a commission but is a real cost, or to slippage -- the price you are executed at is not what you expected. This can happen when the price you trade at is not actually set by a liquid market of many traders.

It is often said that the Forex market is huge, and therefore extremely liquid. As I understand it, that is true if you are Goldman Sachs and trade directly with the other mega-banks.... but if you are an individual trader, you are not likely to be trading in this huge market itself, just a little slice of it. So there can be liquidity issues that, again, affect the price you get.

The issue is not that anything is wrong with all this, but there is often a significant spread between the bid and the ask that is actually a part of your net cost that you may not be aware of, which shows up in your execution price, in addition to the explicit commissions and fees.

There are brokers who do not participate in the trade themselves, and who shop your trade to many liquidity providers, which is preferable from your standpoint, since it at least involves a larger market and you are not trading against your own broker or only one provider. (This is called a No Dealing Desk or Direct Market Access -- check the link for more info.)

Since you mentioned NinjaTrader, perhaps Ray -- @NinjaTrader -- can come in and expand on this. I recall that he gave a webinar on futures.io (formerly BMT) on Ninja's Forex arrangements, which as I recall involve multiple providers through FXCM, a major FX broker. (Note, however, that FXCM had some serious issues recently relating to extreme moves in the Swiss Franc. I am not current on the status of FXCM and am not saying that there is any continuing problem.)

The point is simply that there are many things going on in the Forex world, because pure Forex trades are not executed on an actual exchange. It's sort of a wild West environment. Different brokers will give you different choices, and your actual costs may be affected in ways that are not clear from the commission structure.

I'm sure that it can be a completely reasonable market to trade in, and many do, but you should be aware of the greater complexity and variety of the choices you may find there.

I don't mean to be alarmist, and, as I said in the beginning, I am not experienced in Forex. I have just picked up information from here and there. Perhaps someone with a better understanding will chime in.

However, I was a little concerned to read questions about costs in terms of commissions, without also seeing some discussion of spreads and executions, which are both related to liquidity and not explicitly covered in commissions, but are still very real. I know there are many threads on futures.io (formerly BMT) about the mechanics of Forex, and you can try doing a search for them -- although some may be in the Elite section.

Good luck in deciding the best course for yourself, and in successfully trading it.

Bob.


Last edited by bobwest; July 19th, 2015 at 11:25 PM.
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