Forex Dealers In Pune - Forex Versus Futures Pros and Cons

Dec. 18, 2010 - PRLog -- Forex Dealers In Pune

For professional investors, there are a couple of distinct advantages to trading currency futures contracts. First, traders who use currency futures are assured that their funds are placed in a bank account segregated from the dealing firm's money; this is different from the practice of many foreign exchange dealers, in which the client's and the dealer's money often are commingled.

Futures also ensure lower transactions costs because the markup between the bid and the offer is determined by professional traders and market makers who participate in the transparent and very competitive world of futures trading, not by individual banks and dealers who generally mark up the spread to wider levels. It is through this spread that forex dealers are compensated. Although forex dealers have had to respond with tighter spreads for their clients over the last year or so, these advantages still generally lie with futures markets:

• Futures still maintain a tighter spread between the bid and the offer, and futures clients have negotiated their commission to well below the minimum tick value that represents the smallest increment in which the price can move.
• On any given day the Chicago Mercantile Exchange (CME) trades over 400,000 currency futures contracts for a face value of over $400 billion in business.

However, because of larger account minimums, larger contract sizes, higher margin rates, and government regulations, the futures markets have taken a backseat to the growth of the under regulated cash currency markets, or forex, over the last 10 years. In futures markets, traders compete among themselves and with market makers around the clock, with all the participants having access to the same tight bid and offer, or spread, that is created in a central marketplace regulated by the National Futures Association, whereas traders in forex compete directly with the dealer. Get Internet #1 - Forex Dealers In Pune @ http://forexcure01.webs.com and be Successful forever!

The dealer shows the client what is known as a retail spread, whereas the dealer has excess to an institutional spread and the futures spread, which are generally tighter than the retail forex spread. This difference between the retail spread and the institutional spread is profitable for forex dealers, particularly since a high percentage of the participants trading with the dealer are not professionals. Having this distinct advantage, along with the Internet to promote their services, dealers spend a good percentage of their profits on upgrading their state-of-the-art trading platforms and charting packages to entice clients to trade with them.

These efforts by the dealers to improve their order delivery platforms and charting and analysis packages can benefit educated clients. Another advantage for clients who choose to trade with a forex dealer is the smaller contract sizes. One of the main reasons retail clients lose money trading is that they risk too much per transaction. In futures the minimum contract size is $62,500, whereas in forex it is just $1,000 for a micro contract and $10,000 for a mini contract.

With these smaller contracts, it is much easier for a retail client to manage and maintain acceptable trading risk-reward ratios than it would be with the larger futures contracts. Because of the ease of trade management the smaller forex contracts afford, particularly the fact that a trader can keep the risk per trade to a fixed percentage of his or her account size, we will focus primarily on the forex markets. If you are inexperienced in trading, especially in trading forex, keep in mind that it is a very serious business.

The dealers are in business to capture the transactional costs generated by your trading. You are in business to make money trading. You need to understand this duality:
Information you receive directly or indirectly from a dealer is geared toward getting you to trade more to generate the transactional costs created by the spread. Get Internet #1 - Forex Dealers In Pune @ http://forexcure01.webs.com and be Successful forever!

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