I suspect forex is of interest to traders with large sums of money to invest. Some currency markets can be deep and liquid. A trader might buy or sell US $ 1 billion with little change in exchange rates.
I would like to learn from veteran Currency traders a couple of questions I have: 1. FOREX vs. Currency FUTURES: Both trade 24 hours a day. However, is there a discernable diffrence is actual Bid/Ask spreads of one vs. the other? My backtesting software and DTN data is historical, so no B/A is available to test, just OHLC or tick. Has anyone studied the difference between the B/A spread of EU Future contracts and added typical commission AGAINST the various FOREX shops that purport no commish but obvious spreads? 2. Any suggested links to seeing best liquidity time of day for the top traded Currencies? Thank you!
I'm no veteran, but I try to answer your questions. 1 The spreads on currency futures are much better generally than those offered by bucket shops. I would go with currency futures any day over bucket shop garbage. If you are small time and have no money your only option is one of those mico account garbage offered by various 'brokers', but if you have money there is no excuse to not be trading forex futures or forex at a real interbank broker. Spreads on EUR/USD are around 1 pip, try getting that at any bucketshop. 2 Probably 8:30 - 10:00 when both london and new york sessions are trading.
Globex FX futures do not trade 24h/day they trade 23h. Not a problem for day-traders, but if you hold o/n this exposes you to gap-risk, since the underlying spot-market keeps trading. Its usually a quiet time, but big moves have happened during this period (and will happen again).
Hmmm, I don't agree. There's a good thread about the pros and cons of ECN vs Marketmaker here. I prefer a bucketshop over an ECN any day. Don't forget ECN's commissions when comparing spreads
hi, im a trading noob and never traded on Forex. I just recently downloaded a demo from Forex but am still quite new to it. I think two major differences between stocks and forex are 1) stocks trading among domestic market (its easier when you know your local companies) 2) im not sure if i'm right about this, but you need to have a bigger minimum deposit of money to start trading on forex, whereas for stocks, depending on your broker, say with Scottrade, you only need $500 minimum to open an account for trading correct me if i am wrong, i need to do my hw more on reading up on wiki