Currency Futures Trading is Very Different than Forex Trading!

Many people easily get confused with understanding the different facets, factors, and elements of the foreign exchange market.  It is understandable, of course, because this is a complex subject that is not learned overnight.  One example of a concept that you may find hard to comprehend is the idea of currency future trading, which is also referred to as FX future.  If you plan on making money from Forex investment trading, you really do have to make an effort to study and analyze all of its elements and concepts

What is Currency Futures Trading ?

So what is it currency futures trading exactly?  In formal terms, it is defined as a contract or agreement that will take place in the future;  this agreement states the price in which one currency can be traded to another currency.  Future currency trading also specifies a particular date of purchase in the future.  In short, you are defining the currency exchange rates at a specific time and date in the future.  Many institutions used the currency futures market to hedge against fluctuating currency rates, but it is also used by the small investor for speculation.

Difference between Forex Spot and Futures Markets

How is different from the daily currency exchange rates or Forex spot market?  Well, everything is set to the future, so rates are extrapolated based on comprehensive analyses on the state and condition of the different markets at a certain period in time.  Is it pure guesswork?  No, but it involves wise guessing on the future conditions of Forex trading markets.  By the way, in trading currency futures, the dollar is either directly part of a currency pair, such as EuroUSD, or is used to determine the other currency pair exchange rates, which are called cross pairs.  For example, when determining the exchange rate between the British pound and Japanese Yen (the GBP/JPY currency pair), then the exchange rate between the GBP and USD is used, then the exchange rate between the USD and Yen.

Deals and Agreements

It is essential to note that in the realm of currency futures trading strategies and systems, investors and buyers can actually close their contracts even before the date specified as the expiration date of their futures contract.  For instance, if you notice that the market is heading toward a downturn or  slump, you can immediately sell your contracts to make sure you make profit or reduce your losses.

Historical Origins

Forex currency trading became a reality for the small investor in the year 1972.  It took place at the legendary Chicago Mercantile Exchange, which is also commonly called the CME.  At that time, currency futures were created less than one year after fixed exchange rates and the gold standard were abandoned.   On May 16 of the same year, the CME came up with another element of the trading system called the International Monetary Market or IMM.  Initially, there were only seven currency futures that were allowed to be traded.   Today, there is about $100 billion of currency futures traded daily.  Trading currency futures tends to be safer than Forex trading as it is more regulated, however, it requires more margin to trade with currency futures and usually less leverage is provided by the brokers.

Current Trading Centers

In the world of Forex day trading system, there are three popular options in futures currency trading.  There is the Intercontinental Exchange, the Tokyo Financial Exchange, and the Euronext.liffe stock exchange.

The difference between the Forex market and currency futures trading is that the Forex market is the spot or current exchange rates between currency pairs.  The currency futures market specified the price at which a currency can be bought or sold at a future date.  Therefore, while you will not have a date associated with a Forex trade, there is a date associated with a currency futures contract.

Currency Futures Trading Hours

Here is a list of the currency futures trading hours, although no guarantee is made to the accuracy of the schedules.