hi, can you explain the advantage of spot over futures when dealing with major pairs like eur/usd ? i can see no advantage in a daytrading enviroment. i understand that you are saying the diversification is greater in the spot market. any light you can shed on this subject is apprieciated. guys like soros, and the hedgefunds is whom i was refering. thanks ! surfer
yes, i have heard these statistics but don't believe them. i have never seen verification of these figures. if it exists, i would like to know. there is not even volume on spot, how can dollar amount be determined ?? it makes little to no sense. best, surfer
Hi Surfer, I use futures with IB in the morning, and OANDA in the evening with the Asian markets. I trade only EUR/USD. I use OANDA in the evening because the futures market is not as liquid as the spot market at that time. My concern is that if there was a big swing in the spot market, by the time my order was filled in the futures market, I would have much more slippage than 2 pips. So, I will give 2 pips up in the evening, and pay a commission during the day. During the day I trade EC contracts along with NQ. Also, when the futures markets are closed, the forex markets are open (the spreads approach 10 pips however). Mike
Surfer, The big currency guys do trade the spot, or they trade forwards. Soros doesn't trade the futures, he trades the spot. The liquidity is a lot better in the spot, I don't care who said what about futures. You could probably buy 200,000,000 euros without moving the market if you do it right.
thanks for the info, swoop. however, i think it needs to be made clear that the "big guys" are dealing directly in the interbank market and do not use dealers nor pay spreads. do you know where the dollar volume of spot quoted by the dealers can be verified ? thanks ! surfer
On bloomberg, you can have the bid/ask spread of the interbank in real time. On average 2-3 pip spread on EUR/USD. Most hedge funds do not participate in the interbank. They talk to brokers and get filled like everyone else.
Quote Today, Bruce Kovner may well be the world's largest trader in the interbank currency and futures markets. ... Question: When you trade currencies, do you use the interbank market or the futures market? Answer (Kovner): I only use the interbank market, unless I am doing an arbitrage trade against the IMM. ... The liquidity is enormously better, the transaction costs are much lower, and it is a twenty-four-hour market, which is important to us because we literally trade twenty-four hours a day. --- Market Wizards, 1989, by Jack Schwager Unquote