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Price relation between spot forex and currency futures
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Price relation between spot forex and currency futures

  #1 (permalink)
Elite Member
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Price relation between spot forex and currency futures


Does anyone know the correlation between the price of spot forex and the price of currency future (of the same currency pair)?

Right now I opened a EURUSD chart (Dukascopy Live on JForex) and a 6E chart (Mirus Futures Demo on NinjaTrader & ZenFire), I see the two charts are nearly identical, but the current prices are a little different.

Does the price of one effect the other?

For example if a large order is place on either the 6E or EURUSD, how would it effect the price of either/both of them?

Sorry for the odd question, I've been trading spot forex for a while and is now considering switching over to currency futures (and purchase indicator for NinjaTrader), thus I would like to know the reason behind their price difference.

I'd really appreciate the input of any expert on this subject, thank you.


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  #2 (permalink)
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  #3 (permalink)
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Im sure someone with a definite answer will reply, but my thinking would be:

- Currency futures are centralized. Spot forex isn't. So depending on which liquidity provider your broker is using to display the current price to you, there will be slight variations. ie: there is not one central price as is the case with futures.
- Your broker might be increasing the spread so the current bid/ask that you see will be slightly larger than what it actually is. This is one way that they make their money.

On the whole, you are right that the spot and futures markets should follow each other quite closely. I would expect that any arbitrage between the two would be eliminated in a matter of seconds.

That's all I could think of. Perhaps someone else will provide you with more detail.

Diversification is the only free lunch
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  #4 (permalink)
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so i just posted this on another thread. An issue that is causing much confusion!

futures are in the future

Cash/ spot are today.

They are different things ?

Yeh people have models that say the difference should be the "cost of carry" but they are just that, models. One context / situation can mean one thing and another something else....

There are no rules, that this is that, so that should be that etc etc

I should of added "they" call it contango or backwardation, look them up, along with the cost of carry.

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  #5 (permalink)
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RE spot v futures

You can pretty much find the subtle difference between the two at Investopedia or any other reputable site. It's really academic to be honest but for interviews it's down to settlement, both extremely liquid so don't try to calculate the pip differences. I can recall at my last prop house students were working out the pip differences from spot strategies and translating them onto futures. Affects everything from pivots to SMA's.

Provided your S&R levels are in order it doesn't matter at all!

Lastly pull up a continuation chart to keep all your historical levels as some platforms don't retain drawings on contract rollover subject to subscribed historical data.

If you keep on this line of thought you might want to ask yourself how can I capitalize on rollover gaps using continuation charts and vice versa.

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  #6 (permalink)
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CME posts forward points for the current futures contract everyday on their E-quivalents page

Math. A gateway drug to reality.
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  #7 (permalink)
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Anwering my own question

OK, after extensive testing/comparison, my conclusion is, the forex market is the leading cause of price movement in currencies, both in forex and currency futures markets.

I spent a lot of time analyzing the relation between the reconstructed tape (Time & Sales) and the price movement within several currency futures, and there's little or no relation!

I think it makes sense because it's much easier for the large banks/traders to hide their position and manipulate the market in forex since there's no Time & Sales, there's only Bids & Asks. In currency futures, at least you can see an adjusted or non-adjusted volume of trades made at various price levels, as far as I know, this crucial information isn't available in the forex market.

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