| |
![]() | |
Currency Trading Information Channel |
|
![]() |
|
|
![]() |
Online Futures Trading - Advantages and DisadvantagesWhat Is Online Futures Trading? A futures contract is an agreement to buy or sell a commodity at a date in the future. Everything about a futures contract is standardized except its price. All of the terms under which the commodity or financial instrument is to be transferred are established before active trading begins, so neither side is hampered by ambiguity. The price for a futures contract is determined in the trading pit or on the electronic trading system of a futures exchange. The internet now allows access to those electronic trading systems from anywhere in the world. This increases liquidity in those markets and makes them even more attractive to traders. Trading on all futures exchanges takes place against a backdrop of statutory regulation and rules as laid down by each exchange and the Commodity Futures Trading Commission (CFTC). Regardless of whether your trading is executed within the trading pit or electronically, it is subject to the same rules, regulations and safeguards. Advantages of online futures trading Leverage. Futures operate on margin, meaning that to take a position only a fraction of the total value needs to be available in cash in the trading account. Commission Costs. Electronically traded futures contracts require no human intervention to match buys and sells unlike a traditional futures pit. This means that commission costs can be cut dramatically, leading to significant savings for the frequent trader. Liquidity. The involvement of speculators means that futures contracts are reasonably liquid. However, how liquid depends on the actual contract being traded. Electronically traded contracts, such as the e-mini's tend to be the most liquid whereas the pit traded commodities like corn, orange juice etc are not so readily available to the retail trader and are more expensive to trade in terms of commission and spread. Ability to go short. Futures contracts can be sold as easily as they are bought enabling a trader to profit from falling markets as well as rising ones. There is no 'uptick rule' for example like there is with stocks. No 'Time Decay'. Options suffer from time decay because the closer they come to expiry the less time there is for the option to come into the money. Futures contracts do not suffer from this as they are not anticipating a particular strike price at expiry. Automated trading. Electronic futures brokers offer the facility to programmers to interface directly with their trading software. This means that custom written trading software can automatically trade a strategy without any human intervention at all. A system can make buy/sell signals which are automatically routed to the exchange along with any stops and targets. Almost instant fills. With electronically traded futures there is no need to call up a broker and wait for a fill from the trading floor. Orders are instantly placed on the electronic order book and filled as soon as a match is found - for liquid contracts such as the emini S&P500 this will be within a second. Level playing field. With traditional pit traded futures the professional in the pit has a major advantage over the retail trader in terms of speed of execution and costs. Electronic futures trading offers all participants exactly the same advantages. Disadvantages of online futures trading Leverage. Can be a disadvantage if it encourages trading with too high a risk for a particular strategy. A carefully devised money management plan is essential. Overtrading. The instant nature of electronic futures trading coupled with low commission costs and tight spreads can encourage a trader to take additional trades to those determined by their trading plan. Online futures trading offers significant benefits to the retail trader. However, a carefully developed trading plan must be formulated before attempting to enter this extremely competitive business. Tim Wreford operates Online Futures Trading, a website that provides information and resources for traders. Tim also provides an article detailing the development of a day trading system, the results of which are updated daily on the site.
The Best Forex Brokers and FX Trading Platforms in 2022 ABC Action News Tampa Bay What are the Benefits of Currency Trading for Corporate Leaders? Analytics Insight 4 Ways COVID Boosted Currency Trading Yonkers Tribune. 10 Best Low Spread Forex Brokers for June 2022 Business 2 Community 10 Best Forex Brokers for June 2022 Business 2 Community What Every Australian Forex Trader Needs to Know Analytics Insight 4 Reasons Environmentalists Care About Forex Trading Green Prophet Forex Forecast: Pairs in Focus DailyForex.com Dow Futures Trade Lower After Positive Week Investing.com India MERCURIA ENERGY TRADING SA SUCCESSFULLY CLOSES USD 2177500000 MULTI-CURRENCY REVOLVING CREDIT FACILITIES PR Newswire Dollar trading margins hit Sh10 in currency woes Business Daily Thousands Of Armenian Workers Face Layoffs After Dramatic Rise Of The Dram Radio Free Europe / Radio Liberty Billionaire Ron Baron Says Recent Market Weakness Offers Huge Buying Opportunity; Here Are 3 Beaten-Down Stocks Analysts Like Yahoo Finance Forex Today: Hawkish RBA Sees July Rate Hike DailyForex.com Basics of Forex Trading – Part 1 Yahoo Finance GBP/USD Forex Signal: Evenly Balanced DailyForex.com StoneX Executes First Bitcoin Cash-Settled Swap GuruFocus.com Dealing with forex market manipulators with iron hand The Financial Express Future of Bitcoin Trading in Mali London Post What is forex trading? Bankrate.com Basics of Forex Trading - Part 1 FX Empire What are the Pros and Cons of Forex Trading? RealtyBizNews Moscow Limits Foreign-Currency Trading to Shore Up Struggling Ruble The Wall Street Journal What is forex trading and how does it work? The European Sting How to Know Which Currency Pair to Trade Startup.info Forex (Foreign Exchange) Explained | US News U.S News & World Report Money Currency Definition | US News U.S News & World Report Money Proven Forex Trading Strategies that Work in 2022 BusinessLine FX trading: A loser's game? ETF Stream Trading Forex vs Futures: Key Differences IG International Is forex trading a way to make a living? Nairametrics The Most Common Warning Signs of a Forex Scam Finance Monthly Currency trading in overdrive with dollar at highest level in two decades (NYSEARCA:UUP) Seeking Alpha BC: Tips for Success in Forex Trading Punch Newspapers CEO Of Cryptocurrency And Forex Trading Platform Charged With Fraudulent Scheme Involving Over $59 Million Department of Justice What is Hedging and how can it be used in Forex Trading? Deccan Herald Forex Trading TD Ameritrade Five Myths About Forex Trading Tech Guide How to Trade Forex TD Ameritrade Best books to learn Forex Trading from scratch Free Press Journal Forex Trading Hours: Limitless Trading in an Endless Market The Coin Republic Currency Investing Makes a Comeback | RIAIntel RIAIntel.com Even the Foreign-Exchange Market Is Getting Kind of Crazy The Wall Street Journal Why forex trading is not gambling Nairametrics FOREX.com Review | The Ascent The Motley Fool How To Compare The Relative Strength Of Currencies Finance Monthly Russian Authorities Crack Down on Illegal Currency Trading The Moscow Times Changing the Top Global Currency Means Changing the Patterns of Global Trade Carnegie Endowment for International Peace Is forex trading halal or haram? The Armchair Trader How Currency Trading Works Investopedia
|