I trade both spot and futures full time and can tell you that FX futures micros have crappy liquidity, stay away from them. If you trade thru a very reputable FX spot ECN broker like IB or MBT, or Duka; then you will have no problem trading spot.
2 more crucial differences, you can affect the market when trading futures and you can sit on the bid/ask i.e. you dont have to enter @market everytime you want in.
'U can effect the market' ? really, you must be dreaming ... the real market is interbank spot, not futures in fx yes, you can sit on the bid and the ask, but for like 99% of retail that will hardly make a difference whatsoever, that's more something for market makers ...
You'll never get any price improvement with a futures limit order since there's just a single order book at CME. But with forex, I frequently get price improvement (including on about 20% of my IB limit orders just today).
Not true. If the price in a limit buy order is above the best ask at the time the order arrives at an exchange, the order is immediately executed against the best ask, which will result in price improvement. Just for a reference, CME doesn't have market orders. So, to emulte a market buy order brokers send a limit buy order with a price much higher than the current price range... and these orders are executed at best ask. If what you were saying was true, anyone who tried to send a market order to CME via a broker would have received a fill very far from the market.
Yes. I meant an order that isn't executable when placed. You won't get screwed by CME if your buy limit price is above the current market (and conversely for sell orders) but I don't consider this "price improvement".
Well, price improvement only happens when the market has moved by the time your order reaches the market. It's ususally not solely from the goodwill of the broker. With CME, it takes an order some hundreds of milliseconds to reach the echange. If while the order is being placed it effectively becomes a market order due to market moving you get price improvement. I don't see how it is different from a forex broker.
I can only speak to forex through IB as I haven't used any other broker (or bucket shop). Price improvement is certainly not due to their generosity but due to the fact that there's no central market/order book for forex and IB acts only as a broker (i.e. they don't take the other side of the trade). Here's a real example from my trading on Thursday, January 20. MARKET AT 4:00 PM EST FOR USD.CAD - Bid .99680 Ask 0.99690 ORDER PLACED - Limit sell 100k USD.CAD @ 0.99710 EXECUTION AT 4:03 PM EST - Sold 100k USD.CAD @ 0.99713 A small difference but the price improvement was worth more than IB's commission. The differences are usually of this magniture but 1/2 to 1 pip isn't unusual and on occassion I've gotten several extra pips. That could never happen at CME. Mind you, I've done futures trading and as mentioned by others, it has advantages including easier tax reporting. You also can get price improvement for stock limit orders placed at NYSE. This is less common than it use to be but if a large offsetting order is placed while your order is on their books, the price to clear the order can jump over your price and the NYSE specialist will complete your order at a better price. This won't happen when the order is placed at an ECN since the orders are only matched electronically, the same as CME.
Why would anyone trade spot fx? IMO, it's because you can start out "being a trader" with a very small trading account. Results may very! I like to keep things simple, if I have two accounts 1) Cash & 1) Future and I place the exact same trade in both accounts.... Buy 1 Euro @ 1.3500 and the trade is GOOD and I Sell 1 Euro @ 1.3510 to close the trade, what are my results? Futures Account: 10 points X $12.50 = $125.00 Cash Account: 10 point X $10.00 = $100.00 Figure any reasonable commission (or pip spread) you wish ... You don't have to be a mathematician to analyze the results. Why wouldn't you trade futures, leaving reasonable commissions and/or pip spreads out of the equation, for every 4 successful future trades (per...example), the Futures Trader is one trade ($100.00) ahead of the Cash Trader (in profit). I think the REAL question is, How many Cash Forex accounts have less than $7,520.00 (required margin for Eur/USD futures) in them? :eek: