In Forex, to build synthetic cross currency pairs, for example to buy EURJPY, we can buy EURUSD and buy USDJPY at the same time (yes, cost is higher). Is this also true in currency Futures? Can I just buy E6 one contract and sell J6 one contract at the same time to mimic EURJPY buy trade? Does this exactly follow EURJPY chart in Forex? Are there any factors to consider when I do this? I made some Google research but it seems it's not that simple.... I don't fully understand its logic. Can anyone help me? I am asking this because I am a swing/position trader and I often trade cross currency pairs. Trading Forex is costly due to high swap rate. In Futures, rollover cost is not that expensive.... Thanks,
Yes, it does. However futures more or less mimic the cost of carry too. Plus you pay double commission in case of trading futures spread vs. FX cross.
Things to consider: 1) Execution costs (as you stated, will be higher w/ 2x the trades) 2) Bid/Ask spread costs will be doubled (as you're paying the worse 2x) 3) Contract size: make sure the contracts sizes line up i.e. AUD future is A$100,000 = $71,800; EUR is €125,000 = $141,875, so if you wanted to sell a synthetic EUR/AUD, you'd have to sell 1xEUR, buy 2xAUD4) Margin: you will need to put up full margin for both trades