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Why do YOU trade commodity and index futures rather than forex?
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Why do YOU trade commodity and index futures rather than forex?

  #1 (permalink)
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Why do YOU trade commodity and index futures rather than forex?

Dear Fellow Traders,

I would like to know your reasons for trading commodity and index futures instead of currencies on the forex market.

This question doesnt seem too complex, and I suppose lots of you could give a straightforward answer.
However, Id like to look behind preconceptions, biases without valid reasons, casual habits like I started to trade futures and it works well for me, so Id like to see valid reasons why it is better to trade commodity and/or index futures instead of currencies on the forex market. Better, I only mean more profitable in a given time frame e.g. in a month.

The reasons that I know of in favor of futures:
You have volume data. (Although I suppose there could be profitable trading methods without using volume data.)

The reasons that I know of against forex:
It is an unregulated market, and such, it bears a higher level of risk, especially if you trade at a bucket shop. (Although I think it is possible to choose a reputable forex broker, for example a commodity futures broker company which also offers forex.)


My preconception is this:
Prec 1) Forex has the volatility as big as the futures markets, especially if we look at very short time frames. Furthermore, it has a much-much bigger liquidity; however, this latter might be an advantage primarily when you trade ten millions.
Prec 2) You have an edge. You have to have an edge whatever you trade.
So assuming you have an edge, you could make more money with bigger leverage. As far as I know, you can employ (much) bigger leverage on the forex market. So, employing a good method (even if it is not as good as it could be on the futures market for whatever reasons), you could make much more money bigger ROI, that is bigger return on your investment, on your trading capital, in the same timeframe because of the bigger leverage. Im thinking of very short time frame trading, like scalping, but within one day leastways. This (bigger ROI) is especially true if you apply compounding to your position sizing on a daily basis.

Of course I know that the leverage is a two-edged sword, and bigger leverage bears the possibility not only of bigger returns but also of a total loss. I assume you apply strict and well-thought money management rules.



I would like you to give reasons why this preconception is invalid or not entirely correct and give arguments for why one would trade commodity and/or index futures rather than forex.
And vice-versa, if you think that my assumptions are right, and/or think that I missed some things which I could be aware of, let us know.

Why do YOU trade commodity and index futures rather than forex?



Thank you very much,
All the best,
Arpad

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  #2 (permalink)
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  #3 (permalink)
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Because I can.

Why limit your universe to any product, let alone an OTC product?

The point of your question is?

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  #4 (permalink)
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Arpad View Post
Dear Fellow Traders,

I would like to know your reasons for trading commodity and index futures instead of currencies on the forex market.

This question doesnt seem too complex, and I suppose lots of you could give a straightforward answer.
However, Id like to look behind preconceptions, biases without valid reasons, casual habits like I started to trade futures and it works well for me, so Id like to see valid reasons why it is better to trade commodity and/or index futures instead of currencies on the forex market. Better, I only mean more profitable in a given time frame e.g. in a month.

The reasons that I know of in favor of futures:
You have volume data. (Although I suppose there could be profitable trading methods without using volume data.)

The reasons that I know of against forex:
It is an unregulated market, and such, it bears a higher level of risk, especially if you trade at a bucket shop. (Although I think it is possible to choose a reputable forex broker, for example a commodity futures broker company which also offers forex.)


My preconception is this:
Prec 1) Forex has the volatility as big as the futures markets, especially if we look at very short time frames. Furthermore, it has a much-much bigger liquidity; however, this latter might be an advantage primarily when you trade ten millions.
Prec 2) You have an edge. You have to have an edge whatever you trade.
So assuming you have an edge, you could make more money with bigger leverage. As far as I know, you can employ (much) bigger leverage on the forex market. So, employing a good method (even if it is not as good as it could be on the futures market for whatever reasons), you could make much more money bigger ROI, that is bigger return on your investment, on your trading capital, in the same timeframe because of the bigger leverage. Im thinking of very short time frame trading, like scalping, but within one day leastways. This (bigger ROI) is especially true if you apply compounding to your position sizing on a daily basis.

