Spot and Trade Institutional Money Moves

Algorithmic Trading with Human Interaction for:

Day Traders, Swing Traders, Long-Term Investors

Thursday, November 11, 2010

New Forex Regulations – Who takes the lead for Currencies: Futures or Spot?

With the new regulations for Forex that came into place the landscape for margin requirements changed (see our article: .
We made a first calculation comparing key features of the one towards the other investment vehicle.

See it yourself in the following table. There are various pros and cons, but they are pretty tight to each other now:

Some of the key pros and cons are:

EUR/USD Spot has the advantage of offering mini and micro accounts allowing the novice investors a playground where they can risk less money to test the markets. By offering more variability the spot market allows for better fine tuning on dollar investments.

Currency futures are regulated, there is always a trader on the other side of the contract. In the spot market, the market price is a theoretical calculation and your broker takes the other side of the trade, which is a scary thought for many investors.

All in all, spot and futures go hand in hand in their daily moves, while the spot market shows more spikes which can be an advantage or disadvantage.

Good Trading!

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