FOREX versus Futurescash) market in which trades rarely exceed two days. Many FOREX brokers allow their investors to roll over open trades after two days. There are FOREX futures or forward contracts, but almost all activity is in the spot market, facilitated by rollovers.
In addition to the advantages listed, FOREX trades are almost always executed at the time and price asked by the speculator.
The caveat here is something called a requote, or dealer intervention, which I discuss in a Games Brokers Play.
The Commodity Futures Trading Commission (CFTC) authorizes futures exchanges to place daily limits on contracts that significantly hamper the ability to enter and exit the market at a selected price and time. No such limits exist in the FOREX market. When a surprise news announcement hits the currency markets, appropriate pairs will move as far as they need to reestablish a buyer-seller equilibrium.
Stock and futures traders are used to thinking in terms of the U.S. Dollar versus something else, such as the price of a stock or the price of wheat. This is like comparing apples to oranges. In currency trading, however, it is always a comparison of one currency to another currency -- Granny Smith apples to someone's McIntosh apples, if you will. This paradigm shift can take a little getting used to, but I provide multiple examples to help smooth the transition.
The author was a commodity futures trader and registered trading advisor for many years, but has found currency trading much more to his liking for many of the reasons already discussed.
I must reiterate: There is always some risk in speculation regardless of which financial instruments are traded and where they are traded, regulated or unregulated. Leverage is a door that swings both ways.
Both stock and futures traders must make a similar adjustment to currency trading: in stocks and futures, the specific investment vehicle is denominated in dollars or local currency. In FOREX, the underlying vehicle is a pair -- the relative value of one currency to another.
By Michael Duane Archer