Of course I know that the leverage is a two-edged sword, and bigger leverage bears the possibility not only of bigger returns but also of a total loss. I assume you apply strict and well-thought money management rules.



I would like you to give reasons why this preconception is invalid or not entirely correct and give arguments for why one would trade commodity and/or index futures rather than forex.
And vice-versa, if you think that my assumptions are right, and/or think that I missed some things which I could be aware of, let us know.

Why do YOU trade commodity and index futures rather than forex?



Thank you very much,
All the best,
Arpad

No offense sir, But... it doesn't appear as though you want unbiased opinions ... you want someone to agree with you on your obvious desire to trade Forex.

If you want to trade Forex... that's your prerogative...

I could not in good conscience recommend that a small trader send his hard earned money to a firm that is not regulated by the government, that is not required to keep his funds in a segregated account,especially if it is a firm located in another country, where as a non-citizen the trader has little or no protection under the law and relatively limited legal recourse without incurring substantial legal fees.

Regards,
TMFT

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #5 (permalink)
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Arpad View Post
I would like to know your reasons for trading commodity and index futures instead of currencies on the forex market.

i prefer futures over forex for three reasons:
  1. spread - i don't like messing with spread. period. i know there are some forex brokers/dealers who offer ECN that's commission based, but i don't have any experience with them.
  2. control - like stocks, futures are traded on regulated exchanges, and i am more comfortable with that.
  3. broker/dealer manipulation of market - ever had your platform "freeze" up while the broker/dealer adjusts things? that makes me really, really uncomfortable. same problem i have when i am not able to place an order b/c it is "inside" the market. (this may be related to my lack of understanding with respect to spread.)
cheers,
-e

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  #6 (permalink)
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Answer
This post has been selected as an answer to the original posters question Answer

My reasons for trading futures:

1) More uncorrelated markets to trade. Although there are tons of exotic currency pairs the reality is that the majority of the volatile currency markets with low spreads are USD pairs.

2) Using limit orders makes me happy and keeps my costs per trade down.

3) I don't need more leverage to make more money. 30:1 leverage in futures is plenty.

4) That being said there is nothing wrong with trading forex. I have and continue to trade forex. Why limit yourself?

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  #7 (permalink)
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forex vs futures

For me, the problem with forex is the complete lack of transparency. Aside from the aforementioned problems with regulation, non segregated funds, and little or no oversight. The temptation for firms to engage in front running and other similar techniques can occur without detection. Without oversight, I have to assume these practices take place, money is a powerful agent of corruption; and the temptation for easy profit is an irresistible emotion.

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  #8 (permalink)
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Very simple:

With futures I trade currency pairs with arround 5$ comission.
With forex, if you have a 2 pips spread, it's 25$ for most pairs.

If you scalp with that...

Than there is the volume indicator and the regulations.

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  #9 (permalink)
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I think the question is backwards. As pointed out, if you figure out the spread vs commissions it becomes why would you trade forex over futures.
I think it is best to figure out transaction cost in both absolute dollars and ticks, then make some reasonable assumptions on slippage to factor in.

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  #10 (permalink)
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What if you choose a big, trustworthy commodity-futures broker who also offers forex?



eman View Post
broker/dealer manipulation of market - ever had your platform "freeze" up while the broker/dealer adjusts things? that makes me really, really uncomfortable.


trader7757 View Post
For me, the problem with forex is the complete lack of transparency. Aside from the aforementioned problems with regulation, non segregated funds, and little or no oversight. The temptation for firms to engage in front running and other similar techniques can occur without detection. Without oversight, I have to assume these practices take place, money is a powerful agent of corruption; and the temptation for easy profit is an irresistible emotion.

What if you choose a big, well-known, trustworthy commodity-futures broker who also offers forex (e.g. Interactive Brokers, PFG Best etc.)?
Does this guarantee that there are no such nasty things (referred by @eman and @trader7757), and trading forex through such a firm is as safe and non-fraudulent as trading futures?

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