Advantages of futures over Forex, stocks and other markets

The advantages of futures markets

If we visit any of the webs with information related to futures trading we will see that they usually say that the futures are better than stocks, ETFs, Forex, etcetera.

The same can be said of other markets like binary options or Forex. They all say they have advantages over the others.

Let us see some of the so called advantages of futures markets over other assets.

Efficient market

The defenders of futures markets usually give the S&P500 as an example of trading efficiency, saying that not many instruments are as efficient as it.

For instance, they say that the spread of one tick in that contract is one of the most efficient in the World o trading.

Advantage of futures

If we assume a price of 2,100 in the S&P500, we would have 8,800 ticks (4 ticks per point).

That would give us a cost of the spread of 1/8,800, which would result in a cost of 0.01136% of the contract.

In the Forex market, for instance, we can find spreads of 0.5 pips in the EURUSD easily.

If we consider that the price is 1.1130 and that it is equivalent to 10,130 pips, we would have a spread cost of approximately 0.5/10,130, with a cost of 0.00493%.

Therefore, we see that that the spread cost of trading the S&P500 is twice as much as that of trading the EURUSD in the Forex market.

Hence it is not truth that the futures are the most efficient market.

Although let us not go too fast since there are other things to consider here.

It is true that the futures markets will have a lot less slippages and increasing in the spread in the moments of volatility, with which they keep their leadership as the most efficient asset.


Centralized and regulated market

Truly, the futures have an advantage over CFDs or Forex, since the latter are not traded in a centralized market.

That gives the chance for many problems to occur between the price providers and the customers.

Stocks and ETFs are as well regulated as the futures in this instance.

Very low commissions

Here it is truth that the futures usually have lower commission costs for many of the major contracts than what we can find in the Forex industry.

Although, the majority of brokers that provide good conditions are in America.

In stocks we will normally pay higher commissions when we trading more than 100,000 Usd.

24 hours trading

Some futures markets trade most of the day from Monday to Friday.

However, liquidity will be very limited in the intervals of the market.

Forex is a better market in this respect; meanwhile stocks have more restricted options.

Futures leverage

This is one of the reasons more frequently argued as an advantage since the futures have a big leverage.

The problem is that most of the times having a big leverage is the greatest enemy of traders.

Curiously, Forex offers higher leverage in the majority of cases, besides a lot of flexibility, with which the supposed advantage is not such.

Futures without interest charge

This is true, although the price of the future market has another problem: that it accounts for that issue and the price decreases over time.

For instance a Forex trader sells the AUDUSD and will have to pay the interest every night during many months.

If you buy the same future you will have to pay it in another way when you change between different contracts.

In fact, it is as if you were paying interests, somehow.

Futures liquidity

The S&P500 future has a very big liquidity, to tell the truth.

However not many traders will trade so many contracts as to need to use all that pool.

Although it is true that the market stability is much better than Forex, where you face huge price changes in the spread when there are News.

If you want a similar liquidity in Forex you need to trade through a major bank probably.

Futures security of funds

With respect to the Forex brokers this is true because the American futures brokers are under a more strict regulation than the rest of Forex brokers.

Although you can get cases of bankruptcies like MF Global, it is more common to see problems in the Forex markets.

Stocks, for instance, are more secure than the futures, in some way.

Advantages of futures over stocks and other markets?

Not all that is told about futures is so pretty and true.

The futures intraday market is very efficient to do that sort of trading.

It is a better day for intraday trading than Forex, for instance, despite all things said previously.

However, it is far away from being a safe market for novice traders to trade, who should stay away from it.

In fact, small and novice traders should be away of any sort of day trading as the futures one.

It is a very complicated sector and prone to mistakes and failures, which in most cases will end up with the trader losing the entire account.

The futures markets are some of the best in the World, but they need to be taken very seriously.

Do not you think you can dominate those markets with just a few thousand dollars, euros or pounds.

You will not become a marvellous scalper that easily.

All that glitters is not gold.