If you’ve got some extra money, then you may be wondering whether you should save or invest it. Those who want to start building a nest egg for retirement will be better off investing, as you’ll have a longer time frame to work with, making loss recovery easier.
When you look at your options, there are several, and they can make your head swim. But with a little bit of education, you can come out with a clearer vision and make wiser decisions.
In this article, we’ll give you a brief guide on trading forex vs. futures so you can determine which one’s better for your situation.
Forex vs. Futures: Similarities
First off, let’s discuss each trading option and their similarities.
“Forex” is short for “foreign exchange” and is the largest and most liquid financial market in the world. There are many avenues available for trading forex, such as Forex Thailand.
As the name suggests, futures involves speculating on the future price movement of assets, such as commodities, financial instruments, and currencies. It’s also a liquid market.
Both markets provide opportunities for you to speculate on future price movements. You’ll need to use various risk management strategies to ensure you make the maximum profit possible.
You can take either long (buy) or short (sell) positions and use both technical and fundamental analyses to aid your decisions.
Forex vs. Futures: Differences
Those who are interested in trading currency will be better suited for forex trading. Forex primarily involves currency pairs, such as EUR/USD. While futures involves currencies too, there’s a broader array of assets, such as commodities like corn.
For more flexibility, you’ll want to choose forex trading. The market operates 24 hours a day, five days a week. On the other hand, futures typically have specific trading hours, and are limited to the exchange’s schedule.
In addition, the forex market is decentralized, with no central exchange. Instead, it operates through a network of banks, brokers, and electronic trading platforms. Futures are traded on organized exchanges with centralized clearing, which provides you with a more regulated environment; each contract is standardized, and transactions are cleared through a clearinghouse.
To get high leverage, go with forex trading, as you can control larger positions with a relatively small amount of capital. Leverage levels will vary by the type of futures contract, but they’re typically lower than those found in forex trading.
Lastly, traders usually pay the spread (difference between buying/selling prices), and they may also incur overnight financing costs for positions held overnight. With futures, costs may include commissions, exchange fees, and also financing costs for holding positions overnight.
Which Will You Choose?
For the forex vs. futures debate, there’s no “right” answer as to which one you should put your money in. Instead, you have to look at your situation and determine which one is best suited for you, and that you’re most comfortable with.
If you’re ever in doubt, do more research and have an ear to the ground. Knowing what experts are saying can save you from making terrible financial mistakes.
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