How a Day Trader can differentiate between Online Forex Trading and the Currency Futures traded at the CME
Day Trading currencies with a good online trading system can be really challenging, yet it is a very lucrative career that can help a trader make a good amount of money in the long run. Cash forex or spot forex markets have been around for as long as banks have been around but currency futures trading at the CME is growing rapidly with the onset of twenty four hour round the clock electronic online trading on the CME's Globex fully electronic platform.
A day trader must understand the difference between forex trading in the spot market and currency trading the futures contracts at the CME Futures Exchange or it is very easy to lose money trying to trade either. Forex trading is done over the counter which simply means it is not traded in a central location whereas currency trading of futures contracts is done on a central exchange like the CME Group with a central counter party clearing system firmly in place. Currency futures can be a better choice for the day trader who is usually working with a small amount of capital in his or her account.
In the over the counter markets there are several challenges a small trader must overcome to be able to get the same benefits in the form of price an institution or hedge fund might get. In the futures markets there is a central counter party that takes care of the clearing function which takes off the credit issue faced my many forex brokers off the table. This is definitely a very big advantage enjoyed by the small trader as they will get the same price a large fund or institution will pay for the same currency. In the forex OTC markets a trader has the flexibility of trading an odd dollar amount which cannot be done in the futures markets as they have fixed size contracts that are traded on the central exchange. To overcome this issue the CME has different size contracts called "minis" that are available to traders to choose from depending on their account size and comfort level.
And with the onset of futures trading almost 24 hours a day now the appeal of the forex market that also trades round the clock is not so appealing any more. The other advantage of trading the currency futures contracts at the CME is the commission a trader pays for trading them. Spot Forex trading has a minimum spread of 2 to 3 pips on every currency pair traded and lots more on certain exotic pairs whereas it is always a fixed dollar amount at the CME, usually around $5 for a round turn. In the forex market a trader is never sure of the price he or she is paying as the price shown to them is only an average of prices traded at several large banks that the dealer trades with. On the other hand the price at the CME exchange is the only price at that particular moment in time available to all market participants at that time, whether it be a small trader, a hedge fund manager or even a large institutional trader.
Because of all of the advantages outlined above it is best for an individual trader to trade some of the most liquid currency futures contracts like the Euro, Japanese Yen or even the British Pound offered on the CME Globex Electronic Trading Platform until they have an account big enough to be able to trade directly with the banks on a bank's platform itself and not trade the OTC markets as the broker dealers in the OTC markets have an unfair advantage over the little trader by trading against their own clients all the time.
Questions and Answers
Article Tags:
day trader
,online forex trading
,currency futures trading
,day trading
,online trading system
,forex trading
,currency trading
,online trading
,cme group
,currency futures
,over the counter markets
,forex market
,spot forex
,trader
,globex electronic trading platform
The growing Indian market is attracting investors on the ground of the promising and assured return. The online trading is very popular these days and most of the people prefer it for quick money.
Learn the fundamentals of committing cash in Stocks, Ties, Common resources, Merchandise, Actual estate We create Getting Inventory Industry straightforward for you with a comprehensive guide to committing. Any effective stock market buyer must be acquainted with the fundamentals of stock market committing.
Online share trading is one of the most popular financial markets in the world today; however, any people are hesitant in starting due to not knowing a lot about it. This article will help explain what online share trading is all about, how you can get involved for a low initial investment and what to consider before, during and after trading.
The stock market is mostly used to create money. . I am sharing my investment strategy as a retail investor. Most financial experts recommend investors to initially contact a financial advisor. Able to provide advice, it can ensure that the money an investor get a good return or not.
This article has discussed about the importance of Stop orders. Stop orders act like the life jackets
There are many folks out there today that would love to become full time traders and day trade for a living if possible. After all anyone with a brokerage account and a connection to the Internet can day trade stocks, options, futures, commodities or forex currencies online from the comfort of their home. For what it is worth, it is way easier said than done.
There is a common trait shared amongst all professional day traders about what made them successful traders. They all had to overcome the fear of trading before they became successful traders. Unless new traders can overcome the fear of trading or losing money while trading in their mind, trading success can become an unfulfilled dream very quickly. Fear is one of the strongest emotions possessed by human beings.It can even affect a good day trader with a great online trading system.
It might be a sad but it is also a well known fact that around ninety percent of people who enter the trading arena are destined to fail right from the very beginning. It really does not matter how good of an online currency trading system or forex trading strategy that these new traders possess, they are destined to fail at online trading. All new traders come into trading thinking that they can make a lot of money very quickly, all of the time. It comes down to Trading Capital Preservation.
Online Forex Currency Trading in the futures or forex markets can be a very fulfilling career. Most want to be traders are attracted to day trading as it is the only type of job out there that allows an individual to potentially make quite a large amount of money with a relatively small trading account, if leverage is used the proper way by the day trader. Leverage simply means that a trader can control a significant amount of money with just a little amount of actual cash in the account.
Online Forex Currency Trading is one of the best if not the best career out there available to anyone with some money and an internet connection. It is also probably the only profession where a trader does not have to answer to anyone and is his or her own boss. A typical day trader has no customers or employees to deal with and does not carry any overhead expenses either. All that is needed by a trader is a good charting platform, adequate trading capital and good trading execution software.
Discuss this Article
