Why Emini Futures Are Better Than Forex
August 31, 2013 at 12:44 AM (QQQ)(DIA)(SPY)(GLD)(TSLA)
Why Are E-mini Futures Better Than Forex?
No middle man, no market maker. Yes, Forex is an electronic market, but your order still ends up on a "dealing desk" where a human handles your order. Aside from naked short selling, the biggest reason I left the world of stock trading was because of the Market Maker. He could make you or break you. With E-mini Futures you have a level playing field. FIFO - first in first out. Whether you're Goldman Sachs or Joe from Idaho, you get equal treatment.
Liquidity - 1.5-3m contracts trade hands everyday on the S&P 500 E-mini Futures Contract. If you want in or out of a position, there is almost always someone waiting and willing to take the other side of your trade (24/5) just 1 tick away. This simply isn't true for all Forex Pairs.
Low Cost of Doing Business - Commissions on a self directed SP500 E-mini Trade (ES) should be no more than $3.00 per side or $6.00 per round turn. While many Forex Brokers tout "Zero Commission", we all know there's no free lunch. Forex Brokers don't need to charge a commission because they make money off of the bid/ask spread "they create" and then take the other side of your trade. Run the numbers... for every $100 in profits or loss, you will spend a larger % in "cost of doing business" in the Forex Market than you will in the S&P E-mini Market. Don't take my word for it... go take some real trades and you'll quickly see the truth.
Zero Interest - If you you trade the ES intraday, expect to put up $500 per contract as a "bond" for lack of a better term. That's it. No hidden cost. Forex however, has a "cost of carry" associated which means interest may be charged or paid on positions taken.
Fiduciary Responsibility - Even reuglated US Forex firms are not required to segregate customer funds. If a regulated firm goes under, you do not have the protection of the CFTC and the NFA as you do in the Futures Markets.
Turn ON The Volume Please - In Forex, since there is no centralized exchange, it is impossible to get a true read on volume. Not so with the S&P 500 "ES" E-mini. Simply turn on the volume indicator and you have exact numbers for Volume Analysis. GS and CITI have huge research departments with hundreds of employees, but they know nothing about volume that you don't know via a free indicator on your direct access trading platform. Just one more example of the level playing field we constantly speak of.
Centralized Clearing - I've spoken about the centralized exchange enjoyed by E-mini traders, let me explain; ALL E-mini trades are cleared via the CME - Chicago Mercantile Exchange. All trades, including time and sales, are public information and posted in real time.
Current Index - Currency - Forex Charts
S&P 500 E-mini Futures Daily Chart
EUR/USD Forex Daily Chart
Euro Currency Futures Daily Chart
US Dollar Currency Futures Daily Chart
The Bottom Line - Futures Or Forex?
As we can see from the charts above, the S&P 500 Futures - EUR/USD Forex Pair and the Euro Currency Futures are all in a bullish position and each is positioned at a significant Fibonacci level on their respective daily charts. The only bearish outlook at the moment is for the US Dollar, also positioned on the daily chart at a significant Fibonacci level.
From a technical standpoint, we can see each of these markets is quite tradable. However, based on the reasons discussed above and others we will cover in future articles, we remain steadfast in our belief, the retail traders and smaller professional money manager is still best served by the E-mini Futures as opposed to Forex. If your portfolio diversification strategy requires a portion of your funds be deployed in currencies, we feel Currency Futures cleared through the CME only, offer a vastly superior opportunity over Forex as discussed in a previous article - "Currency Futures Better Than Forex?".
If you have additional questions please contact the publisher - CFRN
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Reader Comments (6)
great
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Emini futures and forex - both have + and -
Unfortunately there's also a downside - you don't have the leverage you have in Forex.
I disagree with forex trader and programmer, there is more than enough leverage in futures.
With 500 usd margin per contract one tick on the ES is 12.50 usd.
What forex brokers will allow you to trade a full contract for 500 usd margin ( in the US)
The one advantage though of forex is flexible lot sizes.
Simply put! If you want to day trade eminis are much much much better, no comparison, it simply has a lot less whipsaws than forex, I'm very profitable daytrading eminis but it's simply very hard to be profitable in forex, as a matter of fact is you try day trading with forex you probably blow your account in no time, it's as if price as a magnet to get to your stop loss and as soon as it hits your stop loss just starts going the other way, my advice is stay the hell away from forex if you want to be a daytrader.
Swing/position trading, here forex has an advantage over emini futures simply because you can manage your risk a lot better, stops of 200 or 300 ticks are doable by investing less, a lot of broker will allow you to buy as little as 100 units of the base currency.
If you want to make a living day trading stick with emini futures because most likely you will not make it with forex